MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | EDWARD ZENG
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | EDWARD ZENG
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Mr. Edward Zeng
Good morning. This morning, the session is about E-commerce: a second industrial revolution - plus a question mark. If we're talking about the same topic at the same conference a year ago, probably we don't need the question mark because at that time, most of the people over estimated E-commerce. Now most people under estimate E-commerce. Like many international conferences, some people over estimate the role in China and some people under estimate the role of China. So I've been asked to talk about e-commerce and talk about China - it's going to be a very tough job. Actually if you look at the history of the real E-commerce preparation, it's going in a totally different direction with today's financial market. Starting from 1995, the IT infrastructure is built, starting from the U.S. and expansion worldwide. And then the software industry, service industry, the accountants, the brokers in marketing, the retail, B to C and B to B and inter-enterprises collaboration, and last year in many verticals form the buyer consortium and now at the beginning of this year, they start the regional e-hub. If we go back further more 20 years ago, the operation system starting a global standard revolution, first started PC based and the leader like Microsoft starting from DOS and then eventually Windows and then Intel became part of the consortium. The PC based global standard operation system, we call the Wintel system, dominated the market starting 20 years ago and 5 years ago became a global standard. The same new trend happened 10 years ago when enterprise based international global standards were formed, starting from enterprises such as ERP and EDI system - the key players including American Oracle, Europe SAP and America EDS - and now due to the 5 year preparation, the industry based operation system is just started. The key drivers include the buyer consortium, most of them are U.S., European, Japan based and also the platform like today's Ariba, Commerce One, Oracle and also the supply chain hub. This is mainly coming from Asia so if you look at the global operation system standards, who are the drivers? There is a trend, it goes from U.S. based to U.S.-European based, now go back to Asia Pacific based. In this global new trend, China as the center of the OEM countries and China, post WTO and post e-commerce revolution could play a very important role for the supplier chain. If we look at B2B e-commerce industry, before the XMLs became a dominant standard, the EDI provided the closed, expensive, pervasive system for multiple suppliers with one buyer. This happened in the retail industry, this happened in many other verticals, but due to the open Internet standard introduced into the commerce, the real revolution started. We call the same concept like today DoCoMo is "3G leader" in the mobile industry: E-commerce actually is also undergoing the third generation revolution. We call first G is pre-transaction oriented, for example, we provide the portal service, we provide the storefront, it's a traffic oriented, we call it the first generation, it's targeted at the pre-transaction information service. Then the second generation is not only the pre-transaction service but also have to provide transaction capabilities. We call the B2B market place, many companies provide the service oriented buyers value added chain and people through the marketplace, transaction fee to make the money. Now at the beginning of this year, the third generation B2B e-commerce just started, it's not only the pre-transaction, not only the transaction but also have to provide the post-transaction service. For example, you have to provide after you had a transaction how you deal with payment, how you deal with quoting insurance, how you deal with logistics, all those post transactions service so we call the B2B regional hub. In these three generations, in Asia, the first generation, there is Alibaba, Meet China, the second generation we got Global Sources, on the third generation Sparkice is one of the leaders in this field. If you look at the global B2B industry, it's vertically the buyer consortium is formed. For example, in the auto industry, Covisint is one of the examples, GM, Ford, Chrysler and some other Japanese and European auto become a part of the Covinsint and same in the finished consumer industry, it is called the WWRE, it's called the World Wide Retail Exchange. They have about global top 50 retailers formed as buyer consortium. The total volume last year for those buyer consortium members is over US$760 billion, Wal-mart is another example, US$240 billion. Also those buyer consortium looking for regional partners so in Asia, eventually the new trend will be to create Japan Hub, Korea Hub, Hong Kong Hub and China Hub. And who would be the leader for the global new industry operation system? Well in different verticals, they have different alliances, for example in the finished consumer products this market is talking about $1.3 trillion in total revenue. The biggest buyer consortium is WWRE and they are using the platform and Sparkice is another one to look at the supplier side in Asia and there are some other consortiums as well. Why do we need regional hub? Because of language problems, because of regulation problem, because of payment problem, because of local distribution problem and some cultural problem, those five interests varies making the regional hub for the B2B E-commerce very reasonable reason for exist. Let's look at the Internet population. Last year the U.S. and Europe became a dominant Internet population worldwide. Now look at five years later, if you look at the red color, China became the number one in five years, 1 billion Internet population, the largest Internet population in the world is China and U.S. become the second. China plus Japan plus India is over 50 percent. So the majority of the Internet population is still is in the PBEC area but internally, the shifting from west to the east. Internet growth in China in 1997 is only 620,000 and by the end of last year, it was over 20 million and this year will be over 30 million, most likely more than 35 million. So the global is changed, the internet population is shifting from west to east so the Sparkice business model is try to become a one source mega- hub for global E-commerce to, from and within China. We want to be the clear leader of the 3G B2B e-commerce. The 3G e-commerce will provide the marketplace dynamic, neutral, open and transaction oriented and the buyers and suppliers are qualified by third party and end to end automation process and also we want to connect with the global leading exchange. How big is the market size for this industry? If you look at this chart, the combination of AOL, Yahoo, E-Bay, Verticalnet, all those today's existing e-commerce company, in terms of revenue compared with those traditional retail consortium is very, very small. So that means the buyer consortium formed by those global leading retailers with Asian suppliers, this market will be a few hundred times bigger than all the E-commerce revenues today. Our business model is focus on global top buyers like global top 30 retailers, global top 10 exchange, global top 30 OEMs and suppliers only talking about top 1000 high quality suppliers. In two days, on Thursday in Beijing, we will announce a partnership with global leading players like Ariba, Vignette, Oracle, COSCO and some other banking partners SGS, AIG will become the first China based B2B E-commerce company to provide a one-source international center of service for global buyers. How is the market in China on E-commerce? This is the latest statistics to show that, most of the Chinese people thinking about in one or two years, China will be delivered in the satisfaction level for e-commerce. And we do some six verticals statistics and 80-90 percent of all those six verticals are ready in terms of financial support but marketing, logistics, procurement is talking about 50-80 percent range. So in terms of readiness, E-commerce in China is much, much higher than most of the bankers research analyses say that China will be 5 years later. Let's look at some banks or some research analysis two years ago, what they had forecasted about China. If you look at the yellow color, the Internet users, the mobile phone users, the PC users, that's the level of China two years ago. What happened today? We doubled most of the yellow colored numbers, so that means all those bank research groups forecast about China is under estimated the power of the growth. We have the same reason to say that post WTO, post e-commerce revolution and the China exporting and China becoming OEM center will become a major trend for the global B2B E-commerce. To get government support is very important, Sparkice is one of the very unique company in China, have 15 country employees in one company and also we have government support from MII to MOFTEC, from the State Administration of Industry and Commerce to The Bank of China, from the Unicom to COSCO, from all the leading media. We are the one of the very unique multinational company in China and serve for China and get support from China. In conclusion, Sparkice will provide a one source regional e-hub by four levels of architecture. The first level is network application architecture; fax, e-mail, EDI, XML. The second level will provide the Commerce Process Framework to deal with traditional payments, quoting insurance, shopping and payment. And then we have the Market Making Mechanisms to help the buyers and suppliers to auction, reverse auction and trading in our platform and also we have Marketplace Administration. Our shareholders include the leading European retailers, leading European food retailers, in Japan we have Softbank, in U.S. we have P.S. Net and Cybercash. We have multinational global companies as our shareholders and also we are looking for some strategic partner and investors to make our leadership in China as a dominant. Conclusion, Pacific Basin will be the key driver for the platform buyers and suppliers. The global B2B today is vertically wired by the buyer consortium and horizontally through the regional hub. The global value chain will be re-consolidated by the second industrial revolution. We are fortunately at the birth of the second industrial revolution but not only to be the witness but also to be the pioneer. Thank you. |
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