Asian social networking sites profit from virtual money

By selling an array of virtual products from avatar clothes to e-furniture, Asia's social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases.

It's simple, they say, the money might be virtual but the profits are all too real.

Chinese university student Tan Shengrong spends about 20 yuan ($2.90) per month purchasing outfits for her pet penguin avatar or playing games on QQ, an instant message portal on Qzone, China's most popular social networking site.

It might not seem like a hefty sum, but every fen, or cent, is money in the bank for Tencent Holdings, which owns Qzone and saw an 85 percent increase in its second quarter net profit this year compared to 2008 despite the economic downturn.

"They keep growing even though the economy's bad because they keep making millions from cents from millions and millions of people," said Benjamin Joffe, head of Internet consulting firm Plus Eight Star.

From virtual clothes to e-pets, Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star. That's about 80 percent of the global market for virtual products, it says.

"Social networking is just a way to get people together, but if you want revenue you have to sell them something. What they found was that people were happy to pay for content related to emotion, status and entertainment," said Joffe.

Of the virtual sales in Asia, about 80 percent comes from the sale of such items as equipment for online games such as rods for GREE's fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.

Such is the success of virtual sales on Asia's most popular social networking sites that Myspace and Facebook are starting to look with a fresh eye at the potential of virtual money to generate cold hard cash.

Qzone's Tencent Holdings made over $1 billion last year with just 13 percent coming from advertising revenue. In contrast, Facebook and Myspace depend on advertising to fund most of their revenue.

The evolution of virtual money on social networking sites in Asia is partly due to a less developed online advertising market which drove Asian web businesses to seek new ways to profit.

Cultural issues are at play too. Gaming is popular among adults in Asia, whereas in the West it tends to be only for kids.

East Asian societies are also very status conscious. Players are loath to be the only avatar without the latest gear and Asians are perhaps more willing than counterparts in the West to buy virtual products to update their avatars or social space.

Asia's social networking sites tend to be country specific but they have very active user bases.

Qzone had 228 million active user accounts for the second quarter of 2009, although it won't give out monthly visitor figures. Meanwhile, Cyworld, which says that 90 percent of South Korea's 20-somethings are members, had 23 million unique visitors per month at the end of the first quarter of 2009.

Virtual rentals

Like their Western counterparts, Asian social networking sites allow their users to chat, play games and share photos.

There is also some advertising, but the sites earn most of their revenues from their users. Members are represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.

The model has taken off abroad but there is still a long way to go until the West catches up with Asia.

Habbo, a social networking site for teenagers owned by Finland's Sulake Corporation, sells virtual clothes and furniture. Meanwhile, games such as Pet Society which is available on Facebook and allows users to raise virtual pets, sells goods such as virtual pet accessories and e-food.

Playfish, creator of Pet Society and other social games, says it has 47 million active users per month playing its games.

With seven million or so inhabitants, the virtual world Second Life offers a range of e-wares for sale for Linden dollars. Some are mundane and others are controversial such as guns and virtual phalluses with price tags based on the size.

Asia is also a playground for a range of virtual business models such as rentals. For example, Cyworld rents background skins of popular South Korean baseball players for limited periods. Such rentals drive repeat sales and tap into trends.

Lost in translation

The success of these East Asian sites contrast sharply to the frustrated social media landscape across the Pacific where despite immense popularity, Facebook and Myspace are yet to fully harness the profit potential of their massive user bases.

Facebook, the world's biggest social network with close to 300 million visitors per month, is on track to bring in more than $500 million in revenue this year, mostly from advertising, but its focus is on growing its user base rather than making money.

Still, a recent New York Times article suggested signs of an exodus from Facebook as disillusioned users leave due to privacy concerns or complaints of rampant commercialism.

Rupert Murdoch's MySpace has been unusual among the major social networks in turning profitable through advertising sales, although is now undergoing a major overhaul, including ousting its CEO and firing hundreds of staff, in the face of worrying user metrics.

Meanwhile, both Facebook and MySpace are eyeing the virtues of virtual money. Facebook, which sells virtual goods mainly in the form of 'Facebook gifts' through a credit system, said in March that it was looking at offering a common virtual currency to third-party application developers.

At the Web 2.0 Summit late last year, Myspace's recently-departed chief operating officer Amit Kapur mentioned that that the firm was also seeking to develop a payments and virtual goods system.

Meanwhile, Internet entrepreneurs are coming to Asia to pick up on innovative web business models.

In June, 32 venture capitalists and Internet entrepreneurs visited Japan and China under the banner "GeeksOnAPlane," to learn about local success stories such as DeNA, video hosting website Tudou, and gaming website PopCap.

"They were all blown away even though some of them already knew about what was going on here," said George Godula, founder of Shanghai-based consultancy Web2Asia. "They (Asian social networking sites) are quite nimble at finding out business models or ways of how to make money," he told Reuters.

Automated merchants

NEED A QUICK hot cup of coffee or snack to go? If there is one store that could satisfy such cravings minus the hassle of making your own, it would be the friendly vending machine.

Consumers’ benefits aside, the vending machine is an almost non-stop, labor-free retail business. All that is needed is an ideal location and the right combination of merchandise to get started.

A brief history

Vending machines date as far back as 215 B.C. when a holy water-dispensing device was identified in the temples of Egypt by Hero, an Alexandrian mathematician. Asia also had its vending machine prototypes: In China, for example, coin-operated pencil vendors had been recorded to have existed in 1076 B.C.

In the 1700’s, coin-operated tobacco sellers appeared in English taverns. Vending machines in the United States started in the late 1800s. In 1886, several patents for coin-operated dispensers were granted in the US, leading to the installation of Thomas Adams Company’s Tutti-Frutti machines on New York elevated train platforms in 1888.

Since then, more products were added to the shelves of vending machines. There were vending machines for stamps (circa 1905), commercial cigarette (1926), bottled soda machines (1930s), and even supposedly fresh foods like sandwiches and milkshakes (late 1950s). It has evolved to accommodate advances in technology, such as the addition of bill acceptors, microwave-oven furnished machines, glass-front machines, and even credit card devices.

In the Philippines, vending machines started in the 1960s with the introduction of automats or cafeterias where food was served from machines. It did not, however, proliferate until the 1970s as the coins back then were irregularly-shaped and could not fit into the coin slots of the imported vending machines.

Nevertheless, the creation of round coins marked the return of the vending machine business in the country, which was led by a Filipino entrepreneur who introduced gum-ball machines. Soft drink vending machines later proliferated. More recently, the introduction of bill-acceptors also led the way for more innovative vending machines in the country.

Vending categories

The National Automatic Merchandising Association (NAMA), a US-based trade association for vending machine business, defines four major categories in the industry. The most basic machines offer the so-called “4Cs” — an abbreviation for coffee, cup soda, candy, and cigarettes. From this basic definition emerge the four major categories:

“Full line” refers to operators selling food and refreshments other than the 4Cs, such as hot canned food, canned soda, refrigerated food, and the like.

“Specialty” is focused on one particular type of product. For example, OCS, or Office Coffee Service, provides equipment and kits that are all focused on coffee and coffee-related items. Bulk machines, a common sight in supermarkets, dispense unwrapped gums, candy, novelties, and the likes, which are a common sight in supermarkets.

“Music/game” refers to coin-operated amusement devices such as music machines and video games.

“Street” refers to the combination of specialty, full line, and music/games vending. It is more often used as a description of the place where the machines are installed; that is, public places such as restaurants, taverns, resorts, etc.

Vending in the Philippines

During its boom phase in the late 1990s, five players led the automated vending business: Sam’s Vendo Corp., Philippine Vending Corp., Vendo King, American Vending Machines Trading Systems, Inc., and Vending Specialists, Inc. These firms operate differently from one another. Sam’s Vendo, Vendo King, and American Vending sell the machines, while Philippine Vending operates automated machines instead of selling them and Vending Specialists is both into selling and operating bulk machines.

As of date, Philippine Vending Corporation is reportedly the leading player in the automated vending industry. Philippine Vending is the only full-line vending company that serves more than 100,000 consumers a day, operates more than 3,200 machines, and serves 600 establishments.

The company covers many regions in the country such as Central Luzon, National Capital Region (NCR), Southern Tagalog, and Cebu. Tri-East Philippines, Inc. is also an industry player involved in vending machine distribution.

Issues and prospects

There are several issues to note about this industry. For one, automated vending is a capital-intensive industry that exhibits economies of scale: that is, an entrepreneur can own and operate more than one or two machines to earn profit. This is the reason why Philippine Vending does not sell machines but rather operates them by itself. In 2000, Vending Specialists president Manuel E. Pangilinan said that this kind of business is all about numbers and building economies of scale.

Automated vending also has other advantages. Vending is an all-cash business; all sales transactions are in the form of cash and thereby provide liquidity. Vending machines, in general, also require low maintenance, and a prospective entrepreneur only needs to make sure that his installation location is vandal-free.

Vending machines also can work 24 hours a day, 7 days a week without the need to hire employees. Finally, minimal overhead costs allow the entrepreneur to sell the merchandise at competitive prices. (As a side note, vending machines can also serve as a channel for advertising. That is, a vending machine not only can dispense canned sodas but can also be a mini-billboard.)

Location is an important factor in this business. An entrepreneur should be able to find a feasible location for his machine to enjoy maximum profits. An area should have constant foot traffic, such as sidewalks or offices. It should also be safe from vandals. The most important consideration is that the machine should complement the market profile of the area. For instance, a coffee machine is best suitable in offices.

With the fast-paced lifestyle nowadays, more people find convenience in everything that is quick and almost hassle-free. As this kind of market profile grows, we can also expect automated merchants to expand further to cater to the demands of the fast-paced Filipino.

A message from the future

Undisputedly, this country is home to a lot of talented artists. So what better way to celebrate this gift than to gather them in one extraordinary design extravaganza.

The 1st Manila Design Week, spearheaded by Team Manila, highlights the art scene today and a peek into its future -- as seen through the eyes of top graphic designers, up-and-coming artists, and art aficionados.

Team Manila’s dynamic duo Mon Punzalan and Jowee Alviar say Manila Design Week aims not only to bring Philippine graphic design into the mainstream but also to establish the Philippines as a major hub of graphic design and creativity in the region, if not the world.

“We want to provide a forum for Pinoy artists where they can show their talents, and likewise, who want to go from local to international recognition,” says Jowee.

YOUTH FUTURE

To acknowledge that wealth of talent in young designers, Manila Design Week presented a student art exhibit-cum-contest where over a hundred original artworks in the form of shirt designs were showcased to different schools from all over the metro.

Themed “Message from the Future,” the event gave students the chance to voice out their ideas on what the future holds.

Narisse Gepilano won the grand prize for her work “Youth Future.” Other winners included Remster Bautista of Cosmopoint International Institute of Technology, Chelseah Ngo of De La Salle University, and Paolo Roa of Shift Design School.

The winning shirt designs will be produced by Team Manila to be sold at the various Team Manila and Bratpack stores. “The student-artists are a growing community. But they are still doing it on their own through blogs and websites, and we want the schools to be more involved in honing the talents of these kids,” says Jowee.

Contest winner Remster Bautista draws the future as a balance between technology and nature. “Yung crescent moon ang pinaka perfect shape sa akin na sa tingin ko nagpapakita ng balance,” explains the 16-year-old Computer Graphics student of his artwork.

Art and Graphic Design student Paolo Roa’s work “Freedom of Expression” wants to express that “everybody is an artist, and all they have to do is explore the artist in them.”

ARTISTS UNITE!

The Manila Design Week is also all about fusion, promoting collaboration of artists from different fields and everything and anything graphic design using all media – from print and publication design to web and motion graphics, photography, advertising and fashion.

Art aficionados were also treated to a generous serving of all sorts of eye candy in the different creative hotspots throughout the metro courtesy of graphic design houses Electrolychee, PSP, 2720 and Wee Will Doodle, music artist-art director Caliph8 and KST visiting US street artist Ron English. Along with the exhibits and activities were dialogues and seminars for aspiring graphic designers.

Iloilo IT Week to highlight ICT jobs, biz prospects

The 4th Iloilo Information Technology (IT) Week on September 28-30 will highlight jobs and business prospects in the field of booming Information and Communications Technology (ICT) industry.

This year’s theme, “Facing Global Challenges through I.T.,” focuses on the opportunities for employment and economic advancement brought about by the ICT sector. The three-day event will feature exhibits, lectures, competitions and jobs fair.

The Iloilo Federation for Information Technology (IFIT) in cooperation with the city and provincial governments and Department of Trade and Industry (DTI-Iloilo) will spearhead the IT Week activities at Robinsons Place here.

The Iloilo IT Week is an annual event that brings together schools, business and government to celebrate the development of the ICT industry.

IFIT is a non-stock and not-for-profit organization founded in 2006 to develop the ICT sector in Iloilo through an active collaboration of the triumvirate of academe-government-industry. It seeks to help transform Iloilo into an ICT investment destination and major ICT and IT-enabled services (ITES) hub through proactive intervention in human resource development.

Dr. Adrian Arcelo, head of IFIT research team will present in the afternoon of September 28 the result of the Iloilo ICT Human Resource Survey conducted by IFIT and funded by the provincial government and DTI-Iloilo.

Dr. Gregg Gabison of Cebu Educational Development Foundation for Information Technology (CEDF-IT) will also present the Philippine Information Technology General Certification Exam (Phil-IT GCE). It is the first certification exam for IT graduates adopted by IFIT to ensure that they master IT upon graduation. It also serves as a benchmarking tool for schools to determine areas of improvement in their ICT curriculum.

Meanwhile, ICT lectures include:

1. “Taking Your Business Online” in the morning of September 29 by Mr. Ramon Lizardo, president of the Philippine Internet Commerce Society and director of Yehey.com;
2. “Freelance 101: Turning Passion to Profit – Blogging from Home” by Ms. Janette Toral, professional writer/blogger, search engine optimization (SEO) consultant and producer of digitalfilipino.com;
3. “Alternative Income Opportunities on the Internet” by Ms. Aileen Apolo, consultant for the Philippines of Google; and
4. “Green ICT for Sustainable Future: ICT Environmental Sustainable Practices” by Ms. Beau Baconguis of Greenpeace, all in the afternoon of September 29; and
5. “Packaging Yourself for Success: How to Make Great First Impressions” by ePLDT Ventus; and
6. “Don’t English Me, I’m Panic: The Importance of English Proficiency for Work” by Ms. Zsa Zsa Bacaling, marketing communications manager of Callbox, Inc., both in the morning of September 30.

The IT Quiz and Jingle Contest will be conducted in the afternoon of September 30.

Fitch revises PLDT outlook to stable from negative

London-based Fitch Ratings raised its outlook for telecom giant Philippine Long Distance Telephone Co.’s (PLDT) long term local currency default rating to stable from negative after Manila Electric Co. buy in.

The rating agency also affirmed its long-term foreign currency issuer default rating (IDR) and outstanding global bonds and senior notes at “BB+" as PLDT remains constrained by the Philippines' country ceiling.

The agency also affirmed the company's national long-term rating at “AAA(phl)," which indicates its relative credit strength among all Philippine companies.

“Under the aegis of new major shareholders, PLDT and San Miguel Corp., Meralco's operating prospects appear to have improved somewhat. Notably, the company has been able to raise distribution charges under performance-based regulation in second quarter in 2009," Fitch said.

Priya Gupta, director in Fitch's Asia-Pacific telecommunications, media and technology group, said the rating “factors in a slight weakening in credit protection measures" for 2009 due to additional 20 percent stake in Meralco.

"While this increase in leverage can be accommodated at PLDT's current local currency rating of 'BBB', there is virtually no headroom for further debt-funded acquisitions of material size," she said.

Fitch cited the ratings signal PLDT’s position as the country’s incumbent operator with “diversified and integrated" telecommunications operations as well as growing operations in call centers and business process outsourcing.

It holds a leading share of fixed-line subscribers around 60 percent and a dominant share of approximately 67 percent of the nascent broadband market.

“Fitch expects fixed-line services to remain a core contributor to earnings and cash flow over the medium term, with strong demand for fixed-data, offsetting substitution pressures on traditional voice services," the statement read.

As PLDT’s cellular business accounts 61 percent of its revenue, Fitch said the market heavyweight’s medium-term growth prospects are “modest" since penetration of subscriber identification modules are now at a high of approximately 82 percent.

“The ratings also take into account rising industry risks, with potential for increased competition from new entrant, San Miguel, over the medium-term, as well as heightened regulatory risks in light of recent directives on prepaid-cellular load extension and on the change in the unit of billing for cellular services," it added.

Google's investors look for next big thing

Google Inc made its fortune on Internet search ads, but Wall Street is increasingly eager for signs that the company's other money-making bets will pay off.

"Even though paid search is 95 percent of the business, I think everybody's looking for that next trick," said John Lutz, a senior research analyst at Frost Investment Advisors, which owns Google shares.

Google will brief investors in a Webcast on Wednesday about search and monetization, though Google spokeswoman Jane Penner said the event will focus more on the monetization of search than on businesses like YouTube.

The Internet giant has myriad initiatives, including a display ad business, mobile Internet products and YouTube, the world's top video Web site.

But none have demonstrated the kind of financial horsepower typically associated with Google, which generated nearly $22 billion in revenue last year.

The Mountain View, California company has been tight-lipped when it comes to the financials of non-search businesses, though there are signs it is opening up a little.

In July, Google lifted the covers slightly on YouTube, revealing that YouTube is monetizing billions of video views every month and that it expects YouTube to become a profitable business in the not-too-distant future. Executives wanted to dispel reports that YouTube, which it acquired for $1.65 billion in 2006, does not have a credible business model.

New formats

Brigantine Advisors analyst Colin Gillis said new ad formats that incorporate videos and graphics could prove key to Google's future growth, as the company courts advertisers like Johnson & Johnson and Procter & Gamble.

"Google's got to give them a good format to convey emotion. This is going to be the next major area," said Gillis.

Google sought to bolster its display ad business with the 2008 acquisition of ad network DoubleClick for $3.1 billion. But rivals Yahoo Inc, Microsoft and Time Warner Inc's AOL still dominate that market.

Analysts also point to Google's mobile efforts, such as specialized search applications for smartphones, as a natural extension of its business. The price of each ad should be higher, because Google can display fewer paid search links on a phone's screen, Sanford Bernstein analyst Jeff Lindsay said.

Moreover, mobile content has the potential to incorporate a user's geographic location, making the ad more specific and relevant, which could also drive up pricing.

"The hypothesis was that mobile search would deliver much higher revenue per search," said Lindsay, but it is unclear whether that is the case.

Analysts estimate that mobile search ads now yield less than 5 percent of Google's revenue. The question is when mobile could become a more significant source of revenue.

"It's not really this year. It's the next three to four years," said Lindsay.

Near-term, search is still what moves the needle.

"The most important thing that everybody wants to figure out is what does a recovery scenario look like for search," said RBC Capital Markets' Ross Sandler. "Once you get beyond that, and that starts to get priced-in and well-understood, that's when Act 2 or Act 3 becomes important."

Got a dream but no cash? The Internet can help

Chris Waddell wants to climb Kilimanjaro in a wheelchair; George Del Barrio wants to make a film in Cambodia; Jeff Edwards wants to write a book about a science fiction writer: they want you to fund their dreams.

A website called Kickstarter.com is making it possible for people like this to raise sums ranging from a few hundred to tens of thousands of dollars to fund anything that captures the imagination of Internet users with a little money to spare.

It worked for Emily Richmond, a 24-year-old living in Los Angeles who plans to sail solo around the world for two years.

She has raised $8,142 from 148 people who will receive rewards such as Polaroid photos from the trip, an origami sailboat or a telephone call when she crosses the equator.

Landon Ray, who runs a marketing software firm called SendPepper.com, gave $500 after showing his 5-year-old daughter Richmond's video promising to keep donors updated by blog and send rewards such as a coconut mailed from a far-flung port.

"I thought this was a perfect learning experience for my daughter," Ray said, adding that he also dreamed of sailing the world himself, so it was partly about living vicariously.

Ray also plans to use his sponsorship as a marketing tool.

Many of the projects on the site are by filmmakers, musicians, artists and writers. Project creators set a time limit and a target. If they don't reach it, they get nothing.

Communities online and offline

Jason Bitner's pitch for $7,500 to pay for post-production of a documentary about the small Midwestern town of La Porte, Indiana, was so popular it raised $12,153.

The film is about an archive of portraits by a photographer who died in 1971. Bitner came across boxes of the pictures in the back room of a diner and has published a book. The film features interviews with the subjects 40 or 50 years later.

"This film is very much about community," Bitner said. "We decided early on we wanted to do community-based funding, sort of crowd-sourced things."

About a third of his 149 backers were friends and family. Others include residents of La Porte but also people from as far afield as Denmark and Australia.

Jonathan Scott Chinn, who is seeking $16,500 to make a short comedy-horror film called "Always a Bridesmaid," said the site was an efficient "creative marketplace."

"You're given the opportunity to make your pitch, and if it's really interesting, it will take off," Chinn said.

Independent singer-songwriter Brad Skistimas, 26, has been using the Internet for eight years to promote his one-man band Five Times August. He used Kickstarter to raise $20,000 to finance his new album "Life As A Song," due out October 13.

Donations amounted to pre-orders of the album, giving fans early access as well as additional material such as handwritten lyrics, photos and, for $1,000, dinner with the singer.

"It's a great way to get involved with fans," Skistimas said. "I was marketing to my own fans, so I said 'If you guys want more music from me, now's a great time to help me out.'"

Kickstarter co-founder Perry Chen said around $500,000 had been donated in the four months since it was launched, with more than 60 percent of projects achieving their goal. Until now the site has charged no fee, but from mid-September it will charge 5 percent of funds donated to successful projects.

Chen said so far there had been no scams that he knows of, though plenty of projects simply don't take off.

"The model works really well to prevent any type of misbehavior because the people who fund these projects; there's always a core group of the person's social network," he said. "Those are bridges people will work very hard not to burn."

Selling friendships on Facebook for businesses

An Australian businessman accused of selling "friends" from the social networking site Facebook hit back Friday, saying it would be "very difficult" to stop him.

Facebook warned Thursday that members who bought information from the Australian online marketing company uSocial.net could be banned from the site.

Leon Hill, 24, who founded and owns uSocial.net, agreed that his customers could be breaching Facebook's terms of service -- but added that Facebook was almost powerless to stop him.

He said Facebook would be "well within their rights" to ban its members who accepted uSocial.net's offer but that it "would be almost impossible to track what we're doing."

Hill's Brisbane-based firm this week angered Facebook by offering to sell a user 1,000 friends for 177 US dollars and 5,000 friends -- the limit imposed by Facebook on a standard profile account -- for 654 dollars.

Facebook "fan" pages have no limits and uSocial.net said it could supply 1,000 Facebook fans for 177 dollars and 10,000 fans for 1,167 dollars.

Likening his service to a dating agency, Hill said his company manually scrolled through Facebook's millions of pages for users who had listed an interest in or already had links to a particular client's industry.

For example, he said they trawled Facebook on behalf of a dealer in performance car parts to find people with an interest in the automotive industry, who were then sent a friend request or fan suggestion.

"We don't manipulate accounts at all," he said. "We are targeting people for our clients but at the end of the day it's all up to the end user," he said.

Hill said his company did the same thing with microblogging site Twitter, which he said had tried unsuccessfully to stop its members using uSocial.net.

"In the end the thing is that I'm not actually ever doing anything against the terms of service -- it's the actual users who purchases my services (who is)," he said.

"Unless they actually say anything, unless they make it known to Facebook or Twitter that they've actually bought my services, there's absolutely nothing they (Facebook or Twitter) can do."

IBM to relaunch, augment global delivery center in RP

IBM’s global delivery center (GDC) in the Philippines is getting an upgrade and will be relaunched soon after performing well and rising to become the company’s fourth highest-earning site globally since being unveiled in October 2005.

This was announced by Richard Patterson, who recently visited the country as part of his functions as vice president for global delivery at IBM global business services.

The global delivery organization, which provides HR services such as consulting and IT application management, is one of the two divisions of IBM’s outsourcing business. The other component, called the global technology services, is comprised mainly of call center services.

The GDC in the Philippines, based in Eastwood City in Quezon City, is one of the eight centers around the world. Other sites are located in Argentina, Brazil, China, Egypt, India, Romania, and Vietnam.

Patterson said the GDC plays a major role in IBM’s globally integrated enterprise (GIE) business model. This model, he said, employs a “follow the sun” approach in which services are continuously delivered in several parts of the globe.

The Manila center, which was inaugurated in 2005 by President Gloria Arroyo, provides in eleven languages to more than 178,000 employees of Procter & Gamble and IBM located in 65 countries.

According to Patterson, the global financial services did not dampen the growth of the Philippine GDC. “There was no slowdown of the backlog of the work we’ve been doing,” he said.

As the fourth highest-performing site among the IBM’s global GDC network, Patterson said the Manila center would be augmented with additional personnel. At the time of its launch, the facility housed some 370 employees.

“We continue to see a demand for services from our center here in the Philippines,” the executive said, adding that the local population has the right skills set to perform the services required of them.

IBM has also revealed that it will open in the fourth quarter its first Innovation Center in the country at the UP-Ayala Techno Park in Commonwealth Ave. in Quezon City.

The Innovation Center will be IBM’s second facility in Southeast Asia after Malaysia. The laboratory will focus on developing open-source and Web 2.0 solutions geared towards helping the Philippines move up the BPO chain.

As Internet turns 40, barriers threaten its growth

Goofy videos weren't on the minds of Len Kleinrock and his team at UCLA when they began tests 40 years ago on what would become the Internet. Neither was social networking, for that matter, nor were most of the other easy-to-use applications that have drawn more than a billion people online.

Instead the researchers sought to create an open network for freely exchanging information, an openness that ultimately spurred the innovation that would later spawn the likes of YouTube, Facebook and the World Wide Web.

There's still plenty of room for innovation today, yet the openness fostering it may be eroding. While the Internet is more widely available and faster than ever, artificial barriers threaten to constrict its growth.

Call it a mid-life crisis.

A variety of factors are to blame. Spam and hacking attacks force network operators to erect security firewalls. Authoritarian regimes block access to many sites and services within their borders. And commercial considerations spur policies that can thwart rivals, particularly on mobile devices like the iPhone.

"There is more freedom for the typical Internet user to play, to communicate, to shop — more opportunities than ever before," said Jonathan Zittrain, a law professor and co-founder of Harvard's Berkman Center for Internet & Society. "On the worrisome side, there are some longer-term trends that are making it much more possible (for information) to be controlled."

Few were paying attention back on Sept. 2, 1969, when about 20 people gathered in Kleinrock's lab at the University of California, Los Angeles, to watch as two bulky computers passed meaningless test data through a 15-foot gray cable.

That was the beginning of the fledgling Arpanet network. Stanford Research Institute joined a month later, and UC Santa Barbara and the University of Utah did by year's end.

The 1970s brought e-mail and the TCP/IP communications protocols, which allowed multiple networks to connect — and formed the Internet. The '80s gave birth to an addressing system with suffixes like ".com" and ".org" in widespread use today.

The Internet didn't become a household word until the '90s, though, after a British physicist, Tim Berners-Lee, invented the Web, a subset of the Internet that makes it easier to link resources across disparate locations. Meanwhile, service providers like America Online connected millions of people for the first time.

That early obscurity helped the Internet blossom, free from regulatory and commercial constraints that might discourage or even prohibit experimentation.

"For most of the Internet's history, no one had heard of it," Zittrain said. "That gave it time to prove itself functionally and to kind of take root."

Even the U.S. government, which funded much of the Internet's early development as a military project, largely left it alone, allowing its engineers to promote their ideal of an open network.

When Berners-Lee, working at a European physics lab, invented the Web in 1990, he could release it to the world without having to seek permission or contend with security firewalls that today treat unknown types of Internet traffic as suspect.

Even the free flow of pornography led to innovations in Internet credit card payments, online video and other technologies used in the mainstream today.

"Allow that open access, and a thousand flowers bloom," said Kleinrock, a UCLA professor since 1963. "One thing about the Internet you can predict is you will be surprised by applications you did not expect."

That idealism is eroding.

An ongoing dispute between Google Inc. and Apple Inc. underscores one such barrier.

Like some other mobile devices that connect to the Internet, the iPhone restricts the software that can run on it. Only applications Apple has vetted are allowed.

Apple recently blocked the Google Voice communications application, saying it overrides the iPhone's built-in interface. Skeptics, however, suggest the move thwarts Google's potentially competing phone services.

On desktop computers, some Internet access providers have erected barriers to curb bandwidth-gobbling file-sharing services used by their subscribers. Comcast Corp. got rebuked by Federal Communications Commission last year for blocking or delaying some forms of file-sharing; Comcast ultimately agreed to stop that.

The episode galvanized calls for the government to require "net neutrality," which essentially means that a service provider could not favor certain forms of data traffic over others. But that wouldn't be a new rule as much as a return to the principles that drove the network Kleinrock and his colleagues began building 40 years ago.

Even if service providers don't actively interfere with traffic, they can discourage consumers' unfettered use of the Internet with caps on monthly data usage. Some access providers are testing drastically lower limits that could mean extra charges for watching just a few DVD-quality movies online.

"You are less likely to try things out," said Vint Cerf, Google's chief Internet evangelist and one of the Internet's founding fathers. "No one wants a surprise bill at the end of the month."

Dave Farber, a former chief technologist at the Federal Communications Commission, said systems are far more powerful when software developers and consumers alike can simply try things out.

Farber has unlocked an older iPhone using a warrantee-voiding technique known as jail-breaking, allowing the phone to run software that Apple hasn't approved. By doing that, he could watch video before Apple supported it in the most recent version of the iPhone, and he changed the screen display when the phone is idle to give him a summary of appointments and e-mails.

While Apple insists its reviews are necessary to protect children and consumer privacy and to avoid degrading phone performance, other phone developers are trying to preserve the type of openness found on desktop computers. Google's Android system, for instance, allows anyone to write and distribute software without permission.

Yet even on the desktop, other barriers get in the way.

Steve Crocker, an Internet pioneer who now heads the startup Shinkuro Inc., said his company has had a tough time building technology that helps people in different companies collaborate because of security firewalls that are ubiquitous on the Internet. Simply put, firewalls are designed to block incoming connections, making direct interactions between users challenging, if not impossible.

No one's suggesting the removal of all barriers, of course. Security firewalls and spam filters became crucial as the Internet grew and attracted malicious behavior, much as traffic lights eventually had to be erected as cars flooded the roads. Removing those barriers could create larger problems.

And many barriers throughout history eventually fell away — often under pressure. Early on, AOL was notorious for discouraging users from venturing from its gated community onto the broader Web. The company gradually opened the doors as its subscribers complained or fled. Today, the company is rebuilding its business around that open Internet.

What the Internet's leading engineers are trying to avoid are barriers that are so burdensome that they squash emerging ideas before they can take hold.

Already, there is evidence of controls at workplaces and service providers slowing the uptake of file-sharing and collaboration tools. Video could be next if consumers shun higher-quality and longer clips for fear of incurring extra bandwidth fees. Likewise, startups may never get a chance to reach users if mobile gatekeepers won't allow them.

If such barriers keep innovations from the hands of consumers, we may never know what else we may be missing along the way.

IBM to get workers for ‘delivery center’

TECHNOLOGY GIANT IBM Corp. yesterday re-launched a "delivery center" in a bid to bring more job opportunities to local talents.

Richard A. Patterson, vice-president for global delivery at IBM Global Business Services, said the Philippine strategic center aims to provide more information technology careers in the country as the company brings its clients near their target markets.

The Manila delivery center, which was established in 2003, is the fourth fastest growing center in eight strategic hubs globally, he said in a press conference.

Mr. Patterson said the Philippines was chosen as a location for the delivery center because of the stability of the peso and the "high level of support" from the government.

Moreover, "good quality" education, language proficiency, and the technical capacities of local talents make the Philippines an ideal place for a global delivery center, he added.

The Manila delivery center is part of IBM’s "globally integrated enterprise approach," adopted by the technology giant to give corporate clients an option to provide services close to their target markets.

Mr. Patterson explained that global delivery centers cater to both large companies and small and medium enterprises by providing consulting and applications services.

IBM’s delivery centers worldwide are focused toward the transportation, banking, telecommunication and industrial sectors, Mr. Patterson said.

Filipino CIOs learn from each other

As the global economic crisis slowly unravels, local chief information officers (CIOs) continue to look for strategies that will ensure business continuity and prepare them for the eventual upturn.

However, not all strategies could work and some CIOs still lack the maturity to implement strategies either because they are not familiar with effective industry practices or even with simple yet novel ideas.

“The best way to learn new techniques is to bring them together and share experiences so CIOs know what works and how these can be implemented in their organizations,” according to Accenture Philippines country managing director Beth Lui.

Speaking before a CIO workshop conducted by Accenture, Lui said CIOs are inclined to learn more from others’ experiences to enable their own companies to effectively maintain business continuity.

She said CIOs are able to exchange ideas and ask relevant questions pertaining to business operations, citing that as the economy turns, these companies would want to deliver faster and better services without breaking their budgets.

“The general consensus is that companies have smaller budgets, especially for information technology but they still expect to deliver their services better. They’ll learn if they find out how others did it,” Lui said.

Accenture has been conducting CIO workshops in other countries bringing together executives from different industries specifically to showcase key findings on how companies leverage in IT for specific business requirements.

The Philippine CIO workshop would be the first the company is conducting locally. About 40 are expected to attend.

Accenture CIO Organization Executive Director Kenneth Corless said the event will highlight different usage models for new technologies.

Among the topics include network security, data consolidation, return on IT investments, strategic IT cost reduction, and even new technologies such as virtualization and “green” technologies.

In the workshop, Accenture will be used as one of the models of a large company that successfully managed their IT needs while reducing costs.

“What’s important here is that they have a venue for peer collaboration and to share these experiences. A large company may learn new things from a small company that is using new ways to operate efficiently. People are hungry for new ideas,” Corless said.