An open letter to Alibaba: Wang Jian, why did you give up?

By Andy Li

My Chinese is not very good, but if I write in English, I cannot make more people understand what I have been going through. So please bear with my imperfect Chinese.

The founder of ELONCITY, Andy Li

*A simple principle: The price of a 2TB desktop hard drive (Terabyte, 1TB=1024 GB) would be about 700 RMB in today’s market. A 2TB enterprise hard drive with the same specifications would still cost over 1,500 RMB. The biggest difference between these two hard drives is the RVI (Rotational Vibration Index) setting. (Therefore, the desktop hard drive can still work regularly at a high RVI, but the enterprise hard drive will stop working at a high RVI to protect the hard drive, in order to increase the reliability). Both hard drives even use the same screws at the same location (not the screws to fix the hard drives, but the screws to fix the internal components). Let us assume that hard drives will follow Moore’s Law (every 18 months the capacity will double). After a year and a half, if we replace all the desktop hard drives (Note), we can still double the storage capacity with the same capital! Four and a half years later, we would quadruple our storage capacity with the same price! With the improvement of the semiconductor industry, when solid-state drives start to replace mechanical hard drives (beginning around 2015), the quality and efficiency of our servers will reach another level (Each SSD, with only 2.5 inches (SFF), can provide a capacity of 250 MB/s). One server with 2RU would accommodate 24 SFF servers, which is the equivalent of 6GB capacity. That is why the servers, which were sold in 2012, would come with two 10 Gigabit Ethernet ports.

*Cost! Cost! Cost!: Why did I give up my stock ownership at ChinaCache and return to the States to search for jobs? Because when I was working as a CTO, I did not stop my CEO from expanding the FLV (Flash Video) business line rapidly. Then in the middle of 2008, when Youku/Tudou built their own CDN equipment under the requirement of reducing the cost of their Venture Capitalists, ChinaCache lost 60% of their business. They had to sell their newly purchased network switches and servers at a reduced price; the worst thing was that they could not find a buyer even though the price of IT equipment was dropping all the time. If the CEO rejected the 10% stock buyback temptation (The VC wanted 100% business expanding for two consecutive years), using the FLV capital to invest on the optimization of group efficiency, then ChinaCache could have used less capital to develop their FLV business. In addition to the reselling period and scale effect, their price for FLV would be cheaper than the cost of Youku/Tudou. Also, video websites like Youku/Tudou would not have built their own CDN under the pressure of VC and they could have paid their employees two months’ salary. You must have the ability to withstand that painful feeling. As a great Chinese internet pioneer who built the framework of the internet, I can’t believe it had to sell everything to wait for the VC’s bridge loan to survive those excruciating three months. That’s why I transferred my stock ownership to the colleagues who stayed in the company (I did not know if the CEO did carry out my wish). Then I returned to the States and kept looking for jobs. With the same principle, in the past ten years, Alibaba relied on its superior business model to occupy 80% of the electronic business market. However, the speed of business model renewal is not as fast as it was 10 years ago. In the meantime, the pressure among homogeneous competitors has been constantly growing. I felt the same thing before: after 2000, Cisco was chased by Juniper and Huawei at two different stages. ChinaCache had all of the similar problems happening simultaneously. Therefore, when this problem occurs, no matter who you hire, no one can save your business.

*New business civilization — the discussion of the relationship between vendors and customers (The twisted result will be bribery and meaningless discounts): The electronic business is solving supply chain problems and we should also use the same concepts to solve our infrastructure problems. To be honest, Alibaba is only one step away from corruption in the procurement of those state-owned enterprise telecom operators! If the manufacturing firms provide a 4,000 RMB dinner during our team building, it makes sense that those SA engineers who earn 10,000 RMB per month like us are afraid to speak the truth. If there are more team building expenses and entertaining expenses for us, do engineers like us really need petty favors from the manufacturing firms?

*Cisco lets me go back and work as their EC3 manager(Business Cloud Computing); Huawei wants me to be the manager of its CTO office in charge of Cloud Computing; I did not accept any of them. They wanted to pay me three times as much as I would get at Alibaba! I want to stay at Alibaba, because of one thing that Jack Ma said, “State-owned enterprise”, a real meaningful public business. Also, who are the ones who encouraged Youku/Tudou to build their own basic FLV facility? How can I continue to work with those people who ruined my career? The only thing that those manufacturing firms want is to make you purchase more equipment, but they never care about whether or not you can use them efficiently. They don’t care if the earth would be destroyed due to global warming or if your company would face a management crisis due to low efficiency. Those are not their problems. They only worry if their pockets are full of money, if they can afford an Audi R8 Spyder, and if they might be fired tomorrow due to low sales.

I am willing to work with Intel, because they always tell me the trend of industry development. I am willing to work with Intel, Foxconn, Quanta and Ruijie, because they can always respond to our demands quickly (They can directly help us improve our servers efficiency). We even made these manufacturing firms provide the bill of materials (BoM cost), and let them set their own reasonable profit. By doing so, we established a sustainable working relationship. However, whenever it is purchasing time, we could not execute these strategies (Buying Dell and Huawei’s commercial servers). We are too ashamed to request original design manufacturer(ODM) for developing new machines (one reason is that the manufacturer did not get any profits; the other reason is that in 2011, the projects did not get much support, therefore, the research and development fund was zero).

Even at China Telecom, they also know that the purchasing department has to be separated from demand sector. But even so, they still could not stop corruption. Our Alibaba company chose to put operation and maintenance department, planning and construction department and purchasing department under one VP. Although doing so helps to solve a small part of the KPI problem, the checks and balances function disappeared due to the combination of the three departments. The interest of Alibaba is no longer the priority and, not to mention, the ideology of public business anymore.

*Why I am not writing code anymore — For the past several months, in order to improve the performance of the server, I worked until midnight every day for 3 or 4 months. In the world of code, I found myself again and I felt that I accomplished a lot. especially when I picked up some books I have not touched for 15 years, which are about TCP (Telecommunications Consumer Protection) Code. I am very happy to find out its insufficiency in LFN (Long Fat Network). But, by doing this job, I could only spur several engineers to do it with me. When I was running the green data center, I brought the whole basic facility industry of Chinese internet with me. That is why I do not want to continue writing code; instead, I hope I am able to change an industry.

Note: The manufacturers provide a 3-year warranty for desktop hard drives. The data from Google shows that the annual damage rate of hard drives is less than 4% and the life cycle damage rate is 8.6%, which means that 90% of hard drives can work for 3 years rather than a year and a half. The price difference of one hard drive is 800 RMB (1500–700 = 800); 12 hard drives will be 10,000 RMB; for 11,000 hard drives in three years, the cost can be saved by about 100 million RMB. With this money saved, we can hire 10 senior system engineers, who can improve the hard drive renewal process, and they do not have to work until midnight whenever it’s time for the renewal.

Author Introduction

The author of this article is Andy Li, the founder of ELONCITY, which contributed to the development of decentralization of traditional power infrastructure into millions of self-sufficient micro-grids, which can store reusable free energy and eventually power the world with clean energy.

Andy Li was previously employed as a Cisco Principle Engineer and mastered traffic engineering. He also led ChinaCache to build an ECN/CDN solution for internet infrastructure, which is analogous to the micro-grids. Also, Andy leads the Alibaba Cloud Computing Data Center architecture team, pioneers the use of direct current distribution networks in mega data centers. Finally, since 2014, Andy has been leading POMCube Inc. to design battery energy storage systems (BESS), which can directly power DC appliances.

While working at ChinaCache, Andy experienced the most adverse condition that can happen to an internet and cloud computing company. Due to this disaster, Andy left ChinaCache, but left all his stock ownership to his coworkers and returned to America to start a new career. Although it is nearly impossible, Andy is always chasing an ideal business world without any corruption. This is his story.