Draft version

The Non-formal Business of Cyber Cafés - A Case-study from India

Small businesses enabled by information and communication technologies (ICTs) are deeply
embedded in a context of non-formal business relations and practices in developing economies. We
take the specific instance of 30 internet cafés in the city of Mumbai as subject of our study to explore
the non-formal business culture operating in and through an unregulated grey market. Using
ethnographic methods, we profile café management of everyday business strategies and
contextualize them in the broader and pervasive culture of non-formal business relationship in the
Mumbai economy.
Regulatory discourse of information technologies in general and the internet in particular is
foreclosed by the language of piracy and ill-legality. Our main contribution in this paper is re-
thinking issues related to piracy and ill-legal practices when they are embedded in non-formal
economic relations. These define and support a way of life for millions participating in a developing
economy. We attempt to open debates by positing non-formality as alternate premise to understand,
the so-called, piracy and ill-legal practices among small ICT enabled businesses. By dismissing the
ICT grey market as piracy we ignore the nature of market relations critical to governing the non-
formal IT sector bringing IT inclusion to the majority in India.
Key words- Cyber café, Ethnography, Non-formal economy, Grey market, ICT,

Introduction
India hosts some of the most dynamic information and communication technology (ICT) businesses.
These take broadly two forms; that of global IT parks serving multinational software solutions and
those of local businesses that assemble and sell hardware for non-formal or grey markets. We also
have a third kind of business, cyber or internet cafés, the focus of our research that sell internet.
First, we attempt to locate cyber cafés in the larger processes of non-formal business practices in the
city of Mumbai. Next, we explore the interaction between café business practices and client usages
of the internet through empirical data to support the argument that both thrive relationally in a non-
formal business environment. Finally, we argue for re-thinking the language of piracy and ill-legality
and suggest non-formality as alternate premise to discuss the structure and implications of broader
market relations informing non-formal business practices.

Research on ICTs for development and social inclusion has frequently pointed to shared access
models as critical enablers of sustainable development and digital inclusion (Best and Macaulay
2002, Haseloff 2005, Heeks 2005). In development discourses, they are viewed as tools that most
fit the demands of integrated development in resource strapped nations (Keniston and Kumar 2004).
Haseloff (2005) considers urban cyber cafes as potential development tools complementing the
telecentre movement in rural regions. Studies from Ghana (Burrell (forthcoming)), London
(Wakeford 2003), Bangalore (Nisbett 2006) and recently, ICTs and the informal sector in
Venezuela (Lugo & Simpson 2008), informed our research. All of them refer to unconventional
usages of public internet assemblages. These are often accessed to maintain kin relationships bound
with patterns of economic migration (Burrell & Anderson 2008). In London, local demographics
play a critical role in the usage of public internet assemblages by immigrant communities
(Wakeford 2003) and cyber cafés in Bangalore were local meeting points for youth to learn about
IT trends in the Indian job market (Nisbett 2006).

We use the term non-formal economy to denote small businesses (own-account, less than five
employees) existing in a ‘state of unease with legal frameworks, formal mechanisms and regulations
governing business practices1. A popular definition of non-formal (or informal) economy (it is also
referred to the gray market) calls it a group of underground activities that have legal ends, but
employ illicit means (Lugo & Simpson 2008) They are activities that do not intrinsically have a
criminal content, but must be carried out illicitly, even though they are arguably legal and desirable
activities. The existence of non-formal economy has been linked to the lack of property rights and
the overall bureaucratic obstacles restricting individual entrepreneurial activity (De Soto, Ghersi &
Ghibellini (1986) sited in Lugo & Simpson 2008 pp102 ). It is particularly useful to discuss the
interplay between cyber cafés and non-formal economy through the lens of social inclusion and the
only source of affordable ICT access to the bulk of population in developing economies like India.
We divide our paper providing 1) background to our ethnographic field 2) Important findings 3)
Discussion to support hypothesis 4) concluding remarks on implications of study

Case-study background and Methodology

We report from our research of cyber cafes in and around Mumbai metropolis, where the normative
forms of internet technologies and structures of Mumbai’s economy combine to endure in locations
somewhere between the formal and the non-formal, the secured and the unsecured and the legal and
the ill-legal (Rangaswamy 2007). Many of these, like other small businesses in Mumbai, operate in
and through a grey market tethered by non-formal business practices. Informality pervades the warp
and woof of these business outfits; Wheeling and dealing through dispersed family ties and local
social networks, sometimes even underground connections, are more important in the running and
maintenance of everyday transactions (Patel & Thorner 1996, Srivastava 2003). These fall into grey
areas of legal practices and remain silent or circumspect in revealing business relations and
networks. The informal sector, arguably, accounts for 68% of Mumbai’s commerce (Naregal 2000)

Our research methods included open-ended interviews with 34 café owners/managers and
observations in 30 café premises in suburban and outer-suburban Mumbai, conducted from August
2006 to April 2007. All interviews were voice recorded, transcribed and coded to deduct common
patterns of data. We bring to light everyday instances of running cyber café businesses how they find
survival niches, adopt organizational strategies and endure amidst irregular and unsecured business
practices. In our study, all 30 cafés are in commercial districts, either a).On the edge of residential
low-middle income neighborhoods or b) Outside any of the city’s metropolitan railway stations. A
geographic break-up of the cafes are as follows: 3 in the heart of the city, 11 in suburbs 10-30 Kms
from the city centre, 8 in outer suburbs 30-50 Kms from city centre, 2 in the outskirts of the city,
around 100 Kms outside city limits, 6 in the midst of bustling slums/shanty, 5 in Dharavi, central
Mumbai, the largest slum in Asia and 1 in a South-east suburb. It is spread over 223 hectares and
consists of densely packed informal settlements accommodating 700,000 people (figures of how
many actually live in Dharavi remain disputed. Unofficial sources put it at one million). It is home to
over 4,000 ‘industries’ producing anything from foodstuffs to clothes, jewellery, leather and surgical
sutures 2.
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Findings

Cyber cafés are an increasing presence, arguably 5000 of them, in Mumbai. Proliferating cafés have
made it a highly competitive business with small margins. We specifically choose low-income
neighborhoods and locations in the outer reaches of the city to understand the interplay between
business practices and nature of demand for ICTs in poor neighbourhoods with skeletal ICT
infrastructure. More importantly, internet was a new entrant in resource-poor locales and provided
opportunities to study emerging usages of internet technologies. We find three important patterns
coming out of the study: 1. Business with internet technologies, even at the small-scale of a café, is
expensive, requiring reasonable computing potential to maintain or expand business potential. Café
managers are young and computer literate, learn hands-on, enroll in private training institutes, or just
use social networks to train themselves 2. Several unauthorized practices routinely happen to sustain
business and merge with the broader structures of non-formal economy. 3. The non-formality of
business practices feed an open, liberal atmosphere to browse the internet and turn in a
predominantly youth clientele.

Interviews with café managers and participant observation in cafe premises reveal an atmosphere of
arbitrary norms and regulatory practices towards café management and internet browsing. There is
overwhelming evidence of a) Tolerance of pirated software transactions governing everyday
operations. All operational PCs and hardware are procured from the thriving grey market b)
Inconsistencies in billing transactions. There are no bills exchanged between client and owner c)
Irregular business licensing and multiple businesses running under a single business title. The oldest
café in our sample, in outer suburban Mumbai, opened shop 11 years ago. Amit, 30, who has now
taken over from the original owner recalls, “… he ran some kind of dating services and had cubicles
with curtains running all around them… … At that time when cyber cafes opened pornographic
surfing was very rampant… In Mumbai where do you get private space…?” Around 20% of cafés
in our sample still have separate cubicles but deny anything improper or illegal going on. When
asked why then have enclosed spaces the owners say nothing. Out of our 30 cafés, 5 had enclosed
cabins and 5 others partially enclosed spaces for internet browsing. Almost all operators, including
those with enclosed cubicles, said they strictly prohibit pornographic web-surf. Enclosures
notwithstanding, ‘inappropriate’ surfing is a distinct possibility. We did note the preponderance of
male users at certain hours in cafés. All cafes had regular women clients but afternoon hours saw
very few visiting cyber cafés and are predominantly ‘male space’.

Café managers are hard pressed to run a profit making enterprise and resort to available measures,
slipping into a time-tested broader culture of non-formal economic relations. We are yet to encounter
a café that did not use pirated software. Many do not own any legal software while some have a
single system license generously shared with the network of PCs. A suburban café owned a side-
business of pirated CD’s for rental circulation. I asked him what he felt about piracy. He said “Well,
the norm here seems to be piracy… We can only play the game a social context allows us to…” To
beat maintenance expense, around 50% of café owners in our sample, were hardware literate,
assembled and sold PCs to local customers. Clients coming to surf were prospective buyers of
assembled PCs. These were cheap (Anywhere between 6000-20,000 INR, 150-500 $US, depending
on quality and specifications demanded by a client) with parts procured in Mumbai’s sprawling grey
markets of Lamington Road, in south-central Mumbai. Around 70% of cafés were communication
centres offering local/national/international telephone services and digital Xerox/scanning/printing
services. Around 30% had mobile servicing and re-charge as attached business. Others had attached a
book lending library, two others photo studios, one share/stocks trading centre, the last two idling
PCs for café business. Two of them offered food catering services. All of these attached business
existed prior to beginning the café. Many of them ran these multiple business under a single license.
From what we gathered, income and profits were not declared with full transparency, more so when
profits were hard to come by. Most café spaces were rented out and economic arrangements between
owner and tenant were unclear.

Turing to our ethnography in Dharavi, there are six cyber café serving, arguably, a million people.
We profiled five of these. All five were owned/managed by a group specific to a region in South
India (kindred is an important network agent sustaining non-formal business) All of them had pirated
software or a single licensed copy generously shared with the network. None of them are stand alone
cyber cafés and attached other business. All cafes were also communication centres offering public
telephony. Four of these had Xerox/printing options and mobile phone services. One had an adjoining
business of textile retail and another had a small tea and snack stall. A third had a small printing
outfit. All are recent, the oldest around 13 months ago and youngest, a week old. That demand for
internet is an emerging phenomenon was interesting in itself. Space being premium, PCs, usually 4-8
in a café, are crowded into as many cubicles, crowded all day, mainly visited by male youth busy
surfing the internet. Café owners opinioned that Dharavi offered one the cheapest going rates for
internet services. Cyber cafes make most of their money selling internet time to young gamers and
chatters. These youth apart from purposive use of the internet like mailing, information search and
picking up computing skills have discovered the ‘covert pleasures of internet chatting and the new
high of gaming with supersonic cars and terrorism’. We spoke to 16 such self-confessed addicts and
their on-line passions. Café regulars were 16-24 years of age. The youngest so far, in an outer
suburban Mumbai café, was an 8 year old gamer who came regularly with his elder cousin. All except
4 were male. The 4 girls were made contact with great difficulty as is considered norm for young and
female persons to avoid cyber cafés for chatting or gaming. Two of them, high-school going
teenagers and chat addicts, went on-line from their home PCs; one young woman of 22 was an
employee in a suburban Mumbai café and got into Yahoo! chat with idling PC; The fourth, a 22 year
old under-grad, was a regular gamer visiting 2 or 3 favorite cafes in South Mumbai with her group of
friends. The 11 boys were hooked to these internet practices and were regular cafe visitors and spent
good money on these services. They reported most of this came by way of pocket money from
parents and other generous relatives. The most popular activity is visiting the Yahoo! chat-room.
Youth spend hours, as much as 8 hours a day, chatting with on-line friends. Internet is popular with
students for information search and mail. Off-line gaming occurs but limited by poor networking
resources (PCs are brought with pre-loaded games, all pirated)

Discussion

Embedded in the everyday functioning of cyber café business are several on-going non-formal
processes. Running a café needed 1) managerial skills to sustain business 2) willingness to
accommodate client demands 3) entrepreneurship to expand or attach business(s). All of these
belong to the ‘grey’ areas of economic practices, skirting normative demands of regulatory
behaviour. It would be understating to suggest small businesses in Mumbai come under a cloud of
non-legality. Functioning internet cafés operate within this paradigm with little scope for economic
 Draft version

transactions existing outside a culture of non-formal commerce. Several of cyber café socio-
economic transactions occupy an indefinite legal status, flirting with copyright laws and appropriate
internet browsing behavior. We also point to irregularity in business infrastructure licensing and
ownership. Cafés find ways to survive the cost and maintenance of expensive internet technology
seeking existing non-formal business networks of Mumbai.

In the Mumbai slum quarter, Dharavi, the non-formal slips back and forth into the ill-legal with
greater vigor. The very social-geographics of this hyper-active slum community is intimately tied to
ill-legal squatting, tenements and the many productive business transactions. Interestingly, the
slippages also occur between ‘irregular’ youth activities inside the café and its embeddedness in the
larger ill-legality of Dharavi’s contested legal status as a residential slum, an active community and a
bustling economic unit. We noted café owners adopt a furtive attitude towards privacy in café
premises revealing a certain ambiguity towards regulation they clearly voice and practice.

It seemed to us the greyness of the broader economy of internet cafés is reflected in the greyness of
behaviour and use of internet by youth clientele within it. As we discovered, these enthusiastic
internet addicts saw internet access as means to fulfill ‘social needs’ linked to secrecy around dating,
expressing sexuality and coded flirting behaviour. The age-group which patronizes chatting and
gaming are adolescent-young. They occupy a loosely marked social zone between childhood and
adulthood and also occupy a special place in the city's changing markets. Here, we make a
speculative and ideational connection between the ‘grey’ non-formalities of café businesses and
‘unmonitored’ chat-room dialogues that youth indulge inside it. As we point out in the paper, cyber
cafés, especially those sprouting in ‘ill-legal’ tenements like Dharavi and social practices like youth
chatting and gaming lend a new dimension to non-formality. Cyber cafés, already suffused in non-
formal/ill-legal business sociality, become sites offering a certain amount of secrecy around virtual
dating and flirting for young clients and coded economic transactions for businessmen. In the
process, the clients are also active users of opportunities the internet provides for employment,
information and skill-building. The scope of the paper does not allow a detailed reflection upon the
nature of affinity among young clients and cyber cafes. We also point to the many instances whereby
the non-formal and the ill-legal develop tenuous links, overlap and mute boundaries separating them,
a function of the overarching non-formal economy of Mumbai.

Conclusion

In conclusion, we wish to reiterate the nexus between Mumbai city, its pervasive non-formal
business culture and techno-social needs inflecting every day business of cyber cafés. The pervasive
nature of non-formality demands us to look at the emerging market discourses of IT business
practices not through the discourse of non-legality but non-formality. With regulatory discourse of
information technologies centered on piracy and ill-legality, informality of business practices in
emerging economies provide an alternate location to understand its nature and function. These
challenge received notions of visualizing IT as simply piracy and coming to terms with markets
shaped and structured by non-formal processes.

Debates around social inclusion and Information technology needs to make allowance for contextual
processes aiding affordable access and inclusion. These seem to require little donor or state
patronage. Instead they are increasingly driven by social forces that are organic to an emerging
market and commercial culture.

Acknowledgement

This material is based upon work supported by Microsoft Research Labs India. The author wishes to
thank Kentaro Toyama, Microsoft Research Labs, Bangalore, India, Rahul Srivastava, The Research
Forum, Goa, India, for valuable comments on early drafts, Sumitra Nair for editorial remarks, Amit
Vasudeo, Omkar Shenolikar, for field ethnography and data collection.

Notes
1. A broader definition includes household enterprises that are own-accounted, with family or
non-formal employees, contract employees employed by the formal sector, casual labor and
intermittent labor all of which work under varying conditions of (un) regulation (Agarwala 2005).

2. A recent survey established that in a central area of Dharavi called, Chambda or leather bazaar
the density is 336,643 people per square kilometer! With sky rocketing rental prices, a report
qualifies Dharavi as the ‘deal location to develop market-driven housing for workers serving the fast
growing financial and service sectors of Mumbai’ (Sharma 2003). In every nook and corner of
Dharavi there is industry; lanes between rows of houses, tiny lofts, even disused toilet blocks are
locations of tiny manufacturing centres, producing readymade clothes, food stuffs, leather bags,
suitcases, jewellery, soap, just about anything. Many of these are unlicensed entities but preclude
other forms of recognition by the state. Unlicensed businesses, officially outside the purview of the
law, have frequent non-formal economic transactions to stay in business with a wide range of
representatives of the state, including police authorities and municipality staff (Anjaria 2006). There
is large amount of literature around the contested status of Dharavi’s economic history (Chatterji
2005, Sharma 2003, Desai 1995, Dwivedi and Mehrotra 1995, Verma 2002, Appadurai 2000) and
nature of re-development politics.
 Draft version

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Table 1: Profiles of 30 cyber cafés

 Draft version

Age café Education No of Popular cyber café

Café Site manager Café manager PCs Attached Biz services
Internet, Print outs on-
1 Mumbai city 24 Engineering college degree 35 Share trading line Gaming
Private tutoring in graphics Internet, colour print
2 Mumbai city 21 design 8 Computer coaching outs, on-line Gaming.
3 Mumbai city 50 School drop out 8 Fast-food restaurant Internet
Mumbai XEROX, scanning, Spoken Internet, print-outs,
4 suburb 30 Private coaching in computing 5 English coaching scanning
Mumbai
5 Suburb 34 High school 8 Book-store Internet
Mumbai XEROX, PC assembling Internet- on-line
6 Suburb 30 Private tutoring in Computing. 10 and computer retail shop Gaming,
Mumbai Internet and off-line
7 Suburb 29 Engineering college degree 8 Computer assembling gaming
Mumbai Private tutoring in Basic Internet, scanning,
8 Suburb 30 Computer programming 9 No attached business Print outs
Mumbai Internet, Photocopy,
9 Suburb 32 College degree in commerce 7 XEROX, telephone kiosk Print outs
Mumbai
10 Suburb 27 Basic Computer programmer 14 Computer peripherals Internet, Print outs
Mumbai
11 Suburb 24 Commerce college degree 8 No attached business Internet and print outs
Mumbai internet, off-line
12 Suburb 20 High school 13 Telephone kiosk gaming, Print outs
Mumbai Scanning and print
13 Suburb 34 High school 6 Telephone kiosk outs
Franchise for money,
Mumbai transfer, telephone kiosk,
14 Suburb 40 High school 8 mobile phone shop Internet, share trading
Mumbai
outer Internet- off-line
15 suburb 21 Commerce college degree 4 No attached business Gaming
Mumbai Family business of
outer repairing musical internet-, off-line
16 suburb 33 High school 4 instruments Gaming
Mumbai
outer
17 suburb 24 Commerce college degree 8 No attached business Internet, print outs
Mumbai
outer Internet, off-line
18 suburb 20 high school 13 Telephone kiosk Gaming, Print outs
Mumbai Mobile services, PC Desk Top Publishing
19 Suburb 39 Commerce college degree 4 assembling internet, Scanning
Hardware maintenance
Mumbai peripheral sales, Computer Internet browsing,
outer maintenance, Software Video conferencing,
20 suburb 28 Engineering college degree 9 consultancy Scanning and gaming
Mumbai
outer Internet, web-astrology
21 suburb 24 High school 5 No attached business and photography
Mumbai
outer
suburb Computer hardware Internet, off-line
22 21 Private tutoring in Computing 5 solutions. gaming
Mumbai
Slum
23 17 Private tutoring in Computing 10 Telephone Kiosk/ fax Internet
24 Mumbai Undergrad student of business
Slum 17 management 4 Telephone Kiosk/ fax Internet
Mumbai Telephone Kiosk/ photo Internet, off-line
25 Slum 25 Private tutoring in Computing. 6 copier gaming.
Mumbai Internet, on-line
26 Slum 28 Private tutoring in Computing 4 Telephone Kiosk gaming
Mumbai
27 Slum 26 Private tutoring in Computing 7 Telephone Kiosk/Tea stall Off-line gaming
Mumbai Telephone Kiosk/Cloth
28 Slum 26 Private tutoring in Computing 7 retail Off-line Gaming
Mumbai Mobile phones sales,
29 outskirts 43 School dropout. 6 computer assembling Internet
Mumbai
30 outskirts 24 Private tutoring in Computing 5 Telephone kiosk/Xerox/ Internet