The sound of the school bell is loud and shrill. Within minutes, a batch of fifth graders sprint out of their classrooms across the muddy playground and race up two flights of stairs to the only air-conditioned room in the Seegehalli Government Primary School. It isn’t the cool air and the swanky interiors that attract them, it’s what the room houses. They hurriedly occupy their assigned seats, books and pencils kept aside, hands on the power button of sleek CPUs, eager to kickstart class.
The moment the teacher signals, they recite the three steps of switching on a computer in a sing-song manner. The familiar Windows logo shines bright on their screens and in no time they have moved on to typing out short sentences on their Notepad applications. Given their ability to recite the instructions and type in English, you might assume that English is their medium of instruction, but that’s not the case. “These children had never worked on a computer before until three months ago. Most of them come from poor households and speak only in Kannada,” says Malavika Chaturvedi, program management officer, Avsar, an NGO that conducts computer classes here as part of Washington-based Expeditors’ CSR program.
Low PC penetration in government schools is a harsh reality in a country that proudly claims to be a global IT hub. As per a 2015 report by the National University of Educational Planning and Administration, only 26.42% of Indian schools have computers. Chaturvedi explains how high PC costs deter schools from purchasing them. But there is one company in India’s Silicon Valley that seems determined to change that. Set up in 2009 by cousins, BS Mukund and Raghav Boggaram, RenewIT refurbishes old PCs and laptops and sells them with a warranty and an authentic operating system license from Microsoft at half the market price. Mukund, an IIM alumnus was part of FMCG major ITC’s marketing team when a business model about harvesting spare parts from old computers in the US interested him. It was at the same time that Boggaram, who worked for the marketing team at Srushti Pharma, had to dispose a fully-functional laptop for work purposes and found a willing buyer in his security guard. “That’s when we realised that a lot of these computers have a good amount of life still left in them and given India’s low PC penetration, there is a market for low-cost second-hand machines,” explains Mukund.
The duo were cautioned by their parents that they must proceed with a new venture only if they were sure of the business model. And that’s what they did. Not only did they modify the spare parts model for India by focusing on complete machines, they also approached the business in a more systematic manner unlike several PC re-sellers in the country. “Corporates often dispose their machines, which are enterprise-level systems that have the ability to run 24/7. Thus, if worked upon, they can run for another five to six years,” says Boggaram. That’s how RenewIT began approaching several corporates in and around Electronics City in Bengaluru. “It took us a while to stabilise the number of incoming machines as we realised that although the corporates found our model impressive, disposing old machines was the last thing on their mind,” adds Mukund. Thus, the brothers invested Rs.30 lakh from their savings, borrowed some more from their families and rented a 2,500 sq ft workshop in Bommasandra.
Once the requisite paperwork was in place and they got the ISO certification, they began establishing ties with other re-sellers to source old computers. With an extensive 40-step testing procedure in place they started vacuuming the machine and wiping off data to prevent malware and virus attacks. The team invested in several proprietary diagnostic tools whereby even an IT diploma graduate could be hired to test the machines. Now, it deals only in branded computers such as IBM, Dell, Lenovo, HP and uses only branded parts for replacements. It is also India’s first Microsoft authorised refurbisher, which means that you can obtain a Microsoft OS license at a fraction of the actual cost, and the machine comes with an extendable six-month warranty.
It currently caters to different segments of customers — schools and NGOs, parents and students, offices and businesses. With computers priced as low as Rs.4,500, RenewIT uses funds from retail sales to subsidise its offerings for government schools and NGOs. The company has sourced computers to around 100 schools and NGOs. It are also in touch with corporates who wish to provide digital literacy programs to government schools as part of their CSR projects.
Sumedha Rao is a part of Whitefield Ready, a group of people who volunteer at government schools in Bengaluru. The Rotary Club of Bengaluru funds the setting up of computer labs and in the past three years, it has sourced around 40 machines from RenewIT for five labs used by at least 600-700 kids. Rao says, “Often the old machines donated by corporates don’t run efficiently. But RenewIT’s refurbished machines are a blessing because it tests it thoroughly before sending. I can buy a computer for my basic needs in the school for Rs.12,500 whereas a new one would cost me 2.5x extra. Also, they assisted us in networking the labs, otherwise, we would have had to pay more.”
Another element that makes RenewIT a preferred choice rather than a neighbourhood vendor is the prized Microsoft software. RenewIT is currently one among two such re-sellers that provide this license for its products. Also, the license for this original software package from Microsoft comes at 1/10th the cost for NGOs and educational institutes. Sivabalan who heads the IT infrastructure team at Isha Foundation in Coimbatore cites this as the main reason they procured their machines from RenewIT. “Traditionally a new PC would cost me Rs.25,000-26,000, a little more for the software licences and if I opt for a better configuration, then another Rs.10,000. Here, we were able to purchase PCs for Rs.10,500 and even laptops at a much lower cost. The good thing is that it comes with a Windows licence and if there are any issues, then they have arranged for a vendor contact in my city to get it fixed,” he says.
Update to stay relevant
The attractive price tag might prompt customers to inquire about their offerings but Mukund says a mindset change would help sales even more. “Sometimes, we have parents coming over to inspect a few models. These are people who have never operated a computer in their lifetime. We sit down with them and understand their kid’s requirements and suggest a machine accordingly. Two days later, they call and tell us, ‘I have understood but my kids still insist on a new machine’.” Thus, acceptance of second-hand products among customers is still an issue. However, K Ravishankar, senior advisor, at Villgro, a social enterprise incubator believes that the tide is slowly turning in their favour. The enterprise incubator gave a grant of Rs.10 lakh to RenewIT. He cites the boom in the second-hand car market as an example to ascertain that people will be more open to purchasing refurbished PCs. He believes that there is immense potential for growth in this market. “There is certainly competition from organised players. But, this is a largely untapped market,” he says. A 2015 report titled India Marketplace: IT The Unrealised Potential by KPMG and MAIT supports this. The report states that Indian households with a PC amount to just 10% compared to 35% in China and 45% in countries such as Brazil, Turkey and Malaysia. Among the 78 million urban households, 15 million use a PC while only 9 million, among 168 million homes in rural areas, house a PC.
Thus, the opportunity is immense for RenewIT which is working on establishing a wider after-sales support network after clocking a revenue of Rs.3.5 crore in FY16. “For any electronics product, after sales support is crucial, currently we have authorised vendor outlets in Mumbai, Bengaluru, Kolkata, Chennai, Delhi, Secunderabad and Hubballi,” says Mukund. Villgro’s Ravishankar also believes expansion is crucial and tie-ups with vendors in other cities to service refurbished products should be next on their agenda. “There is a need to approach different markets simultaneously not sequentially. Customers are your biggest brand ambassadors and to cater to them, there is a whole lot of networking required to establish more service centres especially in rural areas,” he says. Though it currently ships products to places such as Arunachal Pradesh and Srinagar, it is yet to figure out how to serve these customers, in case the machine develops a technical snag. Despite this, it has repeat customers in such areas. Avsar’s Chaturvedi says, “We have just purchased another batch for our computer lab in a Pune school and even in the future, we will continue to source from them because they are very responsive when it comes to resolving issues.” Boggaram adds how one NGO from Srinagar kept ordering bulk consignments despite not having a RenewIT support centre in the city. The company also just secured an order of 80 computers from the Uttar Pradesh government which are to be installed at schools in Mirzapur, Sonbhadra and Bhadohi districts.
The company, which hasn’t attracted any PE investment yet, claims to be comfortable with the debt it takes for working capital. A lot of their revenue is invested in acquiring the best technology to test their computers and hire good talent. RenewIT runs a lean team with seven engineers at its Bommasandra facility, that at any given point of time holds 1,000-1,500 machines. Villgro’s Ravishankar is in favour of the frugal approach. “They come from a business family, if they wish they can pump in a lot more money towards activities such as marketing. It is a good thing that they are very careful about their finances,” he says. While scaling up is a key focus area, RenewIT is well aware that a few years down the line computers might not be relevant anymore and thus they are trying to keep up the pace as well. “We are trying to stay relevant with the times and have even refurbished tablets for a couple of schools in Bengaluru,” says Boggaram. While earning money to run the show is a major concern, RenewIT hasn’t moved away from its core purpose of making computers affordable and thus accessible to many more.