How will China innovate?

SiliconBeat writes:

We talked the other day with Ronald Chwang, over at Acer Technology Ventures.

He’s one of four partners in the Silicon Valley office (Santa Clara) of the venture firm, a spin-off from the Taiwanese computer company Acer. The firm was on the early side of the latest wave of VC firms scrambling to invest in China, making its first investment there in 2000.

True, Chwang is here in Silicon Valley, he says, because it still leads technology innovation broadly. Hands-down winner. Developments in intellectual property, new business models, or just divining things that are “very hard to do” — it’s largely happening here in the San Francisco Bay Area. So the trick so far has been to apply the innovations here to the market back in China, tweaking products so they fit in with local usage habits, cultural preferences and so on.

But then Chwang says things have been shifting lately. In some areas where China’s market size so exceeds the U.S., they’re poised to sneak ahead with several technology innovations. Take the mobile phone usage, where China clearly exceeds the U.S. Chinese companies, he says, are developing new ring tone, music/picture/video messaging capabilities not yet seen here. “Just because of sheer population,” he says. Short Messaging Service (SMS) is taking off faster in China because of the country’s censorship of official newspapers and online news sites. “SMS is China’s underground news media,” he notes. He predicts new innovations sprouting from that usage. Another area is in DVD media. China already has a higher DVD standard, offering higher quality and more storage capability than the going US standard. And with broadband usage taking off in China, companies are moving aggressively to offer video-on-demand — something slow to catch on here. So just as Japan forged a lead in consumer electronics, China has potential to lead in several of these new mobile/DVD/broadband areas, Chwang concludes.

Classifieds and RSS

SiliconBeat wonders if classifieds ads could shift from newspapers to eBay-craigslist to RSS:

The ability of web site owners to publish feeds of their content, known more commonly as RSS, could soon allow sellers and buyers, or employers and potential employees, to more efficiently find each other.

Consider XYZ Corp., which wants to hire five programmers. Its human resources team can place ads in newspapers and with Internet jobs sites Monster and Career Builder. Or, for free, it can create a constantly updated jobs feed that individuals can subscribe to with their aggregators, and that search engines can index and make available for searching.

Former Overture Services and Knight Ridder Digital executive Tony Gentile and Scott Rafer, CEO of Feedster are among those who have promoted the idea. Rafer, in fact, is testing a service at that allows users to scour RSS feeds for job listings.

Rafer says the Monsters and Career Builders of the world may someday become largely irrelevant once companies create RSS feeds of their job listings. will not be able to make money on listings in the same way they do now. Instead, their revenue may come from offering fee-based services — such as background checks on potential hires — that complement the listings and tap into their expertise about the jobs market. (Clarification via Scott.)

“Really what’s going on is, if you have all the job postings, ads, whatever, people have to come to you,” he said. ”What we’re seeing is a world where if you want to see all the software jobs east of the Mississsippi, I can aggregate that and give it you cheaply.”

The concept extends beyond job listings. What about individuals who want to sell their furniture or digital cameras? Today they go to craigslist, eBay or the local paper.

But what happens when they begin publishing their own classified ads on their own web sites? Blogging tools make it a cinch for anyone to quickly and cheaply become a publisher and instant advertiser. In the new world order, they could post their classified ads on their blogs and wait for a Feedster or Technorati or Google to scoop up the XML feeds, categorize them, and make them find-able by anyone on the Web.

“An XML feed for anyone who wants one,” Rafer said. “This puts Monster in a new position. It puts eBay in the buyer insurance business, or something other than the listings themselves. It’s exactly why web services exist.”

Taken further, the concept would allow people on both sides of the transaction (buyers and sellers, recruiters and job-seekers) to publish ads. A smart search engine would automatically notify them when it finds the right matches (think Semantic Web ).

The $100 PC writes about efforts by Microsoft, AMD and Intel, and then adds:

If you want to spread low-cost access to computing, and ultimately protect intellectual property, maybe it’s time to revisit Larry Ellison’s concept of the network computer. You probably remember that the Oracle executive pushed the notion of small, diskless “appliances” that included a monitor, keyboard, network connection and not much else–especially no place to run pirated software.

The idea was that all of the smarts were pushed down to network computers from server computers running Oracle’s database and communications software. Oracle was to make its profits by selling the server software to hosting companies, Internet service providers, governments and the like.

Ellison even founded a company, Network Computer, Inc., to manufacture and sell the devices. But after reinventing itself as a TV set-top box maker, that venture crashed and burned when it failed to get additional funding back in 2003.

Other companies–including Gateway, Sony and the former Compaq Computer–introduced cheap Net-surfing machines four to five years ago, and all ultimately exited the market as the cost, and profitability, of PC hardware plummeted.

Now, the modern version of the network computer concept comes from Sun Microsystems, which is pushing its Linux-based Java Desktop System as a low-cost way to provide computers to people in China and elsewhere. The company signed a deal last year with China Standard Software to provide JDS to millions of consumers. Sun is also aiming the program at India, Israel, Japan, South Korea, Vietnam and other countries.

Devising a low-cost PC isn’t an exercise in altruism. At stake is an opportunity to gain a foothold in what could be the biggest technology market opportunity this century. Ballmer has thrown down the gauntlet. So who’s going to take up the challenge?

We are working to do just that.

Vodaphone’s Strategy

WSJ writes how Vodafone’s aggressive moves are stirring up the industry:

Vodafone’s strategy is altering the balance of power in the $500 billion cellphone business. For years, service operators and phone manufacturers coexisted peacefully, bonded by a mutual dependency. Companies such as Vodafone didn’t want to miss out on hot new phones and phone makers relied on service providers’ huge orders. But as the cellphone market slowed, their goals diverged. Now Vodafone wants to control the look and feel of a cellphone rather than leave those choices to phone makers. Its profit growth is likely to come from selling add-on services and the most effective way to market them is to embed Vodafone’s software inside customers’ phones.

At stake is control of an everyday device owned by more than a billion people. The winner will be in a position to shape the future of the cellphone business and cream off the profits that come from being a premium brand.

The losers, by contrast, could be stuck with a low-margin commodity business, one that’s subservient to its former partner. That was the fate of the U.S.’s personal-computer makers that allowed Microsoft Corp. to elevate its own brand over theirs and dominate the discussion about how PCs should operate.

This push is critical for Vodafone’s next generation phones, based on a system called 3G, or third-generation technology, which can perform a range of tricks from making video phone calls, to playing music tracks to pinpointing users’ locations. Vodafone has spent more than $27 billion on this technology and wants its phones to prominently showcase the new services. At a European and Japanese launch earlier this week, Arun Sarin, Vodafone’s chief executive, said the company is aiming to sell more than 10 million 3G handsets by March 2006, adding that “no matter what handset you are using there is a Vodafone experience.”

Cisco’s IBM-like Plans

The Economist writes about how John Chambers plans to keep growing:

On the one hand, Cisco is still fighting fiercely to stay ahead of technologically savvier rivals such as Juniper in its core business of switches and routers. Last year, for instance, it released the CRS-1, a router that looks like three industrial-sized refrigerators in a row, costs over $1m, and is known inside of Cisco only by the vulgar acronym HFR, for huge fucking router. On the other hand, Cisco is sweating hard to make and sell new kinds of gear. The main danger in this strategy is that Cisco will come up against new, and possibly stronger, rivals.

One instance is the booming market for voice over internet protocol (VOIP)ie, telephony delivered over the internet instead of circuit-switched telecoms networks. Many firms are switching to VOIP because it is dramatically cheaper or even free (as long as a call need not interact at all with the traditional phone network) as well as much more convenientvoice-mail and e-mail all go into one inbox, for instance, and are accessible from any internet connection anywhere. To make that switch, firms need to replace their old switchboards (called private-branch exchanges, or PBXs) and telephones, and Cisco is happily selling them new internet PBXs and internet handsets.

Cisco’s competitive position is, if anything, even worse in the other growth markets it has identified. The fight to be the alpha male in the market for corporate data-storage networks, which are huge consumers of network bandwidth, is between two focused makers of storage switches, Brocade and McData. Cisco is a distant third. In another very promising market, that for wireless and wired home networks, Cisco has bought itself a strong consumer brand called Linksys, but it is up against stiff competition from firms such as D-Link, 3Com and Netgear. Even when it comes to making corporate networks more secure, a natural product extension for a router maker, Cisco is behind firms such as Check Point, the leading maker of firewalls.

In a way, all this loops back to the original dilemma. Cisco, the router company, is ageing gracefully in an unexciting market; Cisco, the cocksure attacker of new markets, is discovering that lots of muscular lads are there already. So Cisco is adding one more strategic effort. Cisco wants to become a trusted business partner, not just a router company, says Mr Chambers. What this really means, says Deb Mielke, an industry consultant, is that Mr Chambers intends to emulate IBM, where he once worked, by transforming Cisco gradually from a boxmaker into an army of network consultants and integrators who charge for services as well as, or even instead of, hardware. That might indeed help him to grow revenue, although it really does sound a bit old and grey.

Om Malik has some counterpoints.

TECH TALK: CommPuting Grid: Developed Market Drivers

The CommPuting-as-a-Utility model that we have discussed is not going to be limited to just the emerging markets. It also has potential in the worlds developed markets, though for an entirely different set of reasons.

Whereas the key rationale in emerging markets is the need for a solution which addresses the twin problems of cost and complexity, in the developed markets, the situation is different. The complexity issue is still one that needs to be solved, but cost is less of a consideration. In fact, the problem is that of plenty a surfeit of computers (desktop, laptop) and other devices (cellphones, PDAs) for every person mean that the problem is one of data synchronisation. With high-speed broadband networks available almost everywhere in these countries, it becomes entirely possible to centralise data, and treat the various devices as presentation and interaction devices in other words, network computers.

Brian Roberts, Comcast CEO, says: Customers want to drive the car; they want to be in control of the remote and not have to live with the linear schedule. We call that the personalization of television that what has happened on the Internet is now going to happen on television and on-demand is a big part of that strategy…The goal is that five years from now it’s virtually unlimited, using the great progress of Moore’s law, where the servers get cheaper and capacity gets greater. You’ll have 30,000 to 40,000 hours someday. We’re really building a whole new cable system inside the cable system in the on-demand world. Computers and television are converging.

Ramesh Jain builds on this point: The convergence of PC-TV is finally here. Clearly Comcast views TV business going more towards becoming a server-based time-independent video content business. In this model, TV will be more like a so-called portal and to access content, powerful search and exploration tools may be required.

Masayoshi Son, CEO of Softbank, Japans leading broadband provider, adds: I think the TV or the PC or the handheld device all become just a subset terminal output device for the internet broadband service. So in broadband service you have lots of content or services in the server, in the network. You don’t need that much on the local thing. Everything would be network computing, and innovation would happen along the network.

Consider another point. Every computer being currently used in the developed market on the desktop and in homes is likely to get replaced in the next four years, given the traditional PC upgrade cycle. This creates the opportunity to overlay a new computing architecture one that conquers complexity and assumes the presence of a ubiquitous global broadband communications network.

Last Word

The first wave of computing adoption in the past two decades has addressed the needs of the top 10% of the world. The CommPuting Grid offers a potential to focus on the next 90%. The building blocks for grid computing low-cost network computers, broadband connections, commoditised software platforms are now becoming available. India and other emerging markets have an opportunity to leapfrog into the next-generation of computing just like they did with mobile telephony.

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