China: Can You Really Scale?

There was something strange happening all over the foreign, sprawling landscape below.  Looking out from my window seat I kept seeing these brilliant blue flashes of light.  They'd appear for a while, disappear, and then reappear once again.  These blue flashes were all over the city below.  As our plane continued to descend towards the airport, the mystery was finally solved - those were the blue arcs from welding rod - hundreds and hundreds of them - all over Beijing.  It was nearly 6:00 p.m. local time, and the sun was setting, but the welders all over the city showed no signs of slowing down.

I recently concluded a long business trip to China, visiting with customers, prospects, associates, and business partners in cities across the country. I was there to talk about voice self service - IVR and speech recognition.  I did not know how much interest we'd find in the topic, but if the self-service market was growing anything like the construction growth underway below, the trip would be very exciting. 

China is growing - growing chaotically and frenetically.   The official bird of China must be the crane - the steel manufacturing crane.  Looking out from my hotel room the first morning in the country, I counted 37 cranes to the south, and 34 cranes to the west.  I had a lower room, so I could not see beyond a couple city blocks.  As I prepared for our first meetings, I began to see the magnitude of growth occurring in China.  That morning, I realized what would be become a recurring theme for the trip - you'd better be ready to scale.  I mean really scale.

There is a massive shift underway in China from an export-driven economy to a consumer-driven economy, and that shift is putting money into the pockets of Chinese consumers.  As those consumers gain economic power, they buy goods - lots of goods.  According to official Chinese government numbers, sales of consumer goods rose nearly 13 percent in 2005.  Audio and video sales were up nearly 15 percent, and automobile sales were up by nearly 17 percent for the same period.  Not surprisingly, oil-related sales revenues were up over 34 percent in 2005.  For the first quarter of 2006, the Chinese economy grew by over 10 percent! 

To meet this incredible demand, and to serve these new customers, companies are scrambling to implement customer-oriented services.  Sales of communication equipment and related software were up nearly 20 percent in 2005.

While China's consumer-driven economy picks up steam, their exports continue to drive an amazing trade surplus - over $101 billion U.S. in 2005.  China's trade surplus is centuries old, having begun in the late 1800's in trading tea leaves for silver bullion with Britain, but China's government has a strategic goal today to shift their economy to an internal, consumable economy, and that shift is well underway.  One recent sign - Wal-Mart just announced that they would increase their presence in China from 36,000 employees to over 150,000, and they would increase the number of in-country stores to over 200 within five years.  For Wal-Mart, this represents 500 percent growth in their retail presence in the country.

Traveling from city to city, our customer/prospect sessions on voice self service were packed - standing room only.  The Chinese came armed with notebooks, and took pages and pages of notes.  Many came with digital cameras and would stand up in the middle of the presentations to take pictures of the slides on the screens.  At breaks, we would meet dozens of companies who were eager to learn the successful practices for deploying self-service solutions - they had growing numbers of customers, and they were looking seriously at new ways to service them.

Scheduled meetings with Chinese customers lasted hours, and the topics would range from technology to business strategy.  The businesses were interested in applications and best practices.  They wanted to know what had worked in the U.S., and where the mistakes were.  The level of interest throughout the meetings would inevitably rise, as the executives would methodically walk through their business challenges, ask questions, and then listen to our responses.

China is eager for voice self-service applications, but they are very skeptical about how speech recognition can play a key role in the near future.  Their first question about speech is always "What languages can you support?" and the vendor response of "Mandarin and Cantonese" is usually met with laughter.  For each major Chinese language there are dozens of unique dialects, and so far there appears to be few speech vendors providing language models for these dialects.  While the customers remain optimistic about how speech could play a role in the future, there seems to be a current sense of resignation that speech recognition won't play a strategic role for most application needs.  Whether this is true or not, there is an overwhelming perception that speech recognition today is not yet ready for mainstream adoption in China.

Text-to-speech is a different story.  There are local vendors providing localized TTS dialects, and companies in China are eager to explore the application possibilities that dynamic TTS can offer.  The interest in TTS is promising, as it exposes customers and callers to a more interactive world of voice self service, and it opens the door to effective speech recognition applications as the speech engines continue to evolve around dialect support.

The growth in China brings scales never seen before.  Because China's 1.3 billion people represent 22 percent of the world's population, even a small percentage of that population can result in a huge number of customers.  China has an incredible 440 million cell phone users, and yet fewer than one in 10 Chinese have a cell phone.  Fewer than one in 20 have access to the Internet, but China has the world's second largest Internet user customer base.  Even small percentage increases in the number of customers results in millions of new customers that have to be serviced and cared for.

To illustrate China's growth and economic potential, one of the most telling set of data is gross domestic product (GDP).  The United States has enjoyed a relatively prosperous economy.  From 1993 to 2005, the U.S. GDP grew every year on average by 3.5 percent.  Business has grown, jobs have been created, and the U.S. has led the way in global economic expansion, but take a look at China.  From 1993 to 2005, their GDP growth averaged nearly 10 percent annually!  This constant, sizeable growth has taken what was once a tiny economy and snowballed China and transformed it into one of the world's most powerful economic engines.  According to the U.S. government, China's GDP purchasing power now ranks third in the world.

China's economic power will continue to grow at astronomical rates.  As they add more and more consumers to that growth, the results will be exponential.  The need within China for effective voice self-service solutions will also grow at a frenetic pace, and the solutions that are delivered into this market had better be prepared to scale - really scale.  And not just the technology and supporting architecture - product distribution, application implementation, and solution servicing will need to scale big as well.  In the years to come, vendors' approaches to voice self-service solutions will be impacted significantly by the unique needs of the dramatically growing Chinese market.  Typified by the Beijing welders late in the day, China is showing no signs of slowing down.