Harvard Case - CERNET: Managing Internet Growth in China
"CERNET: Managing Internet Growth in China" Harvard business case study is written by Michael Parent, Harvey Enns. It deals with the challenges in the field of Information Technology. The case study is 15 page(s) long and it was first published on : Jan 20, 1998
At Fern Fort University, we recommend CERNET adopt a multi-pronged strategy to manage the explosive growth of internet usage in China. This strategy focuses on enhancing network capacity, improving service quality, fostering innovation, and developing a sustainable business model. This approach will ensure CERNET remains a vital backbone of China's digital economy while navigating the challenges of rapid growth and evolving user demands.
2. Background
CERNET, the China Education and Research Network, is a national research and education network established in 1994. It provides internet access and services to universities, research institutions, and government agencies across China. The case study highlights the rapid growth of internet usage in China, putting immense pressure on CERNET's infrastructure and resources. CERNET faces challenges in maintaining service quality, managing costs, and adapting to the evolving demands of its users.
The main protagonists of the case study are:
- CERNET management: They are responsible for navigating the challenges of managing the network's growth and ensuring its continued success.
- Users: The diverse user base of CERNET, ranging from students and researchers to government officials, has varying needs and expectations for internet access and services.
- Chinese government: The government plays a crucial role in setting policies and regulations for the internet sector, impacting CERNET's operations and future development.
3. Analysis of the Case Study
To analyze CERNET's situation, we can utilize the Porter's Five Forces framework:
- Threat of New Entrants: The internet sector in China is highly competitive, with numerous private providers offering services. However, CERNET's focus on research and education provides a niche market with potential for differentiation.
- Bargaining Power of Buyers: Users have a high bargaining power due to the availability of alternative internet providers. CERNET needs to offer competitive pricing and high-quality services to retain users.
- Bargaining Power of Suppliers: CERNET relies on technology providers for infrastructure and software, giving them moderate bargaining power. However, CERNET can leverage its scale and long-term partnerships to negotiate favorable terms.
- Threat of Substitute Products: The increasing availability of mobile internet and alternative communication technologies poses a threat to CERNET's traditional services.
- Competitive Rivalry: CERNET faces intense competition from private internet providers, both domestic and international. It needs to differentiate itself through specialized services and focus on its core strengths.
4. Recommendations
CERNET should adopt the following recommendations to manage internet growth in China:
1. Enhance Network Capacity and Infrastructure:
- Invest in fiber optic network expansion: Increase the network's capacity to handle the growing traffic volume.
- Leverage cloud computing: Migrate certain services to the cloud to reduce infrastructure costs and improve scalability.
- Implement Software Defined Networking (SDN): Improve network efficiency, automation, and flexibility.
- Upgrade network security: Invest in cybersecurity measures to protect against cyberattacks and data breaches.
2. Improve Service Quality and User Experience:
- Implement Quality of Service (QoS) mechanisms: Prioritize traffic for critical applications like research and education.
- Offer differentiated services: Develop specialized packages for specific user groups, such as researchers, students, and government agencies.
- Provide 24/7 technical support: Ensure prompt and efficient support for users experiencing technical issues.
- Develop user-friendly interfaces: Simplify access to services and make the network more intuitive for users.
3. Foster Innovation and Digital Transformation:
- Promote research and development: Invest in research projects related to network technologies, data analytics, and artificial intelligence.
- Collaborate with universities and research institutions: Develop joint projects and initiatives to leverage academic expertise.
- Embrace emerging technologies: Explore the potential of technologies like blockchain, Internet of Things (IoT), and machine learning to enhance services.
- Develop new business models: Explore innovative ways to generate revenue, such as offering cloud-based services or data analytics solutions.
4. Develop a Sustainable Business Model:
- Diversify revenue streams: Explore new revenue sources beyond traditional internet access fees.
- Optimize costs: Implement cost-saving measures through efficient resource management and technology adoption.
- Seek strategic partnerships: Collaborate with private companies and government agencies to leverage resources and expertise.
- Develop a long-term vision: Clearly define CERNET's role in the future of China's digital economy.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: CERNET's core competency lies in providing reliable and secure internet access to the research and education sector. The recommendations align with this mission by focusing on enhancing network capacity, improving service quality, and fostering innovation.
- External customers and internal clients: The recommendations address the needs of both external customers (universities, research institutions, government agencies) and internal clients (CERNET staff) by focusing on user experience, service quality, and employee training.
- Competitors: The recommendations consider the competitive landscape by emphasizing innovation, cost optimization, and strategic partnerships to differentiate CERNET from its competitors.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to improve CERNET's financial performance by increasing revenue, reducing costs, and enhancing efficiency.
- Assumptions: The recommendations assume a continued growth in internet usage in China, a supportive government policy environment, and the availability of qualified personnel to implement the proposed changes.
6. Conclusion
CERNET faces significant challenges in managing the explosive growth of internet usage in China. By adopting a multi-pronged strategy that focuses on network enhancement, service quality improvement, innovation, and sustainable business model development, CERNET can navigate these challenges and remain a vital backbone of China's digital economy.
7. Discussion
Alternatives not selected:
- Privatization: While privatization could potentially attract private investment and improve efficiency, it could also compromise CERNET's focus on research and education.
- Merging with a private provider: This option could provide access to resources and expertise but could also lead to a loss of control over CERNET's operations.
Risks and key assumptions:
- Technological advancements: The rapid pace of technological change could render some of the recommended investments obsolete.
- Government regulation: Changes in government policies could impact CERNET's operations and future development.
- Competition: Increased competition from private providers could erode CERNET's market share.
- Funding: Securing sufficient funding for the recommended investments is crucial for their successful implementation.
8. Next Steps
Timeline with key milestones:
- Year 1: Implement network capacity enhancement measures, upgrade security infrastructure, and develop a new business model.
- Year 2: Launch differentiated services for specific user groups, invest in research and development, and explore strategic partnerships.
- Year 3: Complete network modernization, establish a comprehensive IT governance framework, and monitor the effectiveness of the implemented strategies.
By taking these steps, CERNET can position itself as a leading provider of internet services in China, contributing to the country's continued digital transformation and economic growth.
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Case Description
CERNET, the China Education and Research Network, is a not-for-profit, central government body formed to oversee the development and implementation of a university-based nationwide Internet backbone. By 1997, fulfilling this mandate was well underway. CERNET was connected to 280 of China's 3,035 universities and colleges. Much work nonetheless remained. The case deals with managing the growth of the network from the perspective of the director of the Technical Board and Network Centre. Issues he had to contend with include hardware and bandwidth upgrades and installations, access, security, connectivity, costs, and tariffs. With over half the country's population not yet having made their first telephone call, these tasks proved daunting.
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