OCTOBER 28, 2008 Microsoft Battles Low-Cost Rival for Africa
By STEVE STECKLOW Wall Street Journal http://online.wsj.com/article/SB122332198757908625.html WINDHOEK, Namibia -- Microsoft Corp. sees sub-Saharan Africa, among the poorest places on earth, as one of the last great computing frontiers. It wants to make its Windows software a fixture there. To that end, it has established a presence in 13 countries, donated Windows for thousands of school computers, and funded programs for entrepreneurs and the young. It also has used aggressive business tactics, some aimed at its biggest threat in the region: Linux, a Windows alternative that costs little, and sometimes nothing at all. In Nigeria, Microsoft proposed paying $400,000 last year under a joint-marketing agreement to a government contractor it was trying to persuade to replace Linux with Windows on thousands of school laptops. The contractor's former chief executive describes the proposal as an incentive to make the switch -- an interpretation Microsoft denies. In Namibia and Nigeria, where it has sought government contracts, the company hired family members of government officials. Microsoft says they were qualified. The software giant describes its efforts in Africa as a way to bridge the "digital divide" -- the gap between computer use in rich and poor countries. In the nearly 50 countries of sub-Saharan Africa, roughly 750 million people have access to about 10 million computers, Microsoft estimates. In many of those countries, less than 1% of the population uses the Internet at all. Critics say Microsoft's efforts to outflank Linux are steering cash-strapped governments away from the cheapest, most sensible solution. They say Microsoft has been locking African government agencies into costly, multiyear agreements to license its software. "African governments cannot afford long-term licensing contracts," says Nnenna Nwakanma of the Free Software and Open Source Foundation for Africa, a Ghanaian-based nonprofit. The money, she says, would be better spent on training people to use computers and fostering homegrown software development. Microsoft says its pricing in Africa is fair, and that the company is investing heavily in community projects across the continent. "We believe we can help improve the lives of millions of people and potentially grow our own business in the long term," says Thomas N. Hansen, Microsoft's general manager for the region. Some of Africa's poorest countries also have discovered that they can't meet the terms of a special $3 Windows package for "underserved" students around the world, announced last year by Microsoft Chairman Bill Gates. For governments to be eligible, they have to buy at least 10,000 computers that students get to keep -- an expensive proposition for cash-strapped countries. To date, Microsoft says only four countries have qualified -- Libya, Egypt, Russia and Mexico. Efforts have been under way for several years to bring computers to Africa's masses. Computer makers, including the U.S. nonprofit One Laptop Per Child, have developed low-cost laptops for poor nations. Most can use either Windows or Linux operating systems. Linux is "open source" software, meaning its coding is available for anyone to modify. A number of software companies sell their own versions at low prices, or even give them away and offer technical support, for a fee. In developed nations such as the U.S., Microsoft doesn't see Linux as much of a threat to its commanding market share in software for desktop and laptop computers. But in Africa, where resources are limited and no system has completely taken root, it does. To save money, some countries, including South Africa, Nigeria, Namibia and Ghana, have begun using open-source software such as Linux in some government ministries or schools. "Many education budgets in Africa are seriously constrained," says Dorothy K. Gordon, director general of an information-technology institute in Ghana. "At the moment, there are very, very sound, robust open solutions out there." Microsoft is trying to make Windows the choice of African government offices, schools, companies and other institutions. It contends that while Linux may be cheaper initially, Windows can cost less in the long run to maintain, is more reliable and supports many more applications. Microsoft won't disclose its sub-Saharan sales. Mr. Hansen says they are about one-tenth of its revenues in Singapore, which implies they are small. The company says it has signed software-licensing contracts with 11 sub-Saharan African governments, including Angola, Botswana and Rwanda. South Africa's technology agency signed a three-year licensing agreement costing $800 per computer, says Daniel J. Mashao, the agency's chief technology officer. Namibia's government signed a three-year agreement for about $667 per computer, according to Gordon Elliott, head of administration for the Namibian prime minister's office. Those prices appear to be close to what Microsoft charges U.S. businesses. Microsoft won't discuss pricing on any agreements. A spokesman says it's difficult to compare pricing because different deals may involve different software packages. In setting prices for governments, it sometimes considers a country's gross national income, or GNI, per person. According to the World Bank, Namibia's GNI per person last year was $3,360, compared with $46,040 in the U.S. A close look at Namibia -- an arid, sparsely developed nation to the northwest of South Africa -- shows how Microsoft is fighting Linux for a foothold in the region. Only about 200 of Namibia's 1,600 schools have even a single computer. In February 2000, Joris Komen, a former information-technology manager at Namibia's national museum, launched SchoolNet Namibia. Its goal was to bring low-cost Internet access to all of Namibia's schools. It began setting up computer labs with free, open-source educational software, including Linux. A study by the Swedish International Development Cooperation Agency, which helped fund SchoolNet, found that by 2003, it had connected 112 schools to the Internet, sometimes using solar energy. SchoolNet "has pioneered affordable strategies and solutions for schools," the report said. In 2002, SchoolNet held discussions with Microsoft about installing Windows and Office on low-cost laptops for teachers, but the talks ended without agreement. SchoolNet's Mr. Komen says that the following year, Lizzie Range, then a Microsoft regional academic program manager, "offered me a trip for fishing in Montana." He says he believed it was to be free and was meant to co-opt him. He said no. Ms. Range referred questions to Microsoft. The company says Ms. Range, who owns a Montana fishing lodge, had suggested Mr. Komen "should consider visiting the lodge" if he was in the U.S., but "no all-expenses-paid trip was offered, suggested or intimated." In July 2003, Microsoft signed an agreement with the Namibian government to launch the "African Pathfinder Initiative," a pilot program to bring refurbished Windows computers to Namibian schools. The company promised to set up computer labs in 13 schools, train teachers and help establish a government-run PC refurbishment center, all for free. Microsoft hired Sean Nicholson as its project manager. Mr. Nicholson previously had served as an adviser to Namibia's Ministry of Education, promoting open-source software. Pilot Schools Several of the pilot schools selected by the government already had Linux-based computer labs. School officials say they couldn't afford to provide technical support for both Linux and Windows systems, so the Linux software was removed. One such school was in Katima Mulilo, in northeast Namibia. In 2004, Eric Kouskalis, then a Harvard student, worked there as a volunteer teacher for the WorldTeach organization. He says the Pathfinder computers, provided by Microsoft, "weren't being used at all." He says he spent weeks fixing software and hardware problems. If multiple students tried to access the Microsoft Encarta encyclopedia, "everything would freeze up." At several other Pathfinder schools he visited, "nearly all the teachers felt very unprepared to use the systems," he says. Maggie Tabach, WorldTeach's Namibian country director, says that "from Microsoft's point of view, it was about getting hardware and software into the schools and not really maintaining it or seeing that it was used." Microsoft says its intent was "to create a replicable model on how best to provide technology to schools in emerging markets." In June 2005, Microsoft declared Pathfinder a success and announced it was turning the program over to the Namibian government. It hired Kerii Tjitendero as a contractor to help in that process. Mr. Tjitendero is the son of the late Mose Tjitendero, formerly speaker of Namibia's national assembly, who signed the government's Pathfinder agreement with Microsoft. Mr. Tjitendero, who is no longer a contractor for Microsoft, says he believes he was hired "partially" because of his father. "Just by virtue of him being my father and the fact that he was an important part of the policy part of the Pathfinder agreement in Namibia, it just makes sense," he says. Microsoft says it "believed Kerii had the professional background that made him a good fit for this role." Microsoft had promised Namibia 4,000 used computers under the program. Many were supposed to be retooled and loaded with Windows at a new Namibian refurbishment center. Lodewyk van Graan, in charge of staffing the center, says it received, at most, 600 computers. The center closed after nine months. George Cook, chief executive of Computers 4 Africa, a British charity that supplied the PCs on behalf of Microsoft, says his group delivered only 1,300 for the pilot and the retooling center. "Microsoft never asked for more," he says. Microsoft acknowledges it came up short, and says discussions with the Ministry of Education over the undelivered 2,700 PCs "remain ongoing." After the pilot program ended, some of the school computers stopped working. At the Katima Mulilo Combined School, which received 20 computers under the program, principal Fias Geel said in June that all but four were broken and the network was down, leaving most students unable to get "hands-on experience." Paul Damaseb, the principal of Eden Primary School in Okahandja, said in June that none of the 565 students had been able to use the computers for six months because of a server crash. "This is just a white elephant," says teacher Efraim Geingob. In a statement, Microsoft said the project was a "valuable" learning process. "Unfortunately, it now appears clear that the transition of the pilot to a locally supported model and the subsequent stages of the program have been much less successful." Microsoft said it "accepts some responsibility for that," and it "could have and should have managed the project transition effort better." After the pilot ended, the government launched an ambitious plan to bring computers to every school, prompting SchoolNet to stop installing its Linux-based labs. The government's goal was new computer labs, running either Windows or Linux, in 150 schools in 2007, and another 200 this year. But money has been short, and only about 55 labs had been installed as of September, all containing Microsoft software, says a person familiar with the matter. Microsoft also saw opportunity to take business from Linux in Nigeria. In 2005, Olusegun Obasanjo, then Nigeria's president, had pledged to purchase one million laptops from One Laptop Per Child, the U.S. nonprofit that promised machines using open-source software for $100 apiece. Microsoft had hired the president's son, Dare Obasanjo, in 2002; a year later, it signed a software-licensing agreement with the government. Microsoft says the younger Mr. Obasanjo was hired on his own merit, and that his hiring was not connected to winning the government business. Last year, as the price of the nonprofit's laptop rose above $100, the Nigerian government decided to purchase a different computer, the Classmate, which is marketed by Intel Corp. Efosa Idehen, an official with a funding arm of Nigeria's communications commission, says the agency hired a local subcontractor, Technology Support Center, or TSC, to purchase about 10,000 Classmates. The laptops can run either Windows or Linux, but the government said it wanted Linux, Mr. Idehen says. Microsoft says TSC asked about the $3 software package announced by Mr. Gates. Microsoft told TSC that the deal wasn't available because students wouldn't get to keep the laptops -- a requirement for the heavily discounted product. Rival Offer TSC approached Mandriva SA, a French company that sells a Linux version. Believing Microsoft had offered its $3 package, Mandriva proposed a $3 price for a Linux operating system, plus about $2 for other software, say people familiar with the situation. In August 2007, TSC issued a purchase order for Mandriva Linux, and the laptop's Taiwanese manufacturer began loading it. Microsoft continued to push Windows. It offered its XP and Office software for about $45 per machine, says Nyimbi Odero, then TSC's chief executive. Mr. Odero says Microsoft wanted TSC to delete Linux from the initial shipments of Classmates. He says Microsoft proposed a way to "make it worth your while" through a joint-marketing agreement. According to a draft agreement Microsoft sent to TSC last Sept. 13, Microsoft would pay TSC to fund "certain marketing activities to encourage the sale and distribution" of Microsoft products. Mr. Odero says Microsoft made it clear that TSC wouldn't really be expected to market the products, but could keep the money as an incentive to replace Linux with Windows. Microsoft declined to make any Nigerian employees available for interviews. It denies there was anything improper about the offer, and says it intended to pay TSC only if it performed the marketing activities and software installation. It says the draft agreement "represented negotiations that were midstream" and "does not accurately reflect the deliverables, services and expectations, all of which were under negotiation." The draft agreement stated that TSC would have to comply with the "Microsoft Vendor Code of Conduct," which requires vendors to comply with local antitrust, fair competition, anticorruption and antibribery laws. Sections detailing how much Microsoft would pay TSC, and a description of what TSC would do, were left blank. TSC proposed that Microsoft pay it $1.3 million for the activities, which it said would include laptop demonstrations, teacher training and advertising. Mr. Hansen, Microsoft's regional manager, met Sept. 28, 2007, with TSC and its parent company, Alteq, for "a very high-level discussion" about the deal, Microsoft says. That same month, Justin Spelhaug, a senior director in Microsoft's developing countries' business unit in Redmond, Wash., was involved in the "initial approval" of $340,000 to fund the TSC deal, Microsoft says. On Oct. 30, Mandriva announced it had won the contract to provide Linux software for the Classmates. Microsoft didn't give up. The next day, it delivered TSC a revised draft agreement with an "effective date" of Nov. 1, documents show. It offered to pay $400,000 to TSC. In the revised agreement, there no longer was any mention of TSC having to comply with Microsoft's code of conduct. In an Oct. 31 email, TSC told Mandriva that there had been a "change in circumstances," and that it "has recently reached an understanding with Microsoft to convert" the Classmates from Linux to Windows. Mandriva's chief executive, Francois Bancilhon, responded by posting "an open letter to Steve Ballmer," Microsoft's CEO, on Mandriva's Web site. "What have you done to these guys to make them change their mind like this?" he wrote. "It's quite clear to me, and it will be to everyone. How do you call what you just did, Steve? There are various names for it, I'm sure you know them." Mr. Bancilhon declined to elaborate on his letter. In the end, the joint-marketing agreement was never signed, and the Microsoft deal unraveled. Microsoft says it gave up after "it became clear" that the Nigerian government wanted Linux. The laptops were delivered with Linux. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
