Execution Plan for Mozambique

CSD Course, Fall 2008. Open Case Team Presents. KTH, Stockholm

Open Case – Connests World to You !

This podcast is a practical plan for Open Source Networking Business Idea in Mozambique.

1. ACKNOWLEDGEMENT
This document is outsourced by OSN team to a sub group, which is formed by four ICT
Entrepreneurship master students. We would like to convey our gratitude to the
following people who have helped us to prepare this document.
Professor Björn Perhson, for all the constructive advices and the tips that he gave us.
Anders Sjögren for his great project management skills and personality.
Finally and most importantly, Daryoush Ali Shokrgozar, Elnaz Shayesteh, Pamela Vicelja
and Samuel Ndaula for helping us to prepare this document for the benefits of
entrepreneurs to start up a company in Mozambique

2. INTRODUCTION
Open source software is not only simple free software any longer, but it also caused to
force companies to find new business models for revenue generation. Open source
creates value and can get returns by the value it creates by providing different types of
services.
This report provides the business model for a proposed open source software company
in Mozambique. It covers the product description and a short background of the
company. It goes on to suggest different services that the company could use in order to
make money on the product it offers.
We know that one of the greatest hindrances to social and economic development in
Africa in general and Mozambique in particular is lack of financial resources. The
solution we are proposing is a low cost alternative to equivalent proprietary
alternatives. The solution’s total cost of ownership is a fraction of the competitors,
alternatives cost. What we offer is a networking solution at a fraction of the cost of
proprietary alternatives.
It is important that every business proposition must have a clearly defined Business
Model to support it. As Henry Chesbrough tells us in his book “Open Innovations1 ”, the
business model is the blue print of how a company turns the latent value in technology
into a solution for which the customer may be willing to pay thus generating revenues
for the company. It should cover the following aspects:
Articulation of the Value proposition of whatever product or service the firm is
providing.
Identification of the market segment that the firm is targeting.
Definition of the structure of the firm’s value chain.
Specification of the revenue generation mechanism.
Describe the firm’s position within the value chain.
Formulation of the competitive strategy.
In this document we lay out a business model for a company that is going to provide
Open Source based routing solution Bifrost/OSiAN, including the complementary
services, in Mozambique.

Also, we prepared a document to convince policy makers about the benefits of open
source products for developing countries. This document can be found at Appendix A.
3. PRODUCTS
Proposed company will be an open source software company, specialized in open
source routing software. Specifically, the product is called Bifrost/OSiAN; an open
source pc based networking system. The software is free to download and open to
further development and modifications.
4. SERVICES
For a company providing open source solutions, the revenue sources tend to become
scarcer. Hence, the major source of revenue for the company comes mainly from the
services it provides. To this extend, proposed company in the attempt of generating
high revenue with its product in Mozambique, provides the following services:
4.1 TRAINING AND CERTIFICATION
Training can be categorized into two main levels: basic and advanced training.
Furthermore, both training versions will be provided online and on-sight. This service is
targeted not only to system administrators and IT students, but also to any employee
(member) of any of the organizations that uses the product. The basic training, as the
name implies, is targeted to beginners and trainees with little networking knowledge.
The advanced training is targeted to experienced or professional networking users.
The online training can be accessed from the company’s website, where the trainees
interact with one of the appointed instructors who leads the training. On the other
hand, the on-sight training is a type of service where the company’s instructors go
directly to the customers’ premises to provide training.
The training materials would include videos, flash clips, ppt slides and technical
documentation. The training will be given in the universities or other training agencies.
When the training is carried out well and the product takes off, it is possible to go
further to giving certifications. The certification mainly focuses on the current target
markets. For instance, in the beginning, target markets are MAREN, MoRENet and ISPs
in Mozambique, so we will mainly give certification to this country.

4.2 CONSULTANCY
Company will offer professional consulting services to its customers. This type of service
works by connecting the customers with the technical resources of the company. Such
services include: network migration planning, implementation planning, network
architecture and design, interoperability testing and network integration.
4.3 TECHNICAL SUPPORT
Technical support is also among the complementary services. The customer will be
provided with both online and offline support on request. Technical support should be
available whenever our customers or partners encounter technical problems associated
with our routers. This support would be offered over the Internet and by phone
depending on the customer’s subscription.
Company will offer subscription based technical support. One of the most important
aspects of our whole product concept is technical support. Since African community has
some difficulties to understand and use the open source, technical support becomes
crucial to make the customers happy.

5. FOCUSED MARKET SEGMENT ANALYSIS
Initially we are aiming at the NRENs (specially the MoRENet2), the local ISPs and any
other organizations that have or are planning to build their own private networks. These
can be any governmental places, libraries, hospitals or banks.
The value chain will include the PC suppliers because the router is a PC based product,
the Bifrost development team and training providers. The training providers will be
offering training courses and training material for users and certification training.
It is also important to decide what space is the company occupying? To understand this,
please refer to the graph 2 below.

6. CHANNELS ANALYSIS
In addition to all of this information Porter’s Five Forces model is also important to
analyze market and channels in Mozambique This analysis will allow us to determine how attractive and profitable a market can be
when considering the 5 forces defined by Porter as “the micro environment”.
Threat of new potential entrants:
- Low penetration of internet in Mozambique makes the market not so attractive for
competitors yet
- Language barrier
- The scarcity of economical resources in the country makes the market not too
attractive
- KTH has already developed relationships with the NRENs and the government of
Mozambique

Bargaining power of supplier:
- It may be not so easy to find reliable providers operating in Mozambique
-Since the open source routers rely on normal computers and not very specialized
equipment it is possible to find multiple providers and avoiding dependence on a single
provider
Bargaining power of buyers:
- Currently there are no open source alternatives available in the market for
Mozambique so buyers will be happy about having an alternative solution.
Threat of substitutes:
- Other non open source networking solutions that may arise in the future
Industry competitors:
- The main competitor in Mozambique is Cisco, which already provides routing solutions
in the country. If Cisco decides to lower the prices of the products it could be a serious
threat given the high reputation of the company.
- There are companies such as Vyatta3 which provide similar product and may decide to
target the same market in the future
- Open source solutions are still in an early stage of adoption so the level of competition
is still relatively low

7. REALITY TEST
Referring to the graph below, reality test helps us to visualize the risks that the product
or solution may face in the market place and it is an aid to formulate mitigations against
such risks and contingencies in case those risks become reality.

8. REVENUE GENERATION AND PROMOTIONAL STRATEGIES
As revenue generation activities, we propose to have two sub models.
In the first one, we propose to give away the router free of charge to any customer who
is willing to pay in advance for a 3 year premium subscription for technical support. This
subscription will be approximately USD 3000.
The second option is to buy the router equipment and pay an annual technical support
subscription of about USD 1500. Our guess is most customers would find the first option
attractive because they get the router for free and make substantial savings on the
annual subscriptions.
For the promotional strategies in Mozambique, we suggest these methods.
Advertisements in Universities and Colleges:
By publishing our product in the universities we will not be helpful in offering a better
product but also help the students studying there to provide more innovation in
information communication technology. We will advertise our product by the help of
colorful handy brochures, posting advertisement charts on universities notice boards.
E-Advertisements:
When doing the market research we have come across a lot of websites of Mozambique
where we can place our product and services banners or redirectors to our website. The
cost varies from site to site. But, right now the most important is not the eadvertisement,
so we can focus some other methods.
Exhibitions and Stalls:
This is rather an expensive methodology for the advertisement, but for the case of
Mozambique seems to be quite beneficent and profitable for us as we can attract a
large number of community by this methodology.
Arranging Presentation and meetings with Banks and Businesses:
This is a cost effective and efficient model for marketing our open source networking
solution product. We may need to recruit technical sales guys or technical consultants
from Mozambique as they have their own language for communication. The cost for this
varies and we need further research to calculate cost for the marketing team.

9. SWOT ANALYSIS
By using SWOT Analysis, we are evaluating the strengths, weaknesses, opportunities and
threats involved in this business venture of open source networking in Mozambique. We
hereby present objective of the project and identify the internal and external factors
that are favorable and unfavorable to achieving this objective.

Strengths
Cost effective
Flexibility
Scalability
Broadening of knowledge
Job creation
Free router if 3 year subscription

Weaknesses
Lack of resources
Fail to perform good enough
Lack of confidence in (prejudices
against) open source solutions

Opportunities
Government’s goal of “transforming
Mozambique into a producer and
not only a customer of ICTs”
More costumers
Existence of NRENs
Existing initiatives with enterprise
incubators in Mozambique
External funding for IT projects in
Mozambique

Threats
Competitors like Cisco
Legal problems in the country
Open source adoption

10. FINANCIALS
In Mozambique Internet access is provided by private companies, at a high price and not
offering a fast internet connection as to allow intensive exchange of information. By
connecting National Research and Education Networks (NRENs) with other academic
institutions in nationwide networks, it will be possible to encourage NRENs to share
knowledge, increase research and development capacity and finally create value for
their country. This case study consists in building an infrastructure to connect
universities and research centers in Mozambique under a national research educational
network called NRENs. In this internet infrastructure a PC-Based open source
networking mode is used due to its lower cost and flexibility. The goal is to define the
business model for this idea, which will enable to sell this product in the future or make
this solution acceptable for the possible customers.
The main assumptions here are:
- The project will open an office in Mozambique.
- The costs are calculated in USD
- Initially the team in Mozambique will be formed for only 4 people: a manager, an
engineer, a secretary and an office messenger.
- Since there are already projects with MoRENet4 we assume that initially the potential
customers will be the 10 universities that are already members of the net. Hence we
estimated an initial inventory of 12 routers should be enough.
- The break even point will be reached when the sales amount to 83610 USD. The sales
amount to be considered should include both the price of the router and the price of all
the related services offered and provided by the company (technical support,
configuration, documentation, etc.)

APPENDIX A
Benefits of using Open Source products and solutions.
Low cost
As we all know, Open Source products and/or solutions are more cost effective than
their proprietary counterparts. Even though one has to pay for the complementary
services around the core Open Source products, the total cost of ownership turns out to
be much lower than that of comparable proprietary solutions.
Flexibility
Open Source products by their nature are more flexible in the sense that any user who
has the knowledge can always modify and enhance the product as per his or her specific
requirements. This is something that is difficult (and sometimes impossible) to do with
proprietary products. For a given business it is important to not be tied to a specific
provider and to avoid an excessive dependence, keeping the freedom to choose an
alternative later on as the business experience changes.
Scalability
In many cases, the user would want to start with the basic product at the beginning but
scale up at a later stage. With proprietary solutions, this can be achieved but it is usually
done at a high cost due to the extra equipment that one is required to procure in order
to be able to scale up. On the other hand Open Source solutions allow the user to scale
up as his or her needs change without having to purchase the extra equipment.
Knowledge sharing
Through using Open Source solutions and participating in activities such as developing,
enhancing and modification of these solutions, communities of knowledgeable people
are produced and this is not only beneficial to the individuals themselves but to the
society as a whole. Open Source solutions encourage collaborative working and
knowledge sharing all over the world.
Creation of businesses and jobs
The use of Open Source products enables people to create businesses that offer various
services around these products thereby creating jobs for the communities. The services
may include training and other consultancies.

Bridging the digital divide
Because of their relatively low cost as compared to proprietary solutions, Open Source
solutions could be the answer to the “Digital Divide” syndrome that is affecting the
world today, in which those who don’t have access to the amenities of the Information
Society are left behind and their chances of ever catching up are being reduced by the
day that passes.
Conclusion
As we can see, Open Source can be beneficial to developing countries in several
different ways. First of all, it provides low cost but effective solutions to some difficult
problems. Communities can achieve what is needed without having to invest large sums
of the so much needed money. Secondly, through using these Open Source solutions,
these countries will be able to provide their people with the necessary access to
information that is crucial for social and economic development and at the same time
produce teams of people that are competent and knowledgeable in various fields of
Information Technology. They will become in turn not only consumers but also
providers of technology.

CSD Course, Fall 2008. Open Case Team Thanks. KTH, Stockholm