Asian Perspectives

WSJ writes that “the rising incomes of many of Asia’s rural residents — thanks in part to government spending — are beginning to make a mark in both the economic and investment pictures around the region.”

Rebellious farmers in India, fed up with development skewed toward technology and the urban elite, set the stage for what is developing into a pan-Asian development and investment theme by throwing out the Bharatiya Janata Party-led government in elections in May. The new ruling coalition promptly passed a budget that included an extra 100 billion rupees ($2.18 billion) for investment in irrigation, food-for-work programs and other rural projects.

The message from India — that rural areas really matter — has been resonating for some time with the Chinese Communist Party, which doesn’t face popular elections but feels the heat from peasants angry about widening income disparities, proliferating local fees and taxes, and the loss of farmland to factory owners and golf-course developers. After decades spent cosseting urban industry with subsidies and preferential policies, tax breaks and other benefits now are flowing to farmers.

Another article in WSJ (no link available) had an interesting point – growth in Asia (especially India and China) is being driven by thw twin resolutions of outsourcing and rising domestic consumption.

The consumption revolution changes how Asian consumers consume and the outsourcing revolution changes how Asian producers produce. Each ushers in further changes. The new ways of consuming and producing turn out to be intricately linked and mutually reinforcing, and will prove to have far-reaching ramifications.

The consumption revolution is better known as it has been going on for longer. The export-led growth regime that served the Asia/Pacific region well for much of the post-World War II period has now been supplanted by domestic consumption-driven growth.

Setting the stage is the rapid expansion of the middle class, which is defined as someone with a minimum level of income of $5,000 per person per year (which is the level where consumption begins to shift quickly from basic necessities to discretionary spending). The investment bank CLSA estimated the total size of this middle class at 226 million in 11 Asia/Pacific countries excluding Japan in 2002. More than 65 million of these individuals are already in China, which is the country where the middle class is growing fastest. By 2010, this number could reach 541 million in Asia/Pacific.

The rise of the middle class translates into broadly based growth in domestic demand. This phenomenon stands in sharp contrast with the past situation of a small elite at the top buying luxury goods, while the vast majority lived at subsistence level.

This twin revolution, which is firmly underway today, will therefore see the emergence of Asia/Pacific as a high-performance economic region in the coming years. The region’s foundation of growth will therefore be more balanced and sustainable. More knowledge-intensive and higher-paying employment will be created. The middle class will grow much bigger, with all the benefits that a vibrant and prosperous middle class brings.

Kevin Rollins Interview

SF Gate has an interview with Dell’s new CEO Kevin Rollins (Michael Dell is now chairman):

Our model is a very intensely execution- oriented model. We have a strategy, which is a Dell Direct business model, but then the key to its success is how well we implement it day in and day out. Anytime we fail to execute is the biggest risk by far.

[HP] had a great, profitable printer business before [their merger with Compaq]. They still have a great, profitable printer business. … Their profits are 70 to 80 percent from the printer business. So that’s the area where the profit pool still lives. It’s where it lived before. It’s where it still is now. So I just ask, what’s changed?

[PC growth is being propelled by] New technology. The Internet. Broadband. Wireless. More software. More media capability within the home. Obsolescence and just wearing out. You have to upgrade your PCs. You have to do that at some point in time because they just fall apart. They don’t last forever.

Brad Silverberg Interview

Slashdot points to an interview with Brad Silverberg, former chief of Microsoft Windows division, who left the company in 1999. He is now managing partner and one of the founders of Ignition Partners, a VC firm. Some excerpts from the interview:

I think Microsofts biggest competition for Windows is older versions of Windows. There arent that many new people buying computers that didnt have computers. Its a pretty saturated market worldwide at this point. The places where there is really the most growth are developing countries where they dont pay for software. Not much of an opportunity for Microsoft there. I think the biggest thing they have to do is to figure out how to get people to upgrade, and thats a challenge because people tend to upgrade now only when they buy a new machine.

[Microsoft is] struggling with not so much open source, per se, but rather they are no longer the low price solution. In the past Microsoft was the low cost solution and Microsoft was then competing and attacking expensive proprietary systems from below. Now for the first time the tables are turned and it’s Microsoft that’s being attacked from below by a lower price solution. Microsoft needs to figure out how it can demonstrate better TCO to justify its higher prices. Another aspect to that, which is an area I think Microsoft is also struggling with, which is when you are as successful and dominant as they are, how do you continue to foster that ecosystem? What really propelled Microsoft Windows success was an ecosystem that they created that allowed other people to benefit from your success. Actually your success was really a side effect or byproduct of their own success. If they saw a way that they could develop your platform, make money for themselves and build big businesses. Now that Microsoft has expanded into so many different areas there is reluctance from some developers to continue to invest in a Microsoft platform because they wonder how do they build a business? How does it become their business and not Microsofts business? So people are looking for alternative platforms that create new ecosystems that allow them to build. The challenge to Microsoft is to continue to keep that ecosystem going and to get developers and applications folks to see that there is benefit to themselves in adopting and continuing to develop for the Microsoft platform.

Separately, for those in India, Business India has a cover story on Microsoft India.

Local Search

Chris Schroeder of The Washington Post Co. offers a contrarian view:

I believe the problem for local search is only partly technological, and partly a data acquisition issue. Both the essence and opportunity of real local search is and has always been, even in print directories, nuance.

Nuance means sensitivity to geography (Reston, VA is NOT Washington, DC). Nuance means a sensitivity to qualitative factors (Is the restaurant romantic, or for kids? Is the doctor really good at neurosurgery or other trauma? Are there reviews available from reliable sources? Or at least by people like me?) Nuance means sensitivities to price and value comparisons (What is the best deal, or the most I can afford?) Nuance means countless things to countless people, location by location.

Searches of the massive, unstructured data world that is the Internet cannot do any of this in any kind of useful Web experience at the moment. And, interestingly, where the search engines are weakest here, quality local publishing and commerce sites are strong.

So who might actually be best positioned to win here? Here’s an argument for the often forgotten local newspaper sites. Local newspapers and their sites generate page after page of local content based on the nuances of each city. They have the feet-on-the-street relationships with local merchants. They have-in areas such as classifieds, entertainment listings, merchandise listings, personals listings-a long head start in useful, comprehensive and deeply local structured data. And they are sitting on one of the richest, untapped databases of retail goods for sale embedded in their display advertising (think definitive destinations of what is on sale in any city). With some investment, they can create structured data base after structured database of plumbers, doctors, lawyers, wedding planners, and so forth. As importantly, such Web experiences could not only be comprehensive, but “smart.” They would not just offer search results, but make them nuanced. They would add related links to “meta-content,” articles and reviews, including self-published community commentaries a ‘la eBay and Zagat, and add price comparisons and booking capabilities. Through permission-based registration information, as well as smart cookies and behavioral targeting, they could have powerful knowledge of their users and what their needs are. This all adds up to an online destination that does not exist, and is not easily replicated.

Healthcare and IT

The New York Times writes about the US government plans “for modernizing the nation’s health care system with information technology, bringing patient records and prescriptions out of the realm of ink and paper and into the computer age.”

The report, “The Decade of Health Information Technology,” is being published at the beginning of a government-sponsored conference in Washington. It says that the government should work closely with the private sector to ensure common product standards for storing electronic health records, so data can be shared among institutions and personal information can be kept secure. A product certification system, the report says, should be considered.

The government also plans to organize a consortium of private companies to plan, build and operate health information networks. A Health Information Technology Leadership Panel of industry executives and health care experts will be created to advise the government on the costs and benefits of health technology, and will report in the fall. Among other steps, the government will create a Web site where Medicare beneficiaries can review customized information about services they have received. A pilot test of the Web site will be conducted in Indiana this year.

The savings from making the transition to electronic health records, according to administration officials and health care experts, could be sizable in terms of both dollars and lives. The report estimates that if most patient records were in electronic form, the savings would be about $140 billion a year, or nearly 10 percent of the nation’s annual health care bill.

We should be looking at seeing how we can build an IT-enabled healthcare system in India also, leveraging the commoditisation of IT and the grwoth of networks.


The Economist writes:

The ability to build powerful computers cheaply, combined with growing commercial demand for high-end computing power, is creating a renaissance in the field of supercomputing.

Two applications in particular have driven the development of supercomputers: the modelling of climate change and of what happens inside a nuclear explosionthe second of which is necessary because of the ban on actual nuclear testing that is obeyed by established nuclear powers.

Will the future be full of supercomputers built from more off-the-shelf parts? The American government wants researchers to focus on more customised and expensive systems (reversing the policy in place since the early 1990s). A report this year by the president’s science adviser warned that research in high-end supercomputing has not kept pace with demand. Consequently, this month Congress passed legislation to increase funding of supercomputer research.

America’s Defence Advanced Research Projects Agency, an arm of the Pentagon, also wants a petaflop machine for its research work. Whether the competition for this contract will be won by a supercomputer built from off-the-shelf components, or built from scratch, is unclear as yet. However, some think that the real limiting factor towards achieving such a machine is software rather than hardware.

At the International Supercomputer Conference, held in Heidelberg, Germany last month, Steve Wallach, a vice-president of Chiaro, a router manufacturer based in Richardson, Texas, and a supercomputer expert, suggested that supercomputer hardware may have to relinquish some performance in order to make the systems easier to program. This is a particular problem for machines built from off-the-shelf systems which often have very low efficiencies. While they may be excellent at running the benchmark programs that set the speed rankings, many of their multiple processors remain idle when confronted with real computing tasks.

TECH TALK: Tech Trends: South Korea Leads

South Korea provides a glimpse of the Always-On World, as Business Week writes:

Glitzy new services by mobile carriers are the rage in South Korea, which has emerged as a test bed for the global wireless industry. Cell phones in Korea shuttle data at broadband speeds, up to 2.4 megabits per second. Increasingly, young commuters are shunning newspapers and books in subways and gazing instead into phones for TV, videos, and music downloads. And phone execs are racing to offer services that do everything from trading stocks to finding restaurants. Why? In a country where 75% of the population already talks on cell phones, new data services are the only path to growth. “What’s important is who could be more imaginative or creative,” says SK Telecom senior manager Park Tae Jin.

At the forefront of the race is SK, with 52% of the wireless market. Some 2.5 million SK customers, including Han, have signed up for its June phones, which cost $350 to $550 and are specially designed for multimedia. These handsets, made by local manufacturers as well as Motorola, run processors three times faster than normal phones and have enough memory to download nine hours of music or two hours of video. The payoff? June subscribers spend more than twice the average for data. Han’s bill runs an average of $135 a month.

Real-time TV access is popular — but only for those who can afford it. To lower costs, SK is looking to the skies. In March, it launched a satellite that will beam DVD-quality video to a new phone using digital multimedia broadcasting technology. The service, which provides access to 39 channels of movies, news, and information, will go for a fixed monthly fee of $10 to $12.

Phones are doubling as credit cards as well. Here’s how they work: Instead of pulling out a wallet, a shopper points the cell phone to a tiny terminal next to the store’s cash register or the ticket machine in the subway. An infrared beam sends the user’s credit-card information straight to the card company. The phone asks for a personal ID number to close the purchase. “It’s great to be able to walk into restaurants and shops without worrying about leaving your wallet behind,” says Park Sang Eon, a marketing manager at a logistics company who purchased a credit-card phone last October. “I hope the phone will also work as my driver’s license and my ID card in the future.” wrote recently about the boom in online gaming in South Korea, thanks to the proliferation of broadband networks:

The seemingly overnight emergence of online gaming serves as a successful case study in South Korea’s drive to strengthen its flagging economy with new technologies. An unprecedented program to build a national broadband network has provided the fast Internet connections required for online gaming to thrive. The digital pastime has, in turn, created new businesses looking to meet the demand for more products.

More than 28,000 gaming parlors operate throughout the country, according to various estimates–one for every 1,700 residents. Three cable TV channels are dedicated exclusively to covering tournaments and how-to shows on games like Blizzard Entertainment’s “StarCraft,” a real-time strategy game not unlike the Milton Bradley analog classic “Stratego.”

The gaming boom also shows how quickly a relatively new technology can inspire widespread cultural changes. In just a few years, online games have become serious competition to movies for mass entertainment in South Korea, despite the stereotypical images of game parlors as ill-lit rooms filled with cigarette smoke and budding criminals.

“PC baangs,” as the parlors are known, are usually clean and wholesome places where teenagers often go for dates. Last year, Webzen invited gamers and their families to an event to help dissipate some of the negative reputations of online gaming in downtown Seoul. Around 30,000 people showed up.

Next Week: Tech Trends (continued)

Continue reading TECH TALK: Tech Trends: South Korea Leads