Microsoft drafts partnership deal w/ Internet caf owners in Cebu, Philippines

Microsoft drafts partnership deal w/ Internet caf� owners

Business

Microsoft drafts partnership deal w/ Internet café owners

by Ehda M. Dago-oc
July 13, 2005

The marketing arm of Microsoft Philippines in Visayas and Mindanao, Microsoft Development Partner (MDP) is currently working on a partnership deal with the Internet Café Association of Cebu (ICAC) to help its members maintain licensed Microsoft software products.

It is an “open secret” that a number of Internet Cafés are operating non-licensed Microsoft software, and under the law it is not allowed.

Already, the business of Internet Café alone has breached the regulation stipulated in the end-users agreement that the owner of the Microsoft software is not allowed to rent out, or let other party to use it with a cost.

However, according to MDP marketing communications manager Ivy Llena, Microsoft has reached out to the Internet Café operators, and came up with an agreement to amend the end-users license regulation, in order to help the booming Internet Café Industry.

Llena said in Cebu, MDP is trying to establish good relationship with the ICAC in order to convince Internet Café owners to use genuine software to avoid being caught by the Business Software Alliance (BSA), with its active campaign to run after establishments which are using pirated software.

She stressed that what the office is trying to do is to help Internet Café owners maintain a “legal” business operation, which is to use only genuine software Microsoft products.

MDP, which is a privately owned company that serve as the marketing arm for Microsoft Philippines in the Southern part of the country, has no knowledge on the BSA and Microsoft negotiation, especially on providing the list of establishments which are known to use pirated software products, Llena pointed out.

“What we are trying to do is to reach out to the ICAC members and come up with an agreement to help Internet Café owners maintain licensed Microsoft products” Llena said.

She said MDP would like to present to ICAC members the benefits of using genuine software products, including its freedom from being caught by the BSA, which is actively coordinating with Department of Trade and Industry, National Bureau Investigation, and the Philippines National Police (PNP).

In Cebu, there are a little more than 600 Internet Cafes operating, most of them are maintaining unlicensed software, except for those large Internet Café chain like Netopia, among others.

An Internet Café operator interview by The Freeman said what keep the Internet Café owners maintain pirated Microsoft software is the high investment cost an outlet will have to spend if it has to buy licensed Microsoft software.

For a 25-unit Internet Café operation, the owner will be spending at least P200,000, with a cost of P8,000 licensed cost in every computer.

Starting an Internet Café business would cost at least a million pesos capital, and with the stiff competition, average per hour rate in Cebu would range from P25 to P30 per hour.

Aside from the Microsoft licensing investment, the source an Internet Café owner still has to spend for the licensing of its gaming products, which is the highest revenue earner of Internet Cafes today.







About CEBU Internet Cafes
Source : http://www.eitsc.com/ExecSumSMEDSEPCebuITReport.pdf

INTERNET CAFÉS
There are about 500 internet café operators in Cebu and of which 240 are members of the Internet Café
Association of Cebu. It is estimated that there are about 300,000 internet café users in Cebu. About
80% to 90% of the clientele are students. As such, many of the internet cafes are located near the
schools.
When Internet cafés first started sprouting in 1996, the business was very successful and lucrative. But
now, with so many cafes in existence in Cebu, about three Internet cafés close down every month.
Demographically, Cebu has more Internet cafes than any other city by density. Compared to Metro
Manila, it is littered far more with cyber-cafes per 100 people. Fierce competition, however, is working
against the internet café business as the situation continues to bring prices down. Thus, the tension in
the market is creating a culture of commercial anxiety as stores lining the city’s boulevards and alleys
are always on guard —— worried that customers might switch to the neighboring shop at the slightest
price drop. This, in effect, is making customer loyalty an alien term in Cebu. Internet café users are
only loyal to the shop that offers the lowest price. Competition is primarily based on price and location.
A typical internet café would have 10 to 15 computers with one or two attendants. Majority of the
internet cafes are micro scale. Similar to other micro enterprises, the owner handles most of the tasks
and is assisted by one or two attendants. Many of the internet café operators had no previous computer
and enterprise management background. Daily gross income ranges from PhP 1,500 to 3,000.
Many of the so-called neighbourhood Internet cafes are mainly game centers, where majority of the
computers are not Internet-connected but dedicated to running games. Internet cafes near the schools
also offer desktop services such as printing and scanning. On the side, they also sell pre-paid phone
and Internet cards. Others have expanded into selling of food and school supplies. Other internet cafes
are also into the assembly of hardware and computer maintenance services. A few have offered simple
training courses in collaboration with the government.
Main constraints of the industry are the following:
1. The need to upgrade management skills as well as operations system efficiency
2. Lack of product differentiation
3. Difficulties to move up vertically/value-added services
4. The need to build a wider client base
5. Unfair competition from unregistered internet café — lower overhead costs/no taxes
6. Lack of technical skills for maintenance and troubleshooting tasks, network installation – high
maintenance costs
7. High cost of components and licensed software/ online games
The industry also sees the opportunity to increase their income if they would be allowed to offer voice
over internet protocol (VOIP) based services.