Tuesday, May 25, 2004

The IT Market in China (including a Message to Redmond)

China Sourcing Alert   
Tuesday, May 25, 2004
Dateline: Qingdao, Shandong, China
 
The IT Market in China
 
Time for a couple of side comments about the domestic market in China.  It seems that just about everyone wants to set-up shop in China, and Shanghai (for obvious reasons) is the place to be, even though a lot of the larger U.S. software companies have already established their presence in Beijing.  So I have two comments:  IMHO, Shanghai is tops.  But it's not the only option.  However, it appears that many Americans, especially those in the software biz, think that the only options are Shanghai or Beijing.  Case in point:  I suspect that Guy and another pro-China VC, Jim Beyer with Accel Partners (see http://tinyurl.com/37rvp ) have been to Shanghai (and perhaps to a couple of cities in two adjacent provinces), Beijing (and another city nearby Beijing) and perhaps one other city.  But I know for a fact that they haven't visited what are arguably not only largest systems integration and software development firms in China, but those best positioned to assist U.S. firms looking for offshoring talent.  How do I know this?  Simple:  Because I've asked the firms!!  I guess you have to start somewhere and I'd agree that Beijing and Shanghai are perhaps the "necessary condition" choices for doing due diligence.  But there are many, many other options besides Shanghai and Beijing (as areas) and firms based in Shanghai and Beijing.  My other point pertains to Microsoft GCA (Greater China Area).  I have a lot of faith in Microsoft and still hold my ESPP shares, but their China strategy is goofy.  They think that they're going to capture the domestic market through all sorts of high profile alliances and partnerships.  Think again, Microsoft.  My gut tells me that the folks in China know the reality, but Redmond isn't privy to their secret.  Again, I have a lot of faith in Microsoft and suspect that they might find a solution to their China dilemma:  100% market share and zero revenues.  But their strategy in play is doomed to defeat.  Besides the Evermore (see a Pacific Epoch news item at http://tinyurl.com/2fkak ) and open source threat, their strategy is simply dead wrong.  Trying to impose the will of Redmond upon China's software industry simply won't work.  Message to Redmond:  Try listening to what China's software companies want from you!!  Trust me, it is NOT at all what you think and what you seem to be imposing on them.
 
Cheers,
 
David Scott Lewis
President & Principal Analyst
IT E-Strategies, Inc.
U.S. tel: +001.650.618.1475
China tel: +011.86.(0)532.577.8957
http://www.itestrategies.com (blog) & http://tinyurl.com/2r3pa (access to blog content in China)
http://tinyurl.com/3dcej (AvantGo channel)
 
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P.S.--Pacific Epoch [ http://www.pacificepoch.com ] is my favorite source for news on China's domestic IT market.  I encourage everyone to subscribe to their mailing list.

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posted by David Scott Lewis at 6:07 AM