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China is very special to me. I've had the privilege of visiting your country many, many times over the past 20 years. And I believe you know how proud we are of our business here, and the IBM China team lead by my colleague, Henry Chow.
We employ about 2,000 people in IBM China. We've established 7 joint ventures with an additional 3,000 employees in areas including application software, software development, and manufacturing. We enjoy relationships with hundreds of local Chinese business partners, and we continue to invest very heavily in China. Our storage business is among IBM's most strategic and fastest-growing, and China is home to developments and manufacturing facilities that feed our assembly plants all over the world.
We've spent about $200 million in the last two years in these facilities, including a joint venture in Shenzhen Storage Products Co. In April, we opened the IBM China Mega-Call-Center to provide technical support for a full range of our products and services. It's the most advanced such call center in all of Asia. And the IBM China University Program -- a collaboration with China's State Education commission -- has donated about $70 million in IBM equipment, training, and services to information technology training centers at more than 20 Chinese universities.
Last fall, I was personally honored to host President Jiang during his trip to the United States. And at his request, we demonstrated some of IBM's latest technologies, including one we are extremely proud of: a speech recognition program for Mandarin -- a fantastic product developed right here in our advanced research laboratory in Beijing.
Yesterday, I had the pleasure of meeting with President Jiang once again. We shared a lot of positive ideas of how we can strengthen IBM's relationship with China and serve China's interest in the reformation of Chinese state-owned enterprises.
IBM has enjoyed a relationship with China that has endured for more than half a century. But I do not believe there has ever been a more exciting time to be doing business here, as vast new opportunity is created by your sweeping modernization and ambitious, government-led reform programs for thousands of state-owned enterprises.
This transformation, I believe, will underscore the critical importance of information technology as a driver of competitive success and real economic growth for China.
So today, I want to talk to you about what I believe has to be the agenda of a leader of an enterprise -- business, government agency, university, hospital, bank anywhere in the world -- the agenda regarding this technology. I will do that from the perspective that I brought to IBM.
Some of you know that before I came to IBM, my background was a lot like yours. I was a customer of IBM. I was a customer of the computer industry. I arrived at IBM with a firmly held conviction that this technology is one of those transformational technologies that comes along every hundred years or so and changes everything in our society. I wasn't alone in this opinion, but at that time, it wasn't so easy to find a lot of examples of entire industries being changed by the application of information technology.
Today, in almost every industry in almost every part of the world there are many examples of enterprises applying this technology to seize competitive advantage and to create enormous challenges for their competitors. I think we're seeing information technology reach the point that all transformational technologies reach when they are no longer controlled by just a small group of skilled professionals, and they cross over to mass acceptance and ubiquity.
Networking technology is still in its infancy, yet it's reached already the point where we can call it a new mass medium. Consider that in the U.S.:
* Radio took about 30 years to attract 50 million users.
* Television took 13 years.
* Cable television took 10 years.
The Internet did it in half that. Less than 5 years after the birth of the World Wide Web, some 90 million people are online around the world, and that number will be hundreds of millions before too long.
Of course, right now, the U.S. has embraced the Net more fully than other nations, both in terms of individual users, and business use. But, clearly, this is a global medium. Very soon there will be equal numbers of people accessing the Web in English and other languages. Five countries other than the U.S. have around ten percent of their populations using the Web.
Here in China, the number of Internet users has nearly doubled since just last October, to more than 1 million users. And I've seen statistics that say your Internet population will exceed 7 million people by the year 2001.
Some people are talking about a phenomenon they call "Internet Leapfrog", a high-stakes game in which countries and geographies that make the most astute use of networked technologies quickly bypass other regions in production, productivity, and profitable growth.
Today, this contest of Internet Leapfroging is played on a wide-open field. We hear about 90 million connected users... and some equate that with universal connectivity. But consider that if just 4 percent of the populations of your nation and India got connected tomorrow, the worldwide number of Internet users would double.
These numbers are interesting, but the real important question is: "What are all these individuals, and the world's leading institutions, doing on the Net?"
Not too long ago, the prevailing view was that the Net was about looking up information, or that it was a medium for interpersonal communication, a replacement for the telephone or post office.
Today, it's evident that the Net represents a transformation far more profound than online "chat" groups or giving people access to sports scores and weather reports. It has emerged as a powerful means for parties of every type to conduct interactions of every type.
Certainly, it's changing the way things are bought and sold. Electronic commerce is booming. Even the most conservative estimates say that it will be at least a $200 billion marketplace by the turn of the century (which is only 500 days away) -- most of that volume in business to business transactions.
And while 86 percent of Internet commerce was generated inside the U.S. last year, the rest of the world is getting into the game in a serious way. Internet commerce generated outside the U.S. will represent more than 35 percent of the world total by the year 2002. But what's going on isn't just limited to commerce, to buying and selling.
At IBM, we use a slightly more descriptive term. We talk about e-business to describe all of the vital transactions that will be conducted on the Net.
E-business includes transactions among employees inside an enterprise; among trading partners in a supply chain; and of course, the networked transactions that transform the way educators teach students, physicians treat patients, and the way governments deliver services to citizens.
All of these interactions will become digital. They won't necessarily replace the kind of physical transactions we know today, but they will augment them.
For example, Duoyuan Electronics Group is using the Net to strengthen the ties between all the suppliers, wholesalers and retailers in its electronics manufacturing and distribution business. They're in the early stages of development, but they see networking technologies as the key to building production capability to compete with large enterprises.
Another example: With the support of China Telecom, IBM is working with Hunan Post and Telecom Administration to develop an online payment system. The first application will give customers the convenience of paying telephone bills over Internet using Bank of China Great Wall credit cards.
In projects with customers around the world, we're learning that when they make the move to e-business, they follow a fairly predictable, three-stage process.
First, putting up information on a Web site. Product catalogs. Academic course listings, a list of phone numbers to call for more information.
The second stage is, enabling some form of interaction, typically for customer service. Allowing a customer to track the status of an overnight package is one example. Yamato Transport in Japan and United Parcel Service in America are among companies doing this. And now United Parcel Service in America is launching an entirely new business, going to the third, and most important stage of electronic commerce.
This third stage is the one that represents the real transformation and the major payoff. It's when the enterprise takes the step to allow real Net-based transactions.
For UPS, they're offering secure, confidential delivery of documents over the Net. The service is as reliable as putting the document in an envelope or package and handing it to a clerk or a route driver. And 20 percent to 50 percent cheaper.
Think about what they're doing. They're essentially competing with their traditional package and delivery services by creating an Internet courier service. But UPS sees a digital future -- one in which 30 percent of all such deliveries could take place online -- and they're going there, fast.
This kind of decision-making is the real revolution in the networked world. It's not just about technology. Because when banks and schools and airlines, hospitals and governments use the Net to allow people to execute transactions, they have to make fundamental changes to the way they currently do things.
