The $100 Un-PC

Jain makes an unusual agent for such sweeping change. He has none of the bombast of Oracle's Larry Ellison. He lives more like a monk than a millionaire--though he sold his first successful venture, IndiaWorld, for more than $100 million in 1999. Jain first got the idea to build a low-cost computer alternative back in 2000, when he realized Western PCs weren't getting cheap enough fast enough to serve India's needs. He considered buying secondhand computers from abroad, or opening cybercafés. Then he read about Oracle CEO Ellison's plans for the so-called network computer. Maintenance and management costs for the PC were untenable, Ellison proclaimed, and businesses would soon save millions of dollars by putting software and data back onto their network servers. Ellison's idea hadn't taken off, Jain decided, because so many users in Western markets already had PCs and resisted the change. Jain realized that India would be a better target for the idea.

Aiming first at small and medium-size enterprises, Jain started to explore the potential of network-based computing software at Netcore Solutions, a company he started in 1998 (he remains its CEO). But the hardware costs were a problem. After giving a talk in 2003 at a conference in Bangalore, he was approached by Ashok Jhunjhunwala, a professor at the Indian Institute of Technology in Chennai, who runs a research lab and business incubator much like MIT's Media Lab. "The device you're talking about, the network you need?" Jhunjhunwala told him. "We can build it."

A few months later Jhunjhunwala and researchers at IIT came up with a plan that builds on the "thin client" concept that has been popular in the West for years, but only for business applications. It uses a cheap microprocessor (not Intel or AMD's standard PC chips) and removes the hard disk, CD/DVD drive and other costly and problem-prone components, leaving the keyboard, screen and USB port. Easier to maintain than regular PCs, sales of thin-client PCs to businesses are growing at about 20 percent a year in developed nations, even as sales of regular PCs flatten. Instead of working backward from the PC, Jhunjhunwala pioneered a new architecture from the ground up, replacing the expensive microprocessor with the guts of a mobile phone--thus tapping a supercompetitive industry with enormous economies of scale. In 2003, Jain and Jhunjhunwala cofounded Novatium, along with Analog Devices Chairman Ray Stata, with the aim of taking thin-client computers into the home market.

Making the computer affordable was only part of the equation, Jain realized. It also had to be what users want: something that looks and performs like a PC, with all the necessary software and an Internet connection, but which is also easy to maintain and operate. Products like the Simputer, an inexpensive, Indian-made version of the Pocket PC launched in 2004, never took off because it didn't match potential buyers' image of a computer. Meanwhile, people resisted purchasing low-priced or secondhand conventional desktops because they were too threatening--there was software to install, viruses to fight and all manner of mysterious problems.

The device shouldn't be a stripped-down version of a PC, Jain says. It should be entirely new machines, like the NetPC and NetTV, with streamlined technology and a lower price. Already, Novatium can afford to sell computing like the power company sells electricity, providing everything you need, including Internet access, for about $10 a month. And once production volume hits 1 million units, the cost of materials for a NetTV will fall to $35, bringing the sale price down to $70. In July Novatium started a commercial pilot program in Chennai with a cable operator whose feed goes into about 1,500 homes. By the end of December, it had 100 users. By the end of March it's expected to have 500, all of whom would pay around $10 a month. Started with only $2.5 million, Novatium has just 60 employees, but it is attracting attention from many major players.

One reason is that Novatium machines are open to all. Unlike most thin clients, Novatium's devices work with any network server without requiring major modifications, whether it uses proprietary software from Microsoft or Sun, or free software from an open-source company like Linux. Microsoft is participating in the Chennai pilot program because Novatium's subscription-based payment system could generate profit in markets where most users run pirated versions of Microsoft products. Top U.S.-based executives from Microsoft, Yahoo, AOL and other companies have visited Hema's house and other homes wired with the NetPC and the Nova NetTV to see how the utility computing model could work in the home. And network server giant Sun Microsystems--whose slogan has long been "The network is the computer"--has already inked a deal to market the NetPC to enterprises and schools in India beginning this year. "There's a 100 million-unit opportunity in the next five years in India itself," Jain says.