Although Linux is catching on rapidly in China, dont expect to see open-source application software taking off in the country any time soon, said an analyst familiar with the Chinese IT market.
Huang Yong, chief executive at CCID Consulting Co. Ltd., a Beijing-based market research and consulting firm, said that despite the “profound impact” Linux is having in China, Chinese enterprises are not likely to adopt open-source middleware as the IT industry continues to mature.
In addition to his views on open source in China, Huang said he sees China eventually taking a leadership position in the IT market, and discussed a variety of issues including Chinas contribution to the worldwide IT industry, the key to doing business in China and the indigenous software market.
“At present, no Chinese software company has open-sourced code, particularly in application software,” Huang said. Indeed, the quality of open-source application software “is suspected by consumers,” Huang said.
“The Chinese software market is now worth some 6.5 billion U.S. dollars, which is still small,” Huang said. “Even the largest [ISV UFIDA Software Co. Ltd.] only does 100 million U.S. dollars in revenue in one year.
“So the base of software companies sustainable development will be threatened if source code is opened, and the service model that open-source enterprises rely on is not accepted by Chinese IT consumers. The situation for open-source middleware and application software is not optimistic in China.”
In an interview last month in Beijing, Zhongyuan Zheng, vice president of Red Flag Software Co. Ltd., based in Beijing, said: “Until now, the government has chosen Linux for their IT infrastructure. I dont think there are many cases for using open-source middleware in mission-critical areas. In mission-critical areas, commercial software has the biggest market share in China.”
Moreover, Zheng said the Chinese government is promoting the use of desktop Linux, which his company produces.
“Chinas government promotes and supports desktop Linux very strongly,” he said. “So they hope that … Well, as you know, piracy in China has been very significant. So the government hopes that Linux—legal software such as Linux—can replace all this piracy.”
Huang said he believes China can leverage Linux to build its own independent operating system software, and that leveraging open-source code can help foster local software companies and develop Chinas software industry.
Sicheng Yu, chief technology officer of BEA China, said, “I am not sure about the situation in the U.S., but in China we dont see much of a threat from open-source software in production systems.
“We are seeing great interest in Linux. But when you move to the production side the situation is quite different than in the U.S. and Europe because the open-source application servers have not established their products for running mission-critical systems here. Another reason is labor costs in China is quite low.”
Room for Improvement
Meanwhile, Huang said he believes, “China will be the leader in the global IT industry in five to 10 years” if certain improvements occur. These improvements include advancement of innovative capabilities, enhancement of internationalized management abilities, and progress in product, technology, brand and talents within local companies, he said.
Moreover, Huang noted that currently, “China is still a follower in the global IT industry. The country still lags behind in some aspects, such as industry standards, key technologies and products, independent IPR [intellectual property rights], efficiency of IT application scale.
“But, on the other side, China has a healthy economic base, a rapidly growing economy, stable industry policy and huge potential for the IT market, especially with the rapid development of Chinas innovative companies.”
In addition, Huang said on a scale of one to 10 he would rate the Chinese IT industry as a seven.
“The main lowlights include lack of independent innovation for products and technologies, particularly for software and service, which are developing slowly; low ROI for IT investments level of application; rudimentary marketing tactics, which consist mainly of pricing, and may hurt industry development; and IPR protection needing more effort,” he said.
Yet, the presence of multinational IT and software companies in China has had “a positive impact” on the countrys IT industry by: promoting industry innovation and technology advancement; enhancing the efficiency of returns from IT investments; fostering local talents to enhance local companies competitiveness; enhancing the whole industry chains competency, including technology, product, channel, service, and application efficiency, Huang said.
As for Chinas contribution to the worldwide IT industry, Huang said, “Chinas economy is developing rapidly and doing so in a sustainable way. Chinas IT market has huge potential and its rapid development is boosting the global IT industrys development.”
However, according to Huang, “Chinese companies are extremely competent in the areas such as large-scale manufacturing and other popular consumer IT areas; but multinational companies are more competent in the software and professional services market.”
Meanwhile, the keys to doing business successfully in the Chinese IT market include finding the “perfect” combination of technology and brand, establishing and maintaining strong relations with partners and customers and localizing operations and management, Huang said.
In addition, IT companies planning to enter the Chinese market or to grow their business in the country would do well to establish connections with the Chinese government, Huang said.
Relationships with the Chinese government are “very significant” for IT product and services suppliers.
“Although China started market-oriented reforms some time ago, the governments impact is still significant,” Huang said.
“This is particularly true for industries such as finance, telecommunication, energy, communications, education and other key sectors.
“It is very important to maintain good relations with government to better understand policy and development, and to build a good environment for a companys survival and continued development.”