Willingness to pay
The project is designed to navigate the essentially uncharted transition between conventional information products, desired by known markets, to unconventional information services responding to the changing needs of emerging markets. In this context the "willingness-to-pay" of any particular, possibly as yet undefined, niche cannot be effectively determined in an economically uncertain environment. What degree of confidence it is possible to place in estimates of usage and payment five years hence for a service defined today?
We believe an adaptive project or service would respond like an amoeba to marketing opportunities, pulling back from unsustainable interaction as appropriate. Our strategy relies on the demonstrated sustainability of a continuing core business, through established information publishing and delivery services within more stable economies, venturing wherever possible into more risky areas (see "Financial Sustainability" below). Given the nature of Web and email marketing, charges for the service could vary from zero to "what the market niche will bear" at the time. Charges may be varied also as a consequence of sectoral subsidies, introductory offers, scaled rates and other time or volume dependent devices (see "Multi-Tier Strategy" below)
The process of payment, and "willingness to pay", will also be partially determined by continuing experiments to be undertaken with the use of "information credits" in the exchange between "users" who may also be "suppliers" of information. For Indian NGOs, credits may be provided for a bridging period by collaborating organizations or sponsors in other parts of the world. Another example would be where credits for use were given for information was gathered by Indian organizations but compiled or distributed by others. These experiments may reflect aspects of current investigations into LETS systems and their electronic equivalents. This is currently significant with the revelation of the extent of barter arrangements in countries such as Russia and is equally true of many developing economies such as India. Information has itself become a new unit of currency and the challenge is to integrate its exchange into determinations of system viability.
Reviewer 2: If the commercial potential is really there, the proponents should be seeking a loan to finance this and not a grant from the World Bank (in fact, none of their funding comes from the private sector or from developing country governments which leads me to conclude it is supply-driven and not demand-driven).
Our use of the word "commercial" in the proposal may have unintentionally misled the reader. If so, this is also reflective of the way in which the conventional distinctions between organization types and their activities have blurred in the post-modern world.
This proposal arises from non-profit organisations. These organisations do not have venture capital but they do have venture capability. The boards of these organisations consider this a worthwhile development project with good replication potential, and to which they are prepared to redirect (invest) their organisational resources and research capability. They do not see it in terms of a good investment risk in terms of financial gain. This is simply not the way their mandate requires they think. An interest-bearing loan would not be considered an appropriate funding mechanism by either of them.
Our notion of "commercial" includes market-oriented, non-profit enterprise, which may otherwise be described as earned income of non-profit NGOs. The significant distinction is that any surplus "profit" is fully recycled into the business (as salaries, equipment, training and matching funds for projects such as this); none of it is creamed off. Very similar commercial activity may also be found, for example, in many for-profit eco-enterprises attached to non-profits, family businesses, small environmental consultancies, education institutions, foundations and the like. Indeed many SME’s are non-profits in the legal sense. Within the project partner group, the UIA is a non-profit publishing house; AgoraNet, a legal collective of which it is a member, is a commercial ISP; DA is a non-profit manufacturing company of alternative technologies, amongst its other business and service hats; WCMC is a non-profit information management and consulting company.
To return to the reviewer’s point, this criticism raises the issue of whether the objective is "commercial viability" or "financial sustainability". This is a useful distinction to draw.
The reviewers probably read "commercial viability" as return on investment typical of "for-profit" business ventures. As non-profit organizations, neither the proponents nor the project seek to make that kind of money. Reframing the question in this way, it is quite clear why commercial (for-profit) interests do not invest in the manner developed by the Grameem Bank (subsequently supported by the World Bank) -- they could not make the kind of return on investment characteristic of "commercial potential". This project has a similar set of financial ambitions. As non-profit organizations, the proponents are interested in "financial sustainability", namely the long-term survival of the project with minimal call on fresh funds other than as a feature of any partnership opportunities that would typically improve the quality of information in a sector of interest to the partner in question. We believe this project is financially viable -- as the partners have demonstrated in relation to their other initiatives.
With respect to the point that "none of their funding comes from the private sector or from developing country governments", this loses sight of the range of databases integrated into the service. Without such a foundation provided by the major content-providing partners (UIA and WCMC), this infoDev project would be inconceivable. In the case of the UIA problems and strategies databases, these were originally developed with donated funds from the private sector and have been subsequently developed with advance payments for editorial costs from the commercial publisher (a Reed-Elsevier unit) of the last three hardcopy (and CD-ROM) editions. With respect to the organizations information, this is covered by advanced payment from the same publisher since the early 1980s. The French translation of this database has been largely subsidized by funding through ACCT, which is largely composed of developing country francophone governments. WCMC’s datasets have been prepared in part by funds from corporate sponsors such as oil companies and sporadic funds from developing countries. All this funding is "hidden" within the project, at least not moneterised. But without this long-term, multi-sectoral investment in content, the project would be an idea that could not take off.
The key partners in the proposed enterprise have a long-established track record in the information business (UIA and WCMC) and in grass-roots, third-world development (DA) at its innovative and risky edge -- specifically with respect to the supply of new kinds of information and development tools into emergent markets. In responding to issues relating to financial sustainability, we make the following points:
1. The partner organisations are each already characterised by financial sustainability. infoDev funds are not sought to bolster existing operations but to extend economically sustainable operations into other domains. The distinction to be made is between establishing a new enterprise from scratch and building on a reasonably stable platform and existing initiatives that work.
2. At the broad level, the partners do not distinguish between the financial sustainability of this project and that of their ongoing concerns. This is because the work proposed for infoDev is essentially on their own development paths. They are prepared to contribute considerable matching funds and bring in other funds and partners to accelerate this process. They are also keen to share skills and technology and recognize that this project will enable joint approaches in the Indian context that would otherwise remain untested.
3. At the same time, the partners are keenly aware that the project must produce viable outcomes which survive beyond the term of startup funding. One criterion of its success is that the service provided at the termination of the project period has more or less independent financial sustainability. A key determinant of this measure of success is "willingness to pay" (see relevant paragraphs both above and below). Other indicators will be the startup of agency operations (already begun by DAINET) which themselves embody financial sustainability and the growth of users and their appreciation of the service. Both developments have strong potential to attract additional external sources of financial support to the project.
4. We hold no illusions about the challenges of financial sustainability in a financially stretched market. Some of our models and guidelines for creating success are (1) food market vendors in India have flourishing businesses despite the "poverty" of many of their customers; information, we argue, is also a basic necessity; (2) systems of micropayments and credits, such as the Grameen Bank and Local Exchange and Trading Systems (LETS), administration of micropayments are more realistic in countries with ample labour resources; (3) shared facilities and costs, with wealthy users paying for the backbone of the service + own use charges, poorer users simply for their use (this applies not only within India, but worldwide, because the major part of the data will be globally available and is of global relevance; more on this aspect is provided below); (4) sponsorship and other support, eg any future project of the UIA or WCMC that results in data enrichment will indirectly benefit future users of the service.
5. Because aspects of this project are (1) modular (additive in content to long managed databases; additive in coverage to already funded iniatiatives) and (2) interwoven with information developments funded by other parties in other domains (eg internet and e-commence initiatives), this project has built in a considerable degree of shared risk with other "non-project partners". The immediate circle of partners is INFO2000, Ford Foundation and the Spinning the Web consortium.
6. At the very least, the project will reliably make available in the longer term the substantial corpus of information that has been accumulated over a couple of decades. It will deliver back to NGOs material that they themselves in large part have provided. This information will be more or less continually updated by other ongoing projects within the partners’ domains and those of other hyperlinked domains. This level of service is essentially passive and costless. The additional cost component increases with increasing interactivity. This aspect of the project is also dealt with under "Ongoing Costs" (below).
Mixing commercial and non-commercial goals
Reviewer 2: Mixing commercial and non-commercial goals may perhaps be plausible but I personally feel such an approach is doomed to fail. The document notes that almost all commercial ventures on the Web are currently failing - it would be even more complicated to marry this with non-commercial uses.
We disagree. The mixture affords flexibility which is of advantage to "risky" and "enduring" ventures alike, ie any project whose survival is subject to the whims of fashion and the marketplace, as information projects currently are.
The UIA has long demonstrated its capacity to mix the commercial objectives of its publisher with its own non-commercial objectives -- to the considerable satisfaction of both parties. Whilst it may be "complicated" to marry such contrasting philosophies in a Web environment, the proponents believe they have a credible strategy for doing so -- as well as a variety of credible fall-back positions if any particular tactic proves unsuccessful.
Reviewer 1: In particular, it would be useful to see a breakdown of the estimated costs of service provision over the medium to long-term which clearly distinguishes these from the operating costs/overheads of the agencies involved.
For the strategy described above to be viable, it is assumed that the greater part of the costs of this service would be absorbed into the ongoing operational costs/overheads. In this sense the objective is to benefit maximally from the publishing advantages of the Web.
Once provision is made for stakeholder access to data, by covering server operation and maintenance costs, the core costs then relate to processing information resulting from user interaction with the information and service providers. This is personnel time. We are anticipating a continuing additional requirement of between 1 and 2 persons to deal with the specific person-to-person requirements of this service. The people will be Indian staff of DA employed at TA or PA level. The estimated ongoing cost is $US 30-40,000 annually and will be built into the annual budget requirements of the organization. After completion of the project, the UIA role in India will be advisory, currently envisaged as a cost that can either be absorbed by UIA and/or is within the external consulting budget of DA.
In a worst case "pull-back" scenario, the person-to-person services can be completely automated or severely cut back (as current experiments have determined). Under optimal conditions (an "expansion" scenario), ongoing costs relate to the continuing editorial/research development of information profiles and linkages -- together with the continuing development of the interfaces through which users interact with that information (including new visualization techniques). We see these being funded by a combination of DA/UIA/WCMC surplus funds, some of which will be user charges, and complementary new contracts or direct sponsorships.
Reviewer 1: Further, more detail is required on the proposed multi-tier strategy.
The nature of the multi-tier strategy would be based on a combination of willingness to pay and ability to pay (as indicated in the following table) -- further modified by the amount of information supplied in response to the query of a particular category of user (ie inclusion/exclusion of some data elements for particular databases).
The details of the multi-tier economic and marketing strategy would be a matter for continuing review and innovation in the light of the development of e-commerce possibilities, loss-leader marketing opportunities, exercises in LETS-type interaction with user-suppliers, as well as sectoral subsidies or sponsorship.
Indicative user groups
"Able to pay"
"Unable to pay"
Those deemed "able to pay" would be designated as Category A users and charged "what the market would bear". Typically Category A would include corporations, governments and universities of industrialized countries. The requirement for payment may be accompanied by an explanation that this not only supports work to maintain the quality of the information content but supports access of financially disadvantaged users.
Nonetheless, it is expected that even Category A users would get some level information for free, notably "data", eg names, addresses, URLs, raw statistics and the like; essentially any simple, unprocessed materials that would be considered by their "owners" as public information. Factors certainly likely to trigger user charges are access to multiple records, formatted records, or lengthy texts of professionally edited documentation, extensive searches, analyses or downloads that heavily consume server time, and the like.
Those deemed "unable to pay", or to engage in any kind of LETS-type exchange, would be designated at Category D and would be allowed some form of free use of the system. This might include a range of users from developing countries (or their equivalent in industrialized countries). Note, however, that guest users of all types might be initially accorded this freedom as part of the marketing strategy. A strong encouragement would be given to all such users that contribution of information in return for use would be valued.
Those willing to engage in some LETS-type non-financial exchange in return for information supply would be allocated to Category C. Typically this would include certain kinds of advocacy groups and other non-commercial "power users". Certain academics have expressed a desire to work in this way. Other organizations in this category would be current collaborating partners in information banking of UIA, DA and WCMC.
Category B would be for users that it was considered appropriate to support to some degree in the interests of development objectives, notably those of the World Bank. This would include some bodies with limited ability to pay, whether in developing or industrialized countries. It would include some important development NGOs, for example.
In working with the above scheme, the intention would be to shift users into a progressively higher category, Category A where possible, but without denying them the service if it was possible to include them in one of the other categories. Users could, for example, be allocated to Category B if some sectoral services were subsidized by interested third parties.
Offsetting charges to the poorest
Reviewer 1: To what extent can the needs of the poorest (commonly those with most need) be offset by charges to commercial organizations and other partners? Have WCMC or others investigated this aspect of service provision?
WCMC employs various options to meet the needs of the poorest; it does this routinely as part of its service provision for research, information design and capacity building. Firstly it charges at different rates (discounted, standard, commercial) and ploughs surplus income back into service management and development. Secondly it tends to be rather more flexible over services to those who are not in a position to pay. Thirdly, it has in the past managed to attract funds for providing information services to those less able to pay. As will have been noted, these WCMC procedures are similar to the guidelines for equitable redistribution of resources that we have proposed for the infoDev project.
Ironically, best intentions in this regard can be foiled. Making unsold copies of UIA reference books available to users in developing countries at zero cost price turns out to be significantly inhibited by transportation costs as well as customs charges (to the destinee), especially when secure forms of delivery are considered necessary. As a result very few copies are distributed in this way and unsold publications are simply pulped (despite consultation with Unesco concerning alternatives that would not undercut commercial sales). This is a cause for regret for both UIA as owner and Saur as publisher. Distribution of outdated CD’s poses fewer problems and is being reviewed. In a Web context the inhibiting factors are largely absent. As the above table indicates, users can be allocated into Categories B through D to the extent that the service costs permit. In this way costly reference information can be provided in inexpensive formats and those with greater monetary resources can subsidize the needs of the poorest.