From Package to Product: The Evolving Network

by Craig Toshio Oda

Giving gifts to close business associates during ochugen (mid-year) is common in Japan. A friend of mine recently complained about the waste involved in packaging such common household goods as cooking oil, nori (seaweed), and juice in elaborate layers of plastic and gift wrapping. He didn't care about the outer packaging, he proclaimed, and would prefer to receive just a simple, unwrapped can instead of an elaborate box. "Think of the good it would do the environment."

I merely smiled, knowing that in reality what his Japanese friend had given him was a box; the packaging, the wrapping -- the form rather than the substance -- is as important in this context as the object inside. And while the US does not have the custom of ochugen, I'm reminded of a similar custom in the US that involves selling boxes all year long: beautiful boxes containing a few floppy disks or a CD-ROM, and a couple of paperback books. The actual physical contents cost only a few dollars to manufacture, but millions of computer users support the software industry by paying hundreds or even thousands of dollars for these boxes.

The network as a box

What we are really buying, of course, are the intangible memes contained in the software. When we buy Microsoft Office, we are paying for the memes of an electronic spreadsheet, word processor, and database.

Elaborate computer code is required to convert an initial idea into a usable product, which is why such memes cannot be transferred or replicated easily. The speed at which a company like Microsoft can transform a spreading meme into a polished product is the basis of its success.

However, even Microsoft realizes that ideas are wild and free, and do not like the confines of the software box. Today, software products, and the ideas they contain, are flowing to a more organic type of box: the network. The network is now the box: the Internet is a big box, and intranets are smaller boxes.

One of the early companies to recognize this sea change in the software industry was id Software, producers of the popular action game Doom. In their own words: "Using a non-traditional means of product distribution -- shareware channels, online services, and the Internet -- id has helped to create a new way to market computer games."

Id uses the simple concept of placing a functional test version of its software in a publicly accessible place, such as the Internet, and allowing free downloading and use of the software. The idea is that enough users will like the test version to purchase the real thing. Netscape Communications has used a similar strategy to gain its vast majority share of the huge Web browser market, and Java, the programming language developed by Sun Microsystems, is expressly designed to be used in applications that are run and distributed over the network. Software distributed in this way replicates itself, spreading through the network just as memes and genes are replicated and spread throughout the world.

Paying for intangibles

The problem with this approach, however, especially in Japan, is that consumers are reluctant to pay for software that does not come packaged inside a box. Japanese buyers want the outer form as well as the inner substance. The next generation of software distributed over the network, therefore, will require a new type of box in order for it to be successfully marketed, and this box will be the form of the network itself.

When combined with software that must be run over a network in order to be used, the network, and the physical components it comprises, become unique marketable products. This doesn't mean that all software companies will have to become Internet service providers (ISPs) or intranet systems integrators to survive in Japan, but it does mean that we can expect to see more alliances and business partnerships between the software developers, ISPs, and intranet integrators. Their unified goal will be to provide a turn-key solution, dressed up in a beautiful (network) package.

The package might place emphasis on software, such as JustSystem's Office Server, which is being advertised as Japan's first turn-key intranet server solution. The JustSystem solution is based on an Oracle 7 RDBMS engine running on Solaris 2.4 or Windows NT 3.5. The second software layer of the server consists of mail, scheduling, document management, and workflow server programs, over which is layered an HTTP Daemon that acts as the interface for clients.

Alternatively, a successful package might emphasize hardware, such as Oracle's $500 NC (Network Computer), which is being touted as a new way to administer and deploy information and applications. The demonstration unit shown at NetWorld+Interop '96 Tokyo contained customized chips and peripherals in a slick black box.

Given the reluctance of Japanese businesses to leap on the latest trendy technology bandwagon, it is likely that successful packages here will be based on proven open standards hardware, and software packages that have gone through extensive use on the Internet. Thus, the wrapping on the package will have to come the hard way: through work, service, and planning. While packaging nori in three layers of elaborate paper and plastic may seem like a waste, it is the way business is done in Japan: careful packaging and elaborate presentation are critical to sales.

So, as I sit in the middle of an expanding network, on the second floor of a building filled with fiber optics, routers, and other networking technologies, I find myself staring out the window at Japanese workers carrying beautifully crafted bento (lunch boxes). I look, and I dream of a perfect box made by an artisan -- one with detailed lacquer, polished surfaces, and inlaid foil.ç

Craig Oda is president of TWICS, Japan's first public-access Internet system and pioneer of networking technologies in Japan for the past 15 years.

"Memes are tunes, ideas, catch-phrases, clothes fashions, ways of making pots or of building arches. Just as genes propagate themselves in the gene pool by leaping from body to body via sperm or eggs, so memes propagate themselves in the meme pool by leaping from brain to brain via a process which, in the broad sense, can be called imitation.... If [an] idea catches on, it can be said to propagate itself, spreading from brain to brain."

Richard Dawkins. The Selfish Gene. New York: Oxford University Press, 1976.

A common rule of thumb "guesstimate" for judging Internet size (i.e., an average of 10 users per host) would put the Japanese Internet at about 4.5 million users. That rule of thumb has been called into question by several recent analyses, though -- and even if it is accurate for the US, it doesn't necessarily apply to Japan.