Building A Business Valley in Beijing

2003

Building A Business Valley

Xiaolin Lu
Morning Forest LLC
2/1/2003

Confidential Information Morning ForestTM LLC

What is this all about?

This is a collection of notes on building a business park in Beijing,
China for international businesses - riding on the real-estate boom in
China and with collaboration with MII and its affiliates. It was our very
early naï try, to become a virtual operator in China. The design was
ve
successful but of course the operation part failed as it is not about
business or technology. The political-value-driven and quick-money-
making practice is not something a startup company should get itself
involved.

On the other hands, it taught us a great lesson about business in
China, and led to our next venture. We shamelessly disclose these
notes for those who want to get some understanding of China and at
least for a laugh 

Xiaolin Lu
July, 2011

Property of Morning ForestTM LLC Feb 1, 2003


Part One: Evergreen International Business Park
The “Business Valley” In China
February, 2003

Business Proposition

1. Introduction
This document describes a business proposal to establish an International Business
Park in Evergreen county, Beijing to attract and help foreign business to establish
business presence, business and technology development, and partnership in China.

1.1. What foreign business want in China
There are a few critical areas that any business entity would like to have while
doing business in China:
(a) A support system to help then to understand China culture, regulatory
environment, and business environment in order to do business in China.
This including regulatory requirement, accounting rules, business rules, etc
(b) A networking and support system to connect them with potential local
partners, customers and suppliers.
(c) A support system to manage their in-country HR, marketing, and other local
activities.
(d) A secured communication system (e.g., VPN) to support all their
communication with their other in-country offices and offices in other part of
the world.
(e) A friendly community and related supporting systems that provide
comfortable and convenient living environment for their employees,
especially those non-local ones.

1.2. The strength and leverage of the Evergreen County
Evergreen County is at the west side of Beijing, and is directly adjacent to the
ZhongGuanCun high-tech district. There are a few advantages:
(a) Large land property that is both residentially and commercially zoned and is
allowed to convert to Industry Park and/or residential building.
(b) Great relationship with many government entities, including Beijing city
government and central government. It also has long history of assisting
startup in ZhongGuanCun district and is the one that supports all the
commercial real estate to the ZhongGuanCun district.

1.3. The opportunities

There are a few special business and technology “zones” exist in Beijing.



(a) ZhongGuanCun high-tech zone: a copy of Silicon Valley in the US, and is
concentrated with local computer, internet, and IT startups, leveraging
resources from a few high prestige universities in that areas (Peking
University, Tsinghua University, Beijing Post and Telecommunication
University, etc).
(b) JianGuoMen Financial Zone: an area that is populated with financial
institutes and foreign company representatives.

There are a few issues:
(a) Most foreign companies don’t fully understand the culture and business
environment in China and have been trying to copy the general business rules
of their own country while doing business in China, or blindly rely on local
representative.
 Base their business solely on the potential mass market in China without
careful consideration of the culture and economic environment.
 Lack of synergy with local business and technology development.
 Business plan is too near-term focus and lack of long-term migration
strategy.
(b) Each company is doing the business on their own, and there is no scalable
supporting system to bridge the gap between them and local partners,
customers, and suppliers. Even though the cost of labor is low, the lack of
consistent and scale-based supporting system hinders both the top-line and
bottom-line of those foreign companies.
(c) There is no synergy environment to enable 1+1>2 for both foreign and
domestic businesses.

2. Proposal
There are a few business opportunities for Evergreen County to resolve those issues
and establish a business environment and platform that would also benefit the county
itself and overall domestic business and technology communities. Our proposal is
centered at establishing an International Business Park, leveraging Evergreen’s
geographic location, resources, and relationships.

2.1. Real Estate Business: The Physical International Business Park
The International Business Park (IBP) consist four major parts:
(a) The Office Buildings:
Given the diversity of foreign businesses in China, the buildings should be
“re-configurable” to accommodate different business needs. This including:
 Each floor should be able to re-configure to accommodate one or multiple
business entities.
 Regardless the size of the business, a well present executive office and
conference room is necessary for foreign business to have a good image in
China.



 Given that in the future, the building might be used for certain technology
development, and given the compelling reason to promote certain “silicon
valley” culture, each floor should also equipped with huddle areas and
kitchen.
 Certain buildings should also be design to accommodate Lab environment.
 All building should provisioned with broadband communication wiring
facility (will discuss this later).
(b) Networking and Agency Facility
One of the value-added services of this IBP is to provide support systems to
the business resident inside the park. We will discuss the detailed functions
later. For now, we recommend to locate a special facility to host the agent of
the supporting systems and also provide an environment for foreign
businesses to interact with domestic business partners, suppliers, and
customers in an social environment, outside their office. This can be in the
form of Executive Business Club, etc.
(c) Residential Complex
It would be valuable to both the foreign business and also to Evergreen
County to establish resident complex for those businesses inside the park.
Also, as a value-added service, a shuttle service should be provided between
the residential complex and the office buildings. A side effect of this value-
added service is to reduce the space of parking lot, therefore leaving more
space for other facility that can generate more money.
(d) Shopping Center
This may seem funny, but given that majority of Evergreen’s business is
around real estate, building a shopping center in nearby is compelling for
three reasons:
 It’s a commercial real estate business that fit Evergreen’s general business
model
 It will create local attraction that potentially creates more value to the
county.
 It’s a nice value-added services and environment to the IBP.

2.2. Business Support: The business aggregator
From foreign company point of view, getting local support is one of the critical
parts of doing business in China. This include:
 Understand and get local support on regulatory, legal, and accounting.
 Expose to and networking with local government, potential partners
customers, suppliers, and distributors or local representatives.
Given the relationship Evergreen has and its unique geographic location, we
propose to establish a Business Support System. This type of systems exists in
China, but has been done on an individual base. We believe to integrate them for
scale would be compelling.



 Establish a system that consists of, and/or has close relationship with, local
government agency, Attorney firms, and CPA firms, to provide legal and
accounting support to foreign companies residing in the IBP.
 The same system also provide brokerage functions to establish relationship
between foreign companies and local entities, including introducing to
potential customers, facilitating partner relationship, building distribution
chain, and hiring representatives, etc.
 Further, this system is also a window or platform for both foreign companies
and local companies to get to know each other. It provides services to both
the foreign clients and local clients.
 The form of this supporting system could in a Business Executive Club
format. The client pay annual fee to be the club member and the system
provide all the needed support. Special project will be billed separately.

2.3. Telecommunication and IT Support System:
Another important area is to provide telecommunication systems to the residents
of IBP. This includes:
 VPN capability for secure IP based networking capability. Foreign client
would like to be on their own LAN environment, even though they are
thousands miles away from their headquarters.
 Localized IT systems, for both the clients and also for their customers, such
as localized Web, database, etc.

3. Cash Flow Model
The revenue includes both the front-end sale and recurring sale:
(a) Front-end sale:
 IBP facility developing right, without giving up the control
 IBP residential complex sale
 Shopping Center sale
(b) Recurring Sale:
 IBP facility rental
 Residential complex rental
 Shopping center rental
 Business Executive Club membership, and other service charge
 Communication System monthly fee



 Fee or revenue split for local companies to participate the supporting systems,
and also the case-based commission fee.

The cost includes:
 Land development
 IBP, residential, and shopping center development
 Business Executive Club operation cost, including potential revenue split with
local firms.
 Communication system operation cost, including line charge from
telecommunication companies.



Part Two: Global Business Net
Outline and Business Proposition
May, 2003

2. Missions
 Establish a communication infrastructure in Beijing International Business Parks
 Further establish VPN-based global business connectivity and value-added
services (video conference, VoIP, video-voice integration).
 Further establish a Business Net: a communication community to facilitating
collaboration between foreign and local companies.

3. The International Industry Parks
3.1. The Environment and Background
There are a few counties at the west side of Beijing, including the
ZhongGuanCun high-tech district. They were originally agriculture areas, but
have been gradually converted to hosting China information industry and related
technology development. A few interesting features of those counties:
(c) Large land property that is both residentially and commercially zoned and is
allowed to convert to Industry Park and/or residential district.
(d) Great relationship with many government entities, including Beijing city
government and central government. They also have long history of assisting
startups in ZhongGuanCun district and supported all the commercial real
estate to the ZhongGuanCun district.

3.2. The opportunities
Several huge commercial real estate developments occur in those counties,
sponsored by local government, real estate investment firms, and Ministry of
Information Industry. The notion is to build a “silicon valley” type of industry
environment to host both local and foreign communication and IT companies,
and also to stimulate information technology development in China.

Our goals are:
1. Assist those developments by engineering and building a in-campus
communication infrastructure inside those industry parks
2. Build and manage VPN over those physical infrastructures, and provide
value-added business communication services to the residents of the
industry parks.



3. Further establish a Global Business Net, a communication community
service platform to engage local third parties (IT firms) to add more
value-added services over the infrastructure.

4. High-level Business Requirements
4.1. The physical infrastructure

There are four major components of this infrastructure:

(e) Metro Ring:
 The main ring will cover the entire business park
 There may need to have a few sub-rings to cover certain dense areas
(many buildings) and interconnect them through the main ring.
 Ideally, all the traffic inside the industry park will be in IP format,
therefore, it would be preferred to have Ethernet over fiber type of ring
architecture (e.g., RPR).
 Fault tolerance and fast recovery from ring-cut are necessary.
 The main ring needs to have the capability to add more nodes without
service interruption, and capability to expand (by adding sub-rings).
(f) LAN
 Each building will be wired with Ethernet LANs.
 There will be more than one LAN (autonomous system) inside each
building, supporting different business entities.
 Fiber-to-the-building architecture might be used to connect those LANs to
the metro rings or sub-rings.
 Potentially, the LAN will be constructed with wired and wireless
approaches. A single physical PoP at each building is needed to aggregate
all the LAN traffic and connect to the ring.
(g) Interconnect
Each industry park will have route-diverse connection points to the
communication providers in the areas. The interconnect will be SLA-based
and the PoP will need to have the capability of managing and monitoring the
connection and enforcing the SLA.
(h) PoP at many global location
To support the global VPN application, certain PoP need to be gradually
established in many global locations to aggregate the VPN traffic from and to
the local communication providers to achieve economies of scale.

4.2. The VPN Infrastructure
The goal is to provide global business networking environment to support
enterprise global business connectivity and create a business service platform to
facilitating business transactions, and information exchange. These include:



1) VPN services for enterprises resides inside or outside International Business
Park (IBP) and connect them back to their companys’ intranet.
2) Remote VPN access for business travelers to access that VPN network
3) A private, subscription based Business Net for enterprises to receive certain
business services, participate information exchange, and business
transactions.

The process of establishing this infrastructure may include three steps, in which
the step two and step three may happen at the same time or in reversed order to
what described here:

1) Establish the IBP campus based VPN infrastructure.
2) Extend that VPN network to enterprises outside the IBP, and include the
wireless remote access for business travelers.
3) Establish the Global Business Net

a. Connectivity management:
This includes the capability of managing the connectivity utilizing third
party’s physical network and the connectivity to each enterprise, both the
offices inside IBP and its headquarter.
 Capability of provision connection with local and global telecom entities
(carriers). This may involve multiple players.
 Capability of managing related QoS and capacity, including capacity
planning and provisioning
 Capability of monitoring the connection and its quality and two-way
communication and trouble shooting with the carriers
 Capability of managing multiple carriers and seamlessly switching carriers
without significant service interruption.
 Capability of establishing local PoP or aggregation point at the IBP and
other remote locations to achieve economy of scale to aggregate the VPN
traffic
 Capability of remote connectivity management and trouble shooting

b. Service And Customer Management
Include provisioning services, connecting/disconnecting customers, or
changing the configuration based on their needs.
 Capability of establishing front presence (e.g., certain portal) or manuals
for customers to do certain self provisioning or at least sending request
 Dynamically change the service parameters based on changing request
from customers.
 QoS and security management and report
 Automatic and simple customer sign up and disconnect process.
 Eventually being able to monitor usage, bandwidth consumption, and
therefore related billing. The billing will be volume based, not minute
based.



c. IT Service over the corporate LAN
A typical LAN-based corporate IT services

d. Service Integration
We will eventually integrate VPN with VoIP and video streaming.
 The platform need to be flexible to support this migration
 Capability of scale to larger customer base without major change to the
platform and have less dependency on vendors.

e. Remote Access
Providing remote access for business travelers and also for enterprises outside
the IBP
 Capability of establishing local aggregation point at many global locations
to aggregate remote access traffic
 This needs to take into account that the local access systems may be
operated by third parties (hotel, airport, etc).
 Seamless provisioning of customers in this environment and capability to
track the usage and facilitating transactions with local system providers.

f. Extension
In terms of moving from step-one to step-three:
 The platform needs to be very flexible and vendor independent to be able
to extend beyond normal VPN and be able to add the GBN on top.
 Needs to provision an interface for the additional portal, and allows fast
development of that presence (this has very low barrier for other to enter,
we therefore need to be able to do that fast).

4.3. Global Business Net (GBN)
 Being able to create a open platform for multiple suppliers to create their
interface or site on this GBN
 Being able to manage those third parties
 Being able to manage QoS and security
 Being able to provision and manage the subscription and related usage


Building A Business Valley in Beijing

Recommended

Recommended

More Related Content

Similar to Building A Business Valley in Beijing

Similar to Building A Business Valley in Beijing (20)

More from Xiaolin Lu

More from Xiaolin Lu (20)

Recently uploaded

Recently uploaded (20)

Building A Business Valley in Beijing