“Cloud Leapers” and the Next Billion
It has been a busy few months for us on ReadyTalk’s Innovation Team as we prepared ourselves for the launch of our Hosted Voice product with hours of researching and interviewing customers. One of the pieces of research we came across was a study done by cloud experts Odin in 2015, and that was where we first learned the term “cloud leaper.”
According to Odin, cloud leapers are “SMBs that are not currently using an in-house IT solution (no servers, web servers, or PBX systems) and are likely to move straight to the cloud, i.e., ‘leaping over’ in-house IT solutions.”
This study finally gave us the vocabulary to explain a phenomenon that we had discovered during our customer interviews. We were seeing that folks who never had a robust phone system in their organization were skipping that step altogether and starting with a cloud-based phone system. These users were taking advantage of solutions that could not have existed a few years ago because we had not yet come upon the SaaS revolution — but not because of some idealogical commitment to cloud based applications; these apps just did the job better than how they were doing things before. This behavior was really interesting to us and finally we could just say “cloud leapers” instead of all the other workaround phrases I had come up with (Try saying “non-traditional IT Buyer” five times fast).
While this terminology was useful as we were conducting our investigations and thinking about our strategy, it largely stayed buried in my mind until I read C.K. Prahalad and Allen Hammond’s Serving the World’s Poor, Profitably last week. While I was an undergrad at the University of Florida, I studied political and economic development, with a particular focus on Sub-Saharan Africa, so this is a topic that has been fascinating to me for a while. Originally published in 2002, I picked up this article merely out of personal curiosity, accepting that the information contained in it was likely obsolete 14 years later. As is typically the case, I was wrong.
A few pages in, Prahalad and Hammond describe behavior trends that were emerging in the early 2000s, particularly the idea of shared physical assets. The authors said, “Poor people, rather than buying their own computers, Internet connections, cell phones, refrigerators, and even cars, can use such equipment on a pay-per-use basis.” We have the benefit of hindsight to let us know that it’s not just “poor people” who are interested in this model. What was immediately obvious to me was the fact that, years before, the basis of the SaaS model existed in the developing world. Again, it was not because there was some burning desire to lead the cloud computing revolution from Addis Ababa as much as it was folks doing what they can with what they had available to them.
Later in the same article, Prahalad and Hammond explain, “Bottom of the Pyramid markets are hotbeds of commercial and technological experimentation.” As the argument was presented, since these communities did not have existing technical infrastructures, they solved problems in real time with technology without being tied to existing paradigms. This gave folks the freedom to develop informal workarounds to solve their problems through technology that eventually become formalized practices. As informal behaviors crystalize into formalized ones, efficiency alone is judge, jury, and executioner as far as determining what workarounds make the cut.
Prahalad and Hammond went on to speculate about how some of these strategies that take off in the developing world can have huge influence in tech communities throughout the West. They conceded the fact that it is much easier to try to be innovative when you are starting from scratch, as many in the developing world are — though, large multinationals can see benefits in developed markets from experiments they run in developing markets. I would argue, though, that there is much to be learned from developing markets for small companies entering markets today. When you can start from scratch, you can take advantage of all the accumulated wisdom, not just the traditional best practices for your market or geography.
But what does this mean moving foward?
The perpetual march of technology penetration has been at work in the developing world for years, but by 2020, it is predicted that most of the world will have access to a personal mobile device. Put another way, there will be 5 billion smartphones out in the wild by 2020. When you consider that, for a lot of folks, their first PC is actually going to be a $50 Chinese Android device and not a desktop with Windows 95, things get a bit more interesting.
To me, this means that we are about to have ~2.5 billion people getting access to life changing technology for the first time. The possible impact on mobile behavior across the globe is difficult to quantify early, but it is no stretch to say that behaviors that emerge in Kampala will change behaviors in Wichita. We are already starting to see this manifest itself with the conversational commerce trend coming to the West, based on the success of Asian messaging apps, we heard about throughout 2016. In a similar vein, the bevy of mobile banking services targeted at the rural poor may hold the key that unlocks the doors to mass market scale for FinTech. Most likely, though, the most meaningful takeaways from deeper smartphone penetration in the developing world is something that has not even been considered.
