Let me start with my best wishes for 2010!
I’m starting to investigate the business side of ICT4D projects. Identifying the business model is (or should be!) obviously a critical dimension for most ICT4D projects. Indeed, that’s the study of how to make services at least self-sustainable, or to provide revenue to the provider.
Identifying the cost is the easier part. There are different kinds of costs. Globally you can split them in two major categories, related to the development, deployment and bootstrapping costs, and to the operation of the services. IMHO, it is also relatively easy to find donors funds and grants to cover the development/bootstrapping costs, as far as the proposal identifies the operation costs, and provide a model to cover them. Evaluating these costs is not the issue and there are some hints in the W3C Mobile Web for Social Development roadmap, but how to cover them is the right question. There are two sides to consider, the business side, and the technological side, which is the implementation of the business side through the technology used in the project.
Concerning the business side, i believe we can split the investigation in two parts:
- Commercial Models
- Non-commercial Models
What I call a commercial model is a model which has the goal to get money, directly and indirectly, out of the service operation. Direct models are those where users pay for the service directly. Indirect models are those where the money comes from a third party (not the users).
Concerning the direct model case, the tricky questions are to know first if people are willing to pay for the service. Does the service, in essence, provide a real, valuable impact to people so that they are willing to pay for it? Then how much does the service help them or save in terms of time/money? Identifying the net gain, and thus defining the right price, related also to the disposable income is critical.
Concerning the indirect model case, there are different options. The most common one is advertisement. They are all kinds of possible options for ads, in all technologies: ring back tones, SMS banners, Web banners, etc. But who is paying for these ads? How? Is there risk of collusion between the ads and the service itself? Is there an example of someone successfully or unsuccessfully implementing such a model in an ICT4D project? There are options other than ads such as using the customers’ network to make surveys, or to sell information about e.g. customers interests and search terms and so on. Here again, for me, this is more intellectual discussions than concrete examples.
What I call a non-commercial model is a model where the integration of an ICT service has the objective to increase the efficiency or the coverage of a particular non-ICT activity, typically the provision of a public service such as agriculture extension or education. In such case, the principle is to demonstrate how the operational costs can produce more efficient services based on similar costs already existing. These non-commercial models are the ones that have to be considered when developing pilots which aims is to be adopted by public authorities, and which goal is to deliver public services. How to measure efficiency of a particular service, how to measure the impact per $ invested in two different cases are not easy questions.
User Costs and technical implementations
In all cases, it is critical to take also into account the costs induced at the user level. Typically, the cost of sending SMS, or placing a phone call, or using data services. In case of non-commercial models, where the aim is to provide public services, there are technical solutions to cover these costs for some technologies (a free phone number, call-back…) and some regulatory solutions too.
On another side, it is also critical to understand how the technological choices impact the relevance of the different business models. In direct commercial models, it should be transparent, or at least very easy for the user to pay for the service. In indirect models, it should also be easy for entrepreneurs to get the money back, without too much hurdles, and requirements for advanced business deals with big companies (like e.g. mobile operator).
Here again, these aspects (user costs, technical implementations) are partly covered in the W3C Mobile Web for Social Development roadmap.
To summarize, I’m realizing these days that while this is topic that is discussed in all the conferences and discussions I’m participating in, I cannot find valuable literature references, or project examples that could help me compiling a list of options with cases to illustrate them. In this post, i tried to develop a skeleton of a resource that could be helpful, lots of questions, and ideas, but no real meat, no methodology or examples. It is for now an empty skeleton, and it is at a level where all the discussions are happening today IMHO. What’s needed is illustration, cases, studies. I’m sure some of you have done studies in this scope, or are running projects in which you considered this question. I would be happy to get feedback, either publicly here, or privately (boyera[at]webfoundation.org), and start developing this work from field experience.
January 11, 2010
Comments on some private feedback i got:Do all projects needs a business model ?i tend to answer yes in a vast majority of cases. Of course, there are event-specific projects, like e.g. election monitoring, which would not focus on long term sustainability, and just needs to evaluate carefully the costs. The term 'business model' might also hurt some of those with a NGO or civil society background/focus. Perhaps it is an inappropriate term, but the concept, ensuring that the operational costs are matched one way or another is critical. In many cases, it is not matched in terms on money return/revenue, but just on time saving, efficiency improvement, which leads to savings. Otherwise, one is always running after donors, and when failing, the overall project dies. Steph