LinkedIn and the cost of doing business in China

great wallA few weeks ago I covered the launch of LinkedIn in China. It’s been available in English there for a while now and has even managed to amass around 4 million users, I’m told, but this was a big deal because it could give the firm access to up to 140 million Chinese professionals.

That said, many questions remain unanswered about the move, and I’ve been doing a bit of digging to explore them.

The most important centre around exactly what LinkedIn will have to sacrifice to remain unblocked by the Great Firewall. We all know the likes of Facebook, Twitter and YouTube have been forbidden for years by China’s censorship apparatus, but is the cost of doing business there actually worth the potential damage to reputation and bottom line?

Well, CEO Jeff Weiner had this to say about the compromises it has had to make:

As a condition for operating in the country, the government of China imposes censorship requirements on internet platforms. LinkedIn strongly supports freedom of expression and fundamentally disagrees with government censorship. At the same time, we also believe that LinkedIn’s absence in China would deny Chinese professionals a means to connect with others on our global platform, thereby limiting the ability of individual Chinese citizens to pursue and realise the economic opportunities, dreams and rights most important to them.

To me this seems a little disingenuous. Would Chinese citizens’ lives really benefit so much from a local language version of LinkedIn, or is this all about the money?

“I think the CEO should be more upfront about what exactly he is talking about in this situation,” Charlie Smith, co-founder of anti-censorship body Greatfire.org, told me. “What he means to say is that in order for them to get a business license to operate in China so that they can start to sell advertising and recruitment notices, the Chinese authorities insisted that they self-censor.”

The problem is we still don’t know exactly what LinkedIn has agreed to censor. Surely a pre-requisite for getting the green light from Beijing’s censors is having a plan on exactly what will be monitored, and how many resources will be spent on human censors, filtering technologies, etc? Well, LinkedIn told me the license is still pending, and so it can’t be more specific on the details.

But it gets more complicated. Will, as Smith asked me, the profiles of certain rights groups or individuals be removed by LinkedIn, if requested? What if a Chinese user wants to connect with a rights group or dissident outside China? One presumes the firm will have to create some kind of internal firewall between Chinese users and those outside the Chinternet. Aside from the cost to the bottom line, this has all the ingredients for a potential PR disaster.

“How are they going to ‘protect’ Chinese users from seeing content that is being posted by people outside of China that they are connected with? When this kind of censorship comes to light, many people will start testing the LinkedIn platform to see how far this censorship will go,” Smith argued.

“Most people only use LI when they are looking for a job, so I would imagine that many professionals, upon hearing about this complicit censorship, will simply leave the platform and use traditional job boards for their employment search.”

I also spoke to Lucy Purdon at rights group the Institute for Human Rights and Business, which urged more transparency from LinkedIn and encouraged the firm to reach out to the ICT industry and civil society as a member of the Global Network Initiative.

Purdon added:

LinkedIn should learn from the experience of other ICT companies operating in China, especially where government requests for user details present particular risks to users and conflict with the company’s commitment to respect internationally recognised human rights.

In the post-Snowden fallout, LinkedIn has filed legal challenges in the US, seeking permission to provide greater transparency of the number of national security requests they receive from the US government. Given that, at the very least we would expect LinkedIn to push for the greatest transparency in China and include requests from the Chinese government in their transparency reports, which provides a country by country breakdown. In addition, LinkedIn should consider expanding the categories to include censorship requests.

Now this is just the opinions of two organisations. But they’re valid ones and highlight the problems facing any social media or user-generated content-heavy company trying to do business inside China. It’ll be very interesting to see just how LinkedIn handles these issues as it expands its beta service behind the Great Firewall.


East Asia top source of cyber espionage, but with major caveats

chinaVerizon’s annual Data Breach Investigations Report is out and several headlines have pointed to it highlighting China once again as the biggest source of global cyber espionage threats, however we need to be careful drawing such conclusions.

The report revealed that when it comes to cyber espionage, the majority (87%) is state affiliated rather than committed by organised crime (11%) and is targeted at victim organisations outside of the country of origin.

When it comes to “victim countries”, the US (54%) accounts for by far the majority, followed by South Korea (6%) and Japan (3%), although this is more of a reflection of the intelligence sources that inform the report than anything else.

More interestingly, it pegged “external actors” operating from Eastern Asia – mainly China and North Korea – as the most prolific worldwide, accounting for 49%.

Eastern Europe was next (21%), followed by Western Asia (4%), while North America and Europe were way down with just 1% each.

So what does this tell us? Well, those looking to prove that China is once again the arch bogeyman when it comes to global state-sponsored attacks should think twice, according to Verizon.

Report co-author and senior analyst, Kevin Thompson, told me that the results reflect the fact that large numbers of North American companies participate in the study and relatively few hail from East Asia – with none from China and Japan.

“We have been trying to recruit a partner organisation from China, Japan, or South Korea to increase our visibility into that part of the world,” he added. “Since many of our partners that investigate cyber espionage are based in North America they tend to only see attacks that are aimed at North American companies.”

Also, out of 511 total cyber espionage incidents recorded, more than half (281) were removed because no country could be attributed as the source of an attack.

“East Asia is the most commonly seen espionage actor when our partners are able to identify the country at all, which is not even half of the time,” Thompson explained.

“There tends to be more research around East Asian espionage than other countries, especially among North American partner organisations. Since there is more research in that area, it is easier for a partner to identify espionage from those regions while espionage from North America or Europe might be labelled ‘Unknown’ and would not be included in figure 59 of the report.”

If the NSA revelations have taught us anything it’s that the 1% figure for North America-based attacks is likely to be way smaller than in reality.

Verizon also claimed in the report that “the percentage of incidents attributed to East Asia is much less predominant in this year’s dataset”.

The real growth in activity is actually coming from Eastern European attackers, it said, adding the following:

At a high level, there doesn’t seem to be much difference in the industries targeted by East Asian and Eastern European groups. Chinese actors appeared to target a greater breadth of industries, but that’s because there were more campaigns attributed to them.

Malicious email attachment (78%) and web drive-by (20%) are still the most popular method of gaining access to a victim’s environment.

As for advice on how to lower the risk of a compromise, Verizon reiterated the basics.

These include: patch all systems and software so they’re fully up-to-date; use and keep an updated anti-malware solution; maintain user training and awareness programs; segment your network; log system, network, and application activity; monitor outbound traffic for data exfiltration; and use 2FA to stop lateral movement inside the network.


Indonesia’s 20 per cent smartphone tax likely to backfire

indonesiaThis week news emerged that the Indonesian government is planning to levy a 20 per cent luxury goods sales tax on all smartphones made outside the country. It’s an old fashioned piece of protectionism which could hit mobile phone makers in the region pretty hard and is unlikely to have the desired outcome.

As I mentioned in my story for The Register, Indonesia is a growing smartphone market with massive potential – as the world’s fourth most populous nation.

Firms that might be particularly dismayed by the tax include BlackBerry, which counts Indonesia as one of its few remaining strongholds, and Apple, which only recently restarted iPhone 4 production to target budget conscious locals.

If the rumours are true it can be seen less as an attempt to spur local handset makers, of which there are few, and more as a means to persuade more global manufacturers to locate facilities in the country.

Foxconn has already stolen a march on its rivals here by announcing a $1bn investment in facilities there.

Canalys analyst Jessica Kwee told me that, seeing as most domestic smartphone makers are focused on cheap, low-end handsets it’s unlikely that high-end users will be persuaded by the tax to buy local.

“What I think is more likely to happen is that the extremely wealthy would continue to buy their premium phones as is,” she said.

“Then other users will resort to the grey market to source their high-end phones – either via grey importers, by buying when they travel to nearby countries like Singapore or Malaysia, or by requesting from their friends etc. The latter would certainly not benefit the government.”

It’ll be interesting to see whether the government follows through with its plans. After all, at one stage it was mooting the tax only on handsets over Rp 5 million (£260), which I still reckon is the most likely outcome.


“Don’t get bitten by Asia’s offshore tigers,” says Gartner

chinese dragonIT offshoring; not the most exciting topic in the world but a vital contributor to the global IT economy. Last week Gartner released a new report detailing the challenges and opportunities facing Asian locations and warned that while emerging stars such as Indonesia and Vietnam offer great cost savings, there are risks.

Primary among these, as I noted for The Reg, is that none are doing well when it comes to their Data/IP Security and Privacy rating.

Indonesia, Thailand, Sri Lanka, Bangladesh and Vietnam all ranked “poor”, while more mature markets China, Philippines, India and Malaysia only did one better at “fair”.

Report author Jim Longwood also told me that despite ostensibly low costs, some emerging destinations may incur hidden “soft costs”.

“In some countries, for example, you might have to use a local joint venture; or for manufacturing pay additional fees to ensure a higher level of continuity of power supply than local businesses and homes might receive to avoid ‘brown outs’,” he said.

“Another soft cost is building a local brand, to enable the captive to attract a better quality of resources, e.g. when competing against the well-known global brands like of IBM, HP, Microsoft, SAP & Oracle for local talent. Part of this may well be investing building campus type facilities as the Indian providers have done.”

So, which will emerge as the favourite place to offshore IT services in the future?

Well, there are a number of locations vying for the business of MNCs, the analyst told me. Vietnam Bangladesh and Indonesia are leading the pack of emerging Asian countries thanks to strong government support for the first two and “more adhoc local entrepreneurial means” in the latter.

As for China, well it is certainly creeping up fast on India, and was rated by Gartner as the sub-continent’s number one challenger in terms of scale.

However, India has won the “current battle” in terms of horizontal IT services for apps and business processes and will not be overtaken by the Middle Kingdom anytime soon.

“However, versus India, China has certainly won the ‘battle’ to be a leading global site for manufacturing technology whether for TVs, telecommunications or IT hardware componentry,” he added.