The latest gold rush is on. It’s the Chinese broadband market, and just like the award-winning film “Crouching Tiger, Hidden Dragon” the market is a labyrinth made up of many plots and lessons, accented with plenty of action.
Why This One Counts
China is emerging as the world’s manufacturing center and a sourcing magnet for American auto manufacturers. One of the Big Three’s sourcing managers regularly makes the trip to Beijing and then out to the interior provinces looking for everything from axels, transmissions, and tire rims to mechanical door assemblies. The challenge he speaks of is first making sure the factory can scale to keep up and second, order capture and management at the factories themselves.
This Big Three automaker has had its supply chain for axel assemblies come to a screeching halt because an order was misplaced — it was faxed to the factory in China and got lost under a newspaper — and third- and fourth-demand sources had to be kick-started fast to keep production moving. The perfect market for distributed order management is brewing in China.
Multiply the frustration of this particular manager with the thousands of other companies sourcing products from China and you have so much pent-up pain over how orders are managed with factories that an entirely new growth path opens up for order management systems deployed over the Web.
Couple this with the impressive gains at Infosys, specifically in terms of order management and their business process expertise, and the entire ERP landscape starts to look quite different today. Infosys announced earlier this month they will hire 6,000 new employees in China specifically for services, yet the implications to serving the world’s fastest growing manufacturing base is clear.
China’s Network Latency And Your Customers
Shanghai and Beijing have Internet access speeds, or network latency, from the United States and other western nations that is good enough for enabling Web applications aimed at managing supply chains. The interior cities and especially those near Mongolia are quite slow and sporadic. These two fundamental points around network latency in China may appear to be so far-removed from any marketer or CRM user in the U.S. that it is easy to ignore it.
But as one of the Big Three automakers in the U.S. is discovering, the better the Internet link the more accurate the forecast, the better control over costs, and in the end, the better price on 2006 model cars. In an indirect way, Internet access speeds for these second and third-source factories have a major impact on the price of the next car you’ll buy and in some cases, if it is launched on time.
Lessons Learned in China
After having heard so much about Internet growth in China from a friend who’s involved in sourcing for one of the Big Three automakers, I decided to see what it would be like to get a factory online in China. So I started calling the global ISPs’ offices throughout China to see just how tough this could be. Here are my lessons learned:
- “Connecting to the Internet” is a catch phrase there. I called IBM’s main office in Beijing asking for assistance in getting broadband service to a factory my friend had said was considering adding broadband due to the number of orders coming in. After two bounces and Chinese with “connecting to the Internet” thrown in I was transferred to a professional sounding young man who spoke excellent English with a slight Chinese accent. I asked him about connecting this factory to the Internet, and what it would take. He said, “you take the blue cable and put it in the socket in your IBM laptop …” and I said, no, I wanted to do this to a factory, not just a laptop. He said I had reached IBM Desktop Support internally because many operators key off “connecting to the Internet” and transfer calls to him. So I asked if he had a really big blue cable that would reach to the factory, and he thought for a second and said no, but he would check.
- There’s a huge market for Service Level Agreement Analysis opening up. What also struck me was the fact that so many ISPs are working to bring broadband into China and there is such a vast difference in their own performance. My friend talks about going to one global ISP to get a factory wired, only to find their speed would vary by as much as six times, ranging from incredibly slow one minute to lightning fast the next. For companies who are manufacturing there, it’s going to be critical to have solid SLAs in place to get near the level of service you expect.
- Making manufacturing work in China takes years of commitment. Watching as one of the Big Three automakers works with a supplier to get their factory on broadband so orders can be more efficiently transferred makes one appreciate the paradoxes there. On the one hand there are literally thousands of smaller ISPs in bordering countries, with network speeds much superior to international ISPs, yet they lack the global backbone for managing traffic back to the U.S. On the other hand, cities including Shanghai and Beijing have better broadband access than some parts of Europe.
Bottom line: Many venture capitalists are now coming out with the hockey-stick growth charts of broadband access in China, and while there is definitely a hyperactive level of investment and selling going on, when you get to the last mile of actually getting a factory on the Web, it’s not easy. For getting manufacturing right there is much more to it including learning the language, understanding the culture, building a network of suppliers, and above all, assuming it is unlike anything you’ve done before. Don’t forget to pack your sense of humor, because the differences in cultures can lead to some hilarious consequences too.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He is the author of several books on making the most of analyst relationships, including Best Practices in Analyst Relations, which can be downloaded for free.