On November 7, China’s top legislature adopted a cybersecurity law to safeguard the sovereignty on cyberspace, national security, and the rights of citizens. The law has seven chapters that define specific regulations in various areas, such as network operational security (including key IT infrastructure), network information security, monitoring, alerting, and emergency situation handling as well as related legal responsibilities.
Some critics, especially those in Europe and the United States, continue to read too much into the negative impact of this legislation. I believe that it’s the reasonable move for the Chinese government to make in order to balance national security, citizen privacy, and economic openness. Foreign players in the Chinese market must revisit their local strategy and accelerate their digital transformation if they don’t want to miss the increasing needs and new opportunities regarding security and privacy:
The cybersecurity law has substantial advantages that benefit cybercitizens. For example, for the first time, the Chinese government requires that vendors providing cyberproducts and cyberservices must make clarifications to users and attain their approvals before they collect personal information. The new law also regulates that if companies leak or illegally sell personal information to third parties, they must bear legal responsibilities accordingly. These regulations mark a critical milestone in China’s journey toward personal privacy protection, and they are also important for consumers in the world’s largest market to protect themselves against internet fraud and spam messages.
The rise of mobile networks, improved wireless tech, and rapid sensor innovation over the past 10 years has enabled companies to use internet-connected sensors and actuators to improve business operations and transform products. The ever-increasing number of connected devices is opening up new business models and new opportunities for both tech vendors and end users; as a result, IoT is becoming an essential cornerstone of the business technology agenda. Enterprise architecture professionals must define a holistic IoT software architecture to navigate through the complex technology landscape.
I’ve recently published tworeports focusing on how to architect the IoT software stack. These reports analyze the heat maps and trends around IoT adoption in China and introduce Forrester’s IoT technology stack reference architecture. They also show EA pros how to achieve strategic business outcomes and unleash the power of digital business by analyzing the IoT practices of visionary Chinese firms. Some of the key takeaways:
Successful IoT initiatives yield substantial business value. Outstanding IoT initiatives achieves strategic outcomes, such as competitive differentiation, customer experience enhancement, and asset performance optimization. Chinese companies have successfully launched IoT initiatives to establish their digital business in various industries, including energy, automotive, logistics, and manufacturing.
Cloud platforms from the global megacloud providers like Amazon Web Services, Microsoft, IBM, Google, Salesforce, Oracle, CenturyLink, and SAP will set the pace, accelerating adoption of private cloud and hosted private cloud as well. In 2017, you need to:
Get your private cloud and SaaS strategy in shape in 2017 — start now!
Educate yourself about exciting developments in hyperconverged infrastructure, security, networking, and containers.
Take a fresh look at your regional and industry-specific cloud providers — specialization is afoot.
Consumers in Asia Pacific are in the midst of a digital transformation. Within the past decade, online penetration in China grew from 8% to 54%, while mobile internet access grew more than sevenfold. Today, the rate of customer evolution is gaining speed, as consumers are increasingly willing to experiment with new products, rely on devices, demand seamless digital experiences, consume large volumes of information, and are committed to seeking out the best experiences for themselves.
Forrester’s Empowered Customer Segmentation measures these key shifts in customer behaviors and attitudes and anticipates how consumers both respond to digital innovation and demand it. An analysis of our Consumer Technographics® data for Asia Pacific shows that the most rapidly evolving customers dominate in metropolitan China and metropolitan India:
Some CIOs and enterprise architecture (EA) pros believe that business process management (BPM) is on the opposite side of agility — but they don’t realize that BPM technology itself is also evolving. Agility-oriented BPM platforms are the foundation of a digital business. I’ve recently published a report that discusses the four key areas that EA pros must focus on to accelerate digital transformation with BPM. Some of the key takeaways:
Modern BPM is critical for digital business. Process agility is critical to giving businesses the agility that powers digital business. BPM adoption is gaining momentum in China; EA pros must drive the use of modernized BPM platforms and methods to accelerate digital transformation. 49% of budget decision-makers in China from both the technology and business sides will increase their spending on enterprise process applications, which is higher than their global peers.
An outside-in approach is key to digital transformation. EA pros must understand key BPM platform capabilities and unique local demands. For the Chinese market, this means data-intensive user interfaces with integration and security needs, complex organizational hierarchies and ad hoc decision-making approval processes, and a unique social environment for cross-region collaboration. EA pros should then use these requirements to align the architecture for agility-oriented process platforms. Forrester has introduced a reference architecture for agility-oriented process platforms that consists of four layers: enablement, foundation, engagement, and management.
When we think about the public cloud, the list of credible providers can sometimes seem rather short.
(The Great Wall of China. Source: Paul Miller)
In North America, Europe, and elsewhere, the same few names tend to dominate. But not in China. There, big local brands continue to command impressive market share. And now they're looking to expand into new territories, including Europe.
Huawei hardware and Huawei's distribution of the OpenStack open source cloud platform power T-Systems' Open Telekom Cloud. This was launched, with some fanfare, at CeBIT in Hannover.
Alibaba Cloud, which leads the Chinese public cloud market, is also coming to Europe this year.
In my latest report, I take a look at what both Alibaba and Huawei bring to Europe's public cloud market, and ask whether they can repeat their domestic success in this market.
TL;DR - it would be unwise to discount either of them.
As always each year, Huawei hosted its analyst event in April, with hordes of analysts descending on Shenzhen. Here are a few observations from the event:
In 2015, Huawei’s revenues grew by 37% to €61 billion and its EBIT grew by 34% to €7 billion, keeping the operating margin stable at just under 12%. Huawei’s strategy paid off across all of its divisions in 2015. Huawei’s Carrier Business pushed deeper into carrier transformation support and grew by 21% in 2015. Its Consumer Business operations entered the mainstream: The division grew by 73% in 2015, with Huawei gaining the No. 3 spot in the global smartphone league table. Huawei’s Enterprise Business is gaining traction and grew by 44% in 2015.
There are four distinctive aspects that go some way to explaining why Huawei keeps on outgrowing its peer group. First, Huawei’s heart beats in its R&D division, and most of Huawei’s top managers have come through the ranks of the R&D team. Second, Huawei benefits from strong internal collaboration and flexibility. Compared with other vendors, Huawei seems a lot less process-driven. Instead, Huawei seems to tolerate, even encourage, self-organization among employees — despite strict management hierarchies. Third, Huawei has a flexible and unconventional approach to customer experience. Huawei completes projects that overrun without overanalyzing whose fault it is. Fourth, Huawei is not listed and therefore not answerable to external shareholders. This gives it the freedom to experiment and take a long-term view.
The answer: In the markets included in our latest Asia Pacific Online Retail Forecast— China, Japan, South Korea, India, and Australia — total online retail revenues will nearly double from $733 billion in 2015 to $1.4 trillion in 2020. For perspective, $1.4 trillion is about the same amount spent online in 2015 in every market that Forrester forecasts across the globe combined.
In our latest report, Asia Pacific Online Retail Forecast 2015 To 2020, (subscription required) we look at the growth in these markets over the next five years and some of the key trends shaping the development of online retail in each one, including the following:
China’s eCommerce market grows despite the economic slowdown. 2015 marked a global eCommerce turning point: China surpassed the US to become the largest eCommerce market in the world, but its economy also dipped below 7% for the first time since 2009. While the days of staggering year over year eCommerce growth in China are behind us, current growth rates are solid and more consistent with other mature markets in the region, like Japan and South Korea.
India is the fastest growing eCommerce market in the region, but is not without its obstacles. The smallest eCommerce market in our forecast, India’s online sales will grow by more than five-fold by 2020 as the number of online buyers and per capita online spending increase rapidly. However, in addition to underdeveloped logistics and challenging last-mile connectivity, India's cash-based culture still poses a challenge for eCommerce firms.
News of the shutdown of the P2P lending platform, Ezubao, following investigations by Chinese authorities have shocked the world. Small investors in China were allegedly scammed out of more than $7 billion in what is now called "a giant Ponzi scheme".
But I wasn't very surprised by the news. As I mentioned in my report, P2P lending in China has reached a tipping point and there is a dark side to the industry as it continues to be fraught with fraud and embezzlement. Widespread fraud tarnishes the entire industry, damaging well-run marketplaces as well as immediate victims of fraud. Many P2P lending platforms with unsound business models have operated for years without any backlash, violating regulations with impunity. Some of these platforms used money from new investors to pay off existing investors—like what Ezubao did—or invested lenders' money in the volatile Chinese stock market. These unstable platforms were simply ticking time bombs.
However, the fall of one P2P lending platform does not signify the fall of the entire P2P lending industry in China. Instead, the shutdown of Ezubao:
Signals the Chinese government's resolve to enforce regulations. In late December 2015, the China Banking Regulatory Commission (CBRC) drafted new rules calling for closer supervision of the P2P lending sector. However, "law without enforcement is just good advice". Thus, there was a level of skepticism surrounding what impact these new rules would have on unlawful P2P lending companies. Therefore, the shutdown of Ezubao is significant in that it signals the regulator's resolve to enforce these rules, sending a strong message that violation of these regulations is a criminal activity and there will be consequences, which is positive for the industry.
China is now the largest P2P lending market in the world. In just the first half of 2015, people exchanged RMB 300 billion ($47 billion) on more than 2,000 P2P lending platforms. As P2P lending in China reaches a tipping point, we expect many platforms to fail, and only sophisticated and innovative platforms will survive and thrive.
The “Q&A: Peer-To-Peer Lending Platforms In China” report takes an in-depth look at P2P lending platforms in China, including the main players, key differences between Chinese P2P lending platforms and those in the UK and US, the problems that Chinese P2P lending marketplaces address, challenges P2P lending platforms face, as well as best practices in the P2P lending industry.
While the potential for P2P lending in China is huge, the challenges that lie ahead for these companies are significant. To succeed, P2P lending companies must overcome barriers related to the external environment that they operate in and the operational obstacles that their platform face such as:
Fraud. Widespread fraud and embezzlement in P2P lending tarnishes the entire industry, damaging well-run marketplaces as well as the immediate victims of fraud. Many of China's P2P lending platforms are not transparent, failing to disclose their revenues, expenses or fund allocation.
Regulation. In late December last year, the China Banking Regulatory Commission (CBRC) published new draft rules calling for closer supervision of the P2P lending sector. Some of these regulations include establishing a third-party depository of customer funds, requiring P2P lending platforms to improve disclosure, and prohibiting platforms from building capital pools.