China has driven the cost of a cell phone down past 10.00 a device. What has this done to the box tracker that only tells where your vehicle is? It’s destroyed one market and created others. Market segments like “Buy Here Pay Here” have been relegated to monthly billing of $1.6 a month. This is not your grand fathers Cadillac.
No longer is it even viable to spend $200,000 on software development for backend systems when Chinese manufacturers give it away for free. You could be spending money right now on a GUI interface system with iPhone applications and it is already obsolete. Devices are no different in cost structure. The one time cost of a steel case mold at $150,000 to create, now can be bought for $25,000 but the copy units are deployed at night out of the factories in Shenzhen China. Recently Desmond Koval from Foxconn was quoted as saying “Our prototypes are our most critical resources”. Why?
Development times have shrunk and the technology has become commoditized. So why would anyone enter the space? Why would an investor even begin to trust patents, source code or even would be entrepreneurs?
Smart negotiations, hard and fast selling techniques for strategic selling and a new robust product model must be in place at even the smallest firms. You will be pushed to innovate faster, create quicker, and solve customer issues even with reduced margins.
Once a profit center for all cellular firms, network residual incomes are even being pushed to all time lows. Recently I was negotiating with the head of the M2M department of a US based carrier and we had already crushed the pricing structure available to other companies when we introduced our ICinside product line. This has shattered the perception that a daily fee of $6.00 a day or a monthly fee to monitor your dog at $19.95 is acceptable to consumers. Beware of fake projections or false network residual numbers from firms who quote customers willing to pay $60.00 a month to monitor grandma. Run the other way.
Having lived in China for almost 8 years now, I’ve seen the ups and downs of the electronic market slide. Now more than ever the best thing you can do for investors is show them sales upfront and give them access to your customers. Without that -they will never believe you when you tell them you can honestly do it without them. Entrepreneur up.
Todd Kleperis, President IContain, Shenzhen China.