, November 5, 1998 — Microsoft’s decision to open an international research lab in China is its latest investment in a country that many predict will soon be the world’s most important software market.
Microsoft announced this week it will open a research lab in Beijing to focus on basic computer research. The company’s second international facility and its first in Asia, Microsoft Research (MSR), China, will be devoted to long-term research in areas such as multimedia, Internet technologies and speech recognition. The new research arm is the latest step in Microsoft’s six-year effort to invest in China’s rapidly growing personal computer market.
“China is the most populous country in the world, and it’s becoming an ever more important location for information technology,” said Michael Rawding, Microsoft’s Greater China Regional Director. “It’s very important for Microsoft to understand and really be in the forefront of what’s happening there.”
Computer makers expect to sell more than 4 million personal computers to Chinese citizens this year, making it the fifth largest market for PC shipments worldwide. The market, which has been growing at a rate of more than 30 percent per year, is expected to continue to expand rapidly as Chinese per capita income rises and ownership of a PC becomes increasingly popular.
Microsoft first established a presence in China in 1992 when it opened a representative office in Beijing. During the past few years, the company has expanded its efforts to serve the Chinese market by providing Chinese language software, developing partnerships with Chinese governments and local computer companies, and training Chinese professionals to integrate information technology into the workplace.
Today, Microsoft employs more than 230 workers in Beijing, Shanghai and Guangzhou. The Beijing office, Microsoft’s headquarters in China, is home to Microsoft’s China Research and Development Center, which focuses on the development of specific Microsoft products and technologies underlying these products. Microsoft plans to double the size of the Research and Development Center from 70 to 140 employees by the end of 1999.
Shanghai is home to Microsoft’s sales and marketing organization for China’s eastern provinces and cities, and is also the location of Microsoft’s newly opened Greater China Regional Support Center – Microsoft’s fifth regional support center worldwide. Microsoft opened the center in January to provide improved technical support and customer service for Chinese users of Microsoft products
A major goal for Microsoft during the past few years has been to make its software products accessible to the Chinese. The company offers the majority of its products in China, and has made most available in traditional and simplified Chinese. Microsoft has worked to improve the capabilities and performance of its Input Method Editor, which is used with applications to automatically convert Roman letters to Chinese characters.
Microsoft has also increased its efforts to form partnerships with Chinese central and municipal governments, as well as the local computer industry. For example, the company recently signed agreements with several municipal and provincial governments in China to actively participate in the development of an information infrastructure. Microsoft and local governments will work together to automate key tasks in government offices, regulate these cities’ software industries, and offer training to computer professionals. The company is also working closely with several software and hardware companies, as well as with businesses that offer consulting and other computer-based services.
“Our goal is to build up a thriving software and value-added services market based on PC software in China,” Rawding said. “We’ve significantly expanded our relationships with both existing key software players and with newer players that are interested in moving towards an independent software vendor type model.”
A third goal for Microsoft is to train employees to use PC technologies to increase their efficiency in the workplace, Rawding said. For the past few years, Microsoft has held many of its major developer conferences in China, including the Professional Developers Conference, TechEd and Developer Days.
In March, Microsoft expanded its Microsoft Certified Professional program in China to include two more courses. The five it now offers train computer professionals in areas ranging from maintaining information platforms to managing Internet Web sites. To date, Microsoft has established more than 220 training centers throughout China, and has provided training to more than 130,000 students.
“This is very consistent with the Chinese government’s desire to build up the skills base in information technology,” Rawding said. “We’re also now becoming very active through the universities to make sure that they incorporate Microsoft technologies into their curriculum, and to ensure that they actually train their students successfully and certify them on Microsoft platforms.”
Despite these advances, a major obstacle to developing a viable business in China has been the illegal practice of software piracy. “We suffer from counterfeit products, and we suffer from PC companies illegally loading software onto the hard disk before they sell a non-brand name PC” Rawding said. “End user piracy is also serious, even in the large organizations.”
Software piracy is an even greater problem for local software companies, who rely solely on income generated in China for their revenues, Rawding said. Microsoft is working with local government agencies and partners to combat the problem, and is focused on education and enforcement. It has joined with local manufacturers to convince local governments and educational institutions to help the software industry promote the use of licensed software. It also joined with Shanghai’s China Records and Hong Kong record label “Go East” to introduce a pop song that discourages the use of pirated software. Since its release in May, the song has hit the local pop charts in 60 cities, and climbed to second position in the “Original Song Category” hosted by Shanghai Broadcasting Station. Rawding said he is hopeful that such efforts will eventually solve the piracy problem.
The creation of a research lab in Beijing reaffirms Microsoft’s commitment to the Chinese marketplace, Rawding said. Microsoft chose China for the research lab because of the country’s rapidly growing PC market, the large number of talented scientists there, and the belief that Beijing, as the economic and cultural center for China, will have an increasingly large influence on the Asia Pacific.
“The MSR lab sends a very strong message to the marketplace that Microsoft will continue to invest in making the PC more accessible to the Chinese,” Rawding said. “Indirectly, it’s a very strong example of our commitment to the market place and of our desire to partner with local universities and companies.”
Rawding said Microsoft will continue to increase its investment in China during the years ahead. The company will release a Chinese version of Windows CE in early 1999, and plans to offer a Chinese version of Microsoft Network (MSN) in the near future as China’s interest in the Internet grows. It will continue to make more of its products available in Chinese, and plans to provide education and training to 200,000 Chinese citizens this year.
Microsoft recently signed agreements with six large Chinese software companies to bundle Windows NT and SQL Server into their business applications, and has made it a goal to develop partnerships with 200 new Chinese PC software companies by the year 2000.
“Our overall strategy in China is in line with Microsoft’s vision of developing software to improve people’s lives at work, home and school,” Rawding said. “We want to be a catalyst for the development of information technology here in China as the country moves away from a pure industrial economy into more of a knowledge-based society.”