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Cold wars and search wars

James Christopher Chris Westland | Jan. 29, 2009
Making sense of Chinas Internet

In late 1957, at the height of the Cold War with China and Russia, US president Eisenhower launched an aggressive military challenge to Americas rivals which spawned the Advanced Research Projects Agency (ARPA). ARPA quickly moved to focus on computer science and information processing, in particular connecting mainframe computers at different universities around the United States so that they would be able to communicate using a common language and a common protocol. ARPAnet morphed into the Internet, which moved from military to commercial prominence in the 1990s. By 2008, in an ironic turnabout, Chinas population of Internet users in this one time Cold War arena surpassed the US at 298 million users, growing at 40 per cent annually, and rapidly migrating off to non-traditional platforms such as telephones and personal digital assistants.

China is differentits language, culture, business practices and competitiveness. And it is huge, the most populous country on earth, and now, the biggest user of the Internet.   Americas early dominance of the Internet has not given it automatic licence in China, and many early entrants to Chinese Internet business have found the challenges, along with the rewards, much greater than elsewhere in the world.

US technology, so pervasive in most of the rest of the world, has met substantial local competition in China. There, Chinese Internet companies have successfully adapted to Chinas unique environment to fuel the fastest Internet growth in the world, despite widespread censorship and control of the medium. China boasts 250 million Internet users as of early 2008, the most in the world. Fortunes have been made, but more importantly, society and business are being transformed along the unique lines of Chinese Internet development.  This will substantially flavour the character of Chinese business and politics in the 21st century.

Foreign firms have, to their chagrin, found that copy-and-paste strategies that take business plans that have worked in the West, often do not work in China. Yahoo, Google and Microsoft have discovered this. It is not clear whether many of these firms, though, have truly gauged how and why their Western success stories cant be duplicated in China. The stories will help the reader gain a first-hand understanding of how their Chinese counterparts combined successful components from their Western counterparts, innovated to accommodate the unique characteristics of the Chinese market.

Where giants stumble

Industrial powerhouses such as Microsoft, GM, Coca-Cola and Procter & Gamble learnt hard lessons over decades of investment and operations in China. Newcomers in the Internet sector, such as Google, have found that they had to play a different game.   Yahoo, eBay and MySpace have been there, competing with local Chinese companies such as Sohu, Sina and Tencent, who have also faced their own challenges climbing the learning curve. The speed of Internet industry change and growth has denied these companies the leisure to experiment and learn, while intense competition and technical complexity assured that missteps would be costly.


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