IBM Backs E-Business Play in China

By JONATHAN S. LANDRETH

(Virtual China News -- Mar. 3) IBM will back a China-focused e-commerce Web portal based in California that enjoys unusual access to cable television audiences in China.

Best-of-China.Com (BCC), which aims to sell consumer products in China over the Internet when it launches this summer, will share top management with another U.S. company that has already established inroads to the consumer market in China with its cable TV retail strategy.

BCC's chief executive officer, Ralph Miller, is also CEO of China Shopping Network (CSN), a company that tests, sources, and markets consumer items through an ad hoc network of television stations located throughout China.

IBM has invested in BCC, which will launch in both English and Chinese, with a stake in the company equal to "something less than 10 percent," according to Zeb Maclellan, BCC's chief operating officer.

"Best-of-China is a spin-off of a company that's doing infomercials with a whole chain of businesses in China," Maclellan said, referring to CSN.

IBM's investment in the company includes a package of proprietary software and costly hardware, such as supercomputers, that will be instrumental in managing a high-traffic e-commerce site in China.

"IBM has provided us with the software for that purpose," Maclellan said.

Big Blue Machines

In setting up the Web site's servers in China, BCC will use three of IBM's Big Blue machines, also known as RS-6000 supercomputers, which will be dispersed in locations throughout China, including Shanghai. These computers, which Maclellan said are the same model that beat Russian chess genius Anatoly Karpov, will enable BCC to handle the high volume of user traffic the company expects as e-commerce in China grows.

"Using IBM technology to meet the transactional needs of companies, individuals, and groups, Best-of-China.Com can significantly advance the state of e-business in China," said Henry Chow, Chairman IBM Greater China Group, at a press conference in Shanghai Wednesday. "By providing commerce-enabled content it can become the commerce portal of choice for both Chinese and international users and businesses," Chow said.

"BCC is the first of its kind to adopt a supercomputer," Chow said. "IBM is honored to be the only information infrastructure partner and we will participate in the whole process of construction, in the whole process of BCC."

According to Chow IBM has recently provided solutions to some 18,000 enterprising electronic business development plans in finance, manufacturing, telecommunications, and government.

Somewhere in the Middle

"Worldwide the company earned US$14 billion in 1999, an increase of 360 percent over 1998," Chow said.

The challenge for BCC will be to import to the Internet CSN's "direct response" TV marketing model, television programming that induces viewers to buy or inquire about a product over their telephone based on what they saw on their TV screen. The Internet could turn out to be the venue of choice for retail in mainland China, where e-commerce sales are expected to grow to US$3.8 billion by 2003, according to International Data Group.

CSN's home channel, Shanghai Cable Television (SCATV), is the top-ranked cable station in China and serves over 6.8 million viewers. The CSN network of over 25 cable, terrestrial, and satellite affiliate stations gives CSN an audience base of approximately 435 million people, according to the CSN Web site.

IBM spokesman Mark Guan said that BCC fell somewhere in the middle range of its China clients.

"They're not as big as the Bank of China," Guan said of another IBM client, which is also a partner of BCC. "But we want to help make them a good model for China for other e-businesses, large or small, because they're trying to make full use of the IT technology."

Open System Design

BCC intends to feature more than a thousand products when it launches this summer, as well as a wide range of business and consumer services, including secure convertible Chinese currency transactions, according to a company press release. In addition, an open system design will allow Chinese users and businesses, as well as those doing business with China, to conduct business easily through the Internet.

Companies intending to offer goods or services through the site when it is launched include: Oregon Scientific, Philips Consumer Electronics, Bank of China, Industrial Commercial Bank of China (ICBC), Wells Fargo Bank, Hong Kong Shanghai Bank (HSBC), Citibank, China Eastern Airlines, SinoFound, FedEx and Worldlink International.

In addition to CSN, BCC's other partners include Baltimore Technologies (ticker: BALT), another California high-tech firm that is providing encryption technology to insure e-commerce payment security.

To reach Jonathan S. Landreth: jslandreth@virtualchina.net