Beijing Business Valley


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Business Design for building an industry park in Beijing, China

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Beijing Business Valley

  1. 1. 2003Building A Business Valley Xiaolin Lu Morning Forest LLC 2/1/2003
  2. 2. 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 inChina and with collaboration with MII and its affiliates. It was our veryearly naï try, to become a virtual operator in China. The design was vesuccessful but of course the operation part failed as it is not aboutbusiness or technology. The political-value-driven and quick-money-making practice is not something a startup company should get itselfinvolved.On the other hands, it taught us a great lesson about business inChina, and led to our next venture. We shamelessly disclose thesenotes for those who want to get some understanding of China and atleast for a laugh  Xiaolin Lu July, 2011Property of Morning ForestTM LLC Feb 1, 2003
  3. 3. Confidential Information Morning ForestTM LLCPart One: Evergreen International Business Park The “Business Valley” In China February, 2003 Business Proposition1. 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.Property of Morning ForestTM LLC Feb 1, 2003
  4. 4. Confidential Information Morning ForestTM LLC (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.Property of Morning ForestTM LLC Feb 1, 2003
  5. 5. Confidential Information Morning ForestTM LLC  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.Property of Morning ForestTM LLC Feb 1, 2003
  6. 6. Confidential Information Morning ForestTM LLC  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 feeProperty of Morning ForestTM LLC Feb 1, 2003
  7. 7. Confidential Information Morning ForestTM LLC  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.Property of Morning ForestTM LLC Feb 1, 2003
  8. 8. Confidential Information Morning ForestTM LLCPart Two: Global Business Net Outline and Business Proposition May, 20032. 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.Property of Morning ForestTM LLC Feb 1, 2003
  9. 9. Confidential Information Morning ForestTM LLC 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:Property of Morning ForestTM LLC Feb 1, 2003
  10. 10. Confidential Information Morning ForestTM LLC 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.Property of Morning ForestTM LLC Feb 1, 2003
  11. 11. Confidential Information Morning ForestTM LLC 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 usageProperty of Morning ForestTM LLC Feb 1, 2003