In India's rural areas, Internet on broadband, or even a 64 kbps Internet connection, is still a pipe-dream. Well, the pipes can be laid if one follows a dream.
With the vision to back it, Praveen Kumar Prithvi, Managing Director, OneRoof Service Pvt Ltd, is keen on extending his vision to take the Internet services to villages in the southern states via the social franchise route.
His target group comprises mostly youth and student communities, which he will reach out through 5,000 rural computing centres in the southern states over the next five years.
"Since June 2006, OneRoof has opened 10 centres in Thiruvallur and Kanchipuram districts in Tamil Nadu. These 10 centres are owned by OneRoof. We now plan to expand via the sale of turnkey OneRoof franchises, the first five of which will open during the first quarter of 2008 and scale up rapidly in 2008," says Prithvi.
Under its Rural Entrepreneurship Development Program, OneRoof charges a franchisee fee of Rs 70,000 plus 8% of sales at each centre as royalty.
Prithvi, an e-governance project veteran, with prestigious undertakings like the Kuppam project (Andhra Pradesh) under his belt, notes that the micro franchisee centres will be financially viable only if they come up in commercial areas fringing most rural pockets.
"There are lean seasons like summer holidays, when student influx will be low. The centres can double as BPO-related help desks during such periods. Besides, there are prospective partnerships we will enter into to deliver rail and air ticketing services, insurance premium collections, cellphone recharges and financial services via electronic smart cards," Prithvi comments.
The current breakeven per centre of Rs 30,000 justifies the Rs 3.6 lakh (Rs 3, 60,000) in investments for hardware and other start-up costs from the franchisee's end to operate out of his own premises, he adds.
Renting a 200-400 sq.ft building to house the computers and server, purchased under a tie-up with HCL Technologies, would require start-up investments of up to Rs 4.2 lakh (Rs 4, 20,000).
Even after paying the two operators at each centre monthly salaries of Rs 4,000 each, the franchisee is able to break even says Prithivi -- considering the high demand for computer courses like Tally and services like desktop publishing, gaming and digital photo processing in the rural areas.
A sophisticated MIS system allows OneRoof staff and franchisee owners to view unit, sales and margins online by service. Royalties on turnover will be paid monthly by each franchisee.
OneRoof's total operational expenses are high at Rs 1-1.5 crore (Rs 10-15 million) annually for its 15 centres in Tamil Nadu. The next five years could be a stretch as more centres sprout up in the four southern states. Tighter franchisee oversight would require new branch offices.
The company is making a start with new offices to open shortly in Coimbatore, Vellore, Salem and Erode. Prithvi allays fears of high overheads, saying that the company is currently logging revenues of Rs 36 lakh (Rs 3.6 million) per month. He is pinning hopes of breaking even on OneRoof's expansion apex over the next five years primarily through royalty and franchisee fees.
His Indian subsidiary is replicating the model of its San Francisco-based parent, which has successfully run rural computing centres in Mexico, Brazil and other developing countries with economic structures mirroring India.
OneRoof India has 15 centres of which five are franchisee managed with the rest being company-owned. Prithvi is bullish on the franchisee model which can help it slash start-up costs per centre and give it buffer funds while on the route to profitability.
Ninety-nine per cent of the 5,000-strong rural computing centre network post set-up in five years will be run on the franchisee model.
While margins in this business are expectedly thin, the cascading effects of computer awareness will see the business model offer scope for more flexibility in royalty fee for franchisees, Prithvi says.
OneRoof's key challenge will be to narrow the digital divide by enhancing services to make the system cost-effective
