THE BLOG

Emerging Markets Are Powering Their Own Tech Growth

19/11/2014 11:13 GMT | Updated 18/01/2015 10:59 GMT

For the vast majority of people living in the West, when you think about smartphones just two brands immediately spring to mind: Apple and Samsung. But if you live anywhere outside Europe or America, then it's likely that your first thought is not either of these giants, but the Chinese smartphone brand, Xiaomi.

According to recent reports, Xiaomi is now the world's third largest smartphone maker. That's hard to get your head round, but to give you an idea of quite how popular smartphones are becoming: in India, for example, according to Businessweek at 2pm on 14 October, Xiaomi put 100,000 of its 'Redmi 1S' smartphones up for sale, using local e-commerce site Flipkart to sell them, unsubsidised, for $98 each. Within four seconds the phones had sold out.

But in India, even Xiaomi are playing catch-up. India's second most popular smartphone after Samsung is a brand called Micromax; and unless you're an emerging markets telecoms guy like me, it's unlikely you've ever heard of this brand or any of the next best-selling brands: Karbonn, Lava and Celkon Mobile.

So why are these brands so popular? Well, for a start off they're a great deal cheaper than an iPhone, plus they're built for the needs of the market. They're not just repackaged and 'imposed' on consumers; sold purely on the basis that they're must-have Western technology. And there's the rub.

Let's look at this from the point of view of what users put onto their smartphone. In the West we're led to believe that Facebook's messaging apps will dominate the developing world. Yes, Facebook Messenger is popular. But let's think logically about the future. Ignoring the potential 1bn consumers in India that at the moment don't readily have access to the money or infrastructure to get on the Internet, there are still over 250m middle-class people, many of whom reside in rural and semi-rural locations. They're aspirational - and they have the money for a smartphone. But they don't necessarily live in the city centre - so they're stuck using slower access networks with pre-3G technology, such as EDGE or 2G. Double challenges then: a low-bandwidth area and their phones tend to have less processing speed.

This situation means that while Facebook Messenger is popular in India, many consumers simply don't have the right phone or connectivity to use it effectively. The heart of the matter is that what works perfectly in the West, doesn't necessarily work in emerging markets. Which leaves the big US power-houses with something of a dilemma: they need to grow outside the West - emerging market consumer demand is about to explode - while in the West it is nearing saturation. But they can't grow without re-engineering their products, and even if they did, there's plenty of competition that's already streets ahead of them.

The big Western technology brands are no doubt well aware of this Catch-22 situation. They must know that it's OK marketing a Western brand as the must-have thing in the developing world, but if that product is not properly engineered to the local phones of the majority of users then no amount of marketing will sell the app. But what I'm not sure they've really grasped is that the real competition doesn't come from other Western brands but from tech companies located on the ground in the emerging markets themselves!

Nimbuzz for example is a fast-growing Indian mobile technology brand with more than 210m users across the globe - it's one of the most popular messaging apps in India and it offers a very similar but arguably more feature-rich service than Facebook Messenger. What makes it different is that it uses half the data of Facebook's app. So it loads in low-bandwidth environments and doesn't hog the memory and use too much RAM. The change here is that Nimbuzz has been engineered from scratch to overcome two key challenges: first, poor infrastructure, i.e. low bandwidth, which is typical of an emerging market, and secondly lower cost handsets. It's an app built specifically for developing countries. Today, Nimbuzz is helping consumers in all parts of India communicate.

In telecoms right now we're at the start of a huge revolution; we're on the cusp of a massive realignment of the technology industry globally. Before too long, the incredibly talented developers living and working in emerging economies will be leading the way. And I wouldn't be surprised if in five years' time, when we look to buy a new smartphone or think about what messaging apps we want to download, we'll be looking East rather than West!