Auctioneer EachNet’s Success in China

A WSJ story on how EachNet, founded in 1999, has made things work in China. eBay bought a 33% stake in it a year ago for USD 30 million.

Straight out of the eBay playbook are the site’s system of having buyers and sellers rate each other to build trust, and its staggering diversity of products. But EachNet hews closely to the realities of the Chinese marketplace. Many of its services are geared to help buyers and sellers exploit the huge inefficiencies in many sectors of the Chinese economy — exactly what the Internet had always promised to do.

For example, on the EachNet Web site, with its trademark lime-green and bright orange colors, the largest category of goods sold is clothing. Unlike in the U.S., with its national clothing chains that also run their own online operations, China’s clothing market suffers from fragmented distribution and huge price differences between cities. And because clothing bought in stores is often marked up sharply to cover store rental and overhead costs, many cost-conscious consumers shop for clothes online.

Other top-selling categories include computers and consumer electronics, another market characterized by huge price differentials; electronic goods tend to be cheapest in the southern province of Guangdong, which is home to most of the factories where the goods are made.

EachNet relies on the old-fashioned but serviceable postal service to handle the bulk of deliveries and payments between buyer and seller. It uses China’s growing ranks of private courier services, which benefit from a vast pool of cheap labor to deliver goods door-to-door for pennies, often by motorcycle or even bicycle. And it puts a great deal of faith in the ingenuity of buyers and sellers to reconcile logistical problems and endure hassles that might scare off the average American consumer.

“Our model relies on the entrepreneurial nature of people. Buyers and sellers are more resourceful than you think,” says Shao Yibo, the company’s 29-year-old co-founder and chief executive.

Lessons from EasyGroup

David Kirkpatrick writes in Fortune about what one can learn from Stelios Haji-Ioannou’s EasyGroup [via Anand Patwardhan]:

Look for services with high fixed costs, price elasticity–meaning that consumers will typically buy more if prices drop–and the ability to be ordered over the Internet. Then create a frill-free offering that gives consumers few if any choices. EasyJet has only one class of service; EasyInternetcafe ditched its printers because they demanded too much maintenance; EasyCar rents only one class of car and requires that it be returned, clean, to the same location. Says EasyGroup chief technology officer Phil Jones: “We don’t aspire to be all things to all people. We do one thing very well at low cost.”

At lunch recently Stelios bubbled over with new ideas. Consumers today are even more interested in low-price services, he says, and the technology that makes it all possible has never been cheaper. He hopes to open the first EasyCinema outside London shortly. It will have few employees; customers will print out tickets at home or from lobby terminals and will be admitted by a bar-code scanner. Pricing will vary not by age but by showtime and how far in advance viewers purchase. Holding him up is the resistance of the movie studios; Stelios says he anticipates a legal battle. Other new ideas include a low-cost hotel chain called EasyDorm, an EasyBus service, and EasyCruise. “It’s a great time to have a clean sheet of paper and some know-how rather than a lot of infrastructure already in place,” he says. That was a common theme in the late ’90s; it’s truer than ever now.

Some good ideas for our thinking at Emergic.

2003 and Beyond

Automation Access has a long editorial on the trends that we are seeing around us, and how they will play out. There is also a section which deals with “the road ahead” for Microsoft. Here’s the take on software:

The PC software industry is in the final days of being destroyed by Microsoft, [which] is preparing to drive the few remaining significant software publishers out of the Windows market.

Soon there will be Microsoft, Intuit, and Symantec. While Intuit will put up a strong fight, its popularity is not something Microsoft will tolerate for long. Revenue plans for Microsoft Great Plains do not allow for the existence of accounting software competitors. Microsoft will use Longhorn and .NET to bash and batter Intuit. Symantec will continue because someone has to publish antivirus software, and it isn’t going to be Microsoft (liability issues).

Paradoxically, a strong open source alternative is the best hope for a revived commercial software industry. Much software needed by businesses is simply of no interest to open source developers. As Linux becomes a mainstream business operating system, the market for commercial software running on Linux expands.

The market for commercial software running on Linux is, however, a market for small companies to serve, and will not spawn a “new Microsoft”.

Slashdot thread

Sony PlayStation 3

For its new gaming console due in two years, Sony is designing a chip based on “cell microprocessor” technology which could, according to Dean Takahashi, “allow it to pack the processing power of a hundred of today’s personal computers on a single chip and tap the resources of additional computers using high-speed network connections” and help it “achieve the industry’s holy grail: a cheap, all-in-one box for the home that can record television shows, surf the Net in 3-D, play music and run movie-like video games.” More:

Ken Kutaragi, head of Sony’s game division and mastermind of the company’s last two game boxes, is betting that in an era of networked devices, many distributed processors working together will be able to outperform a single processor, such as the Pentium chip at the heart of most PCs.

With the PS 3, Sony will apparently put 72 processors on a single chip: eight PowerPC microprocessors, each of which controls eight auxiliary processors.

Using sophisticated software to manage the workload, the PowerPC processors will divide complicated problems into smaller tasks and tap as many of the auxiliary processors as necessary to tackle them.

“The cell processors won’t work alone,” Doherty said. “They will work in teams to handle the tasks at hand, no matter whether it is processing a video game or communications.”

As soon as each processor or team finishes its job, it will be immediately redeployed to do something else.

Programming these consoles would be a daunting exercise!

As one of the analysts quoted in the article says, “Games are the engine of the next big wave of computing.”

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Windows-Unix TCO Comparison

Paul Murphy compares TCO (total cost of ownership) for Windows and Unix, in the context of a small college / university. Numerically, Unix is cheaper by more than 50% vs Windows. There’s more to it than just number, as Murphy writes in his conclusions:

In the Microsoft client/server model, faculty members become part-time PC-support workers, continually interrupting themselves to deal with the latest crisis. This gradually reduces their own view of computing to that of the Windows PC while blanking out their awareness of other options. In many places, this is what we have now. Not only is it wasting a significant percentage of teaching resources, it’s producing a generation of graduates that thinks SAP costs $495 and runs on a PC.

In the Unix model, the computers work. They blend into the background like telephones and power plugs, letting teachers teach and researchers research.

As a result, the direct-cost comparison shows a Unix advantage in the range of 50 percent over five years, but the unquantifiable indirect effects are clearly much more significant. These costs, measured in terms of how well the faculty does its job, play out over the lifetime of the university’s graduates and the careers of its teachers.

Stay with Microsoft and the need to work with the PC will gradually narrow your view of the computing world until all you can see and all you can teach is the hope that the next generation of Microsoft products will magically be effective. Go all-Unix and the computing infrastructure disappears from day-to-day visibility, leaving teachers free to teach their subjects and students free to learn.

Slashdot thread

It would be good to do a similar analysis from an emerging market viewpoint, and using a terminal-server approach.

Amartya Sen and Famines

Amartya Sen won the Nobel Prize for Economics in 1998 for his work in development economics. A part of his work has been devoted to the assertion that famines do not occur in democracies, an assertion that is being tested in India. NYTimes writes:

“No famine has ever taken place in the history of the world in a functioning democracy,” [Sen] wrote in “Democracy as Freedom” (Anchor, 1999). This, he explained, is because democratic governments “have to win elections and face public criticism, and have strong incentive to undertake measures to avert famines and other catastrophes.”

Now, however, in India, the main focus of Mr. Sen’s research, there are growing reports of starvation…About 350 million of India’s one billion people go to bed hungry every night, and half of all Indian children are malnourished.

Meanwhile, the country is awash in grain, with the government sitting on a surplus of more than 50 million tons. Such want amid such plenty has generated public protests, critical editorials and an appeal to India’s Supreme Court to force the government to use its surpluses to feed the hungry.

To Mr. Sen, though, it is not the thesis that needs revision but the popular understanding of it. Yes, famines do not occur in democracies, he said in a phone interview, but “it would be a misapprehension to believe that democracy solves the problem of hunger.”

In his more recent writings, Mr. Sen has paid more attention to the shortcomings of democracy and how they can be addressed. The key, he said, is not to jettison democracy but to find ways of making it work better for society’s underdogs.

TECH TALK: RSS, Blogs and Beyond: Mapping Blogs

Tens of thousands of blogs exist, and there are few goodand comprehensive blog directories. That may seem strange, considering that as the Web pages evolved in 1994 and 1995, Yahoo was there to categorise the Web in its hierarchies. But blogs are very different. Unlike websites, they are not so much about topics or companies, but about people and their ideas. People are inherently multi-dimensional, and this is reflected in their writing. The result: a single blog will typically cover a diversity of areas, very much in the nature of its author.

This makes categorisation of a blog (or even a blogger) a very difficult exercise. And yet, the hundreds of thousands of blogs that exist out there beg for some form of classification, as to make them easier to find. If we do not do this (or maybe even if we do this), blogs are likely to end up in two bins: one, of the few and famous bloggers, who become hubs and get lots of traffic, and the second, that of the rest of the bloggers, whose traffic is quite limited to friends and family, unless they are chanced upon by the famous few. Should we try and alter this future?

I believe so. I start with the belief that most bloggers have certain areas of expertise, on which they will dwell on more than other topics. This belief stems from just seeing people around us we know someone who is a movie whiz, another who is great at talking about travel destinations, someone else who knows about MPLS and telecom, or that other person who is a finance guru. Of course, not all of them will blog, but more likely than not, the world of bloggers will be a reflection of the expertise areas that we see in people in the world around us. The challenge: finding these experts.

The point to note is that the world of blogs is a connected world, a networked world. There has been a lot of work which has happened recently in understanding how networks are formed and about the laws which govern them. Clay Shirky has written an article recently about Power Laws and Blogs. Three recent books by Barabazi, March Buchanan and Duncan Watts shed more light on networks. Blogspace is still emerging, so it will be some time before theories emerge as to how blog (and expertise) maps can be built.

This notion of thinking of the blogosphere as territories carved out by experts can be quite useful in helping us think of how to categorise blogs. What we need to think of is to connect areas to bloggers. So, for example, when I want to know anything 802.11b, the first blogger who comes to mind is Glenn Fleishmann. If I want to know more about wireless and open spectrum, Kevin Werbach comes to mind. If I want a general technology expert, Dave Winer is the connector. The idea here is that given a set of words or phrases or topics that we are interested in, we should be able to connect to a set of bloggers, who are the experts in that area. This is the first challenge that a Blog Directory needs to tackle.

Tomorrow: Blog Directory

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