Tech Firms Look to Capitalize on Chinas Growth

As China gains IT market muscle, BEA and others move in to tap the economic growth.

When BEA Systems Inc. founder, Chairman and CEO Alfred Chuang says he wants to see China become an IT power, he is not alone. All the technology companies that have placed early bets on China are thinking the same thing.

Last month, the Organisation for Economic Co-operation and Development published a report showing that Chinas exports of information and communications technology, including laptops, mobile phones and digital cameras, grew in 2004 by more than 46 percent to $180 billion, surpassing U.S. exports of $149 billion. This marked the first time China upstaged the United States, where exports grew at a rate of 12 percent over 2003.

With IT as a leading driver of the economy of 1.3 billion people, tech vendors from BEA to SAP AG, Microsoft Corp., Google Inc., IBM and Hewlett-Packard Co. are trying to keep up. But with that growth, these companies have had to learn that "business as usual" is quite different in China. Technology adoption rates are different—in some cases, skipping whole generations of products—while existing IT infrastructure and processes to build on lag behind those of more developed countries. Finally, IT vendors have had to learn to navigate the government bureaucracy with the help of partners.

Among the more aggressive companies making a push into China is BEA, which, although based in San Jose, Calif., is led by a native son of China, and its China operation is viewed as a "local company," Chuang said. Its slogan for China is: Rooted in China to Serve Chinese Customers.

At BEAWorld Beijing in December, Chuang said all 300 members of the BEA team helping the company move further into the Chinese market are Chinese, "including myself."

/zimages/2/28571.gifClick here to read more about BEAs pledges to make China an IT world power.

Chuang said BEA entered the China market in 1997 and introduced the concept of middleware to the country. By last March, BEA held a 27 percent share of the Chinese middleware market, according to Chinese analyst reports.

BEAs Tuxedo and WebLogic platforms have sold well in China, Chuang said, but nearly all sales of the relatively new AquaLogic line have been in the United States, he said.

BEAs WLCP (WebLogic Communications Platform), launched last year, is an infrastructure platform for the convergence of IT and telecommunications and the development of next-generation mobile communications.

Sicheng Yu, chief technology officer of BEA China, said the WLCP technology is popular in China because of Chinas "unique requirements" of having areas that are simply skipping over fixed-line service and going straight to mobile and other services.

Chinas IT needs are "quite different" from those of the United States or other developed countries, Yu said. "The applications side, the business process and the IT organization structure, and sometimes even the technical requirements, are different," Yu said.

Added Yu: "The No. 1 thing happening in China is the economy is booming. With the growth, enterprises need new IT systems. So building IT applications to make the system more efficient is the No. 1 job. So it means lots of opportunity here. But it also means some technical difficulties because some customers are shortsighted. They are chasing after short-term returns."

BEA is in it for the long haul, however, and will stand behind its more than 2,000 customers and 300 partners in China, said Deputy General Manager of BEA China Leo Liang, a former IBM executive who joined BEA in 2004.

"We are the No. 1 provider [of middleware] in this marketplace," Liang said. "I know because I have been around the block here. IBM is the competitor in this middleware market, particularly in China. And one of my roles was to run the IBM software business in China. And I was carrying the quota for WebSphere. And now I am carrying the quota for BEA, and ours is four times bigger than IBMs was."

IBM was unable to comment in time for this story.

Next Page: SAP sees solid growth in China.