Does Microsoft Need China?

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Posted by michael on Tuesday September 7, 2004 @06:56AM from the great-wall dept.

angkor writes "Does Microsoft Need China? Interesting article from CFO.com's perspective on MS pricing strategies in the developing world: 'Put another way, Microsoft is relying on current pricing and a goodly portion of the world's tech growth to sustain its 31 percent net profit margins. But an increasing portion of global tech growth will come from Asia's burgeoning economies. And it's precisely in Asia--with China in the lead--that pressure to alter the uniform pricing structure for its software is the strongest in the world...'"

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It's Not Just The Price by ackthpt · 2004-09-07 06:56 · Score: 5, Insightful

One of the most compelling reasons Microsoft has difficulty making inroads with the PRC goverment is because he central plan is not the have China beholden to foreign interests. The central government has invested strongly in developing a native CPU and education in computer sciences. Why make something for the rest of the world work for China, when they could develop something that works for China and not care what the rest of the world does?
I think Microsoft has some of the right ideas, trying to develop an infrastructure which has a need for their products, but they'll need businesses to buy into it more than government.
Connors responded that the total cost of ownership of Microsoft Windows and Office products which account for 80 percent of its revenue is in fact less than that of cheaper, open-source software, because Microsoft can offer the entire weight of the 'eco-system' that supports its products. This eco-system can be described as the support, customization, integration services, and software that evolve around the Windows product. Connors cited studies that have endorsed this view from Forrester Research and Merrill Lynch
And at that point the conference center's FUD alarm went off and people fled into the streets.

--

A feeling of having made the same mistake before: Deja Foobar
1. Re:It's Not Just The Price by echeslack · 2004-09-07 07:00 · Score: 3, Insightful
  
  "Why make something for the rest of the world work for China, when they could develop something that works for China and not care what the rest of the world does?"
  
  Because they might actually need to interact with the rest of the world at some point?
  
  I'm not saying its impossible to come up with their own solution, but it may not necessarily make sense.
  
  --
  GMail invites for completed freeipods.com of
2. Re:It's Not Just The Price by Anonymous Coward · 2004-09-07 07:08 · Score: 3, Insightful
  
  Because they might actually need to interact with the rest of the world at some point?
  If you're big enough, the rest of the world will happily come interact with you (as all the US companies are eager to prove through outsourcing relationships).
3. Re:It's Not Just The Price by ahfoo · 2004-09-07 07:40 · Score: 3, Insightful
  
  I follow it fairly regularly. Their web site is in Chinese only but I'll give you a quick run down of what has happend over the last year with the much hyped Dragon Chip.
  Basically, with commodity chips like Celerons and the various entry level priced AMD chips being so cheap the market for their chip/board combo got knocked out.
  From a business perspective, and this is a business rather than a governmental agency although they've had help from academia and some grants, the original idea was to get away from the royalty costs and thereby produce a super cheap chip. But the reality of the market has been that chip royalties have become insignificant so you can't get ahead in the market by cutting royalties. There's essentially nothing left to cut at the low end.
  But they're still at it.
  The big thing this year was a joint venture with AMD. AMD is partnering with them on some of their chip designs that were considered industrial PC grade but are actually even better than what Haier was offering with the Dragon Chip.
  And as you're probably most interested in this part, I could be recalling incorrectly, but I'm pretty sure the specs were something like a 266Mhz with 64K RAM on board and the cost was US$150 but only in units of several thousand.
  You see the problem here? You can get a Via Epia 800 for less than that and those are not cheap. You can get an older Celeron or AMD chip with a motherboard for almost half that if you really shop around.
  So, they're still in business, but the facts of the overall market have made their story a bit less newsworthy.
  The bottom line is this: if the price is right then foreign products will be just fine.
  The same is true for Microsoft. But this is where it gets interesting. Microsoft's market position is already in serious trouble when the guts of a PC go below a hundred bucks.
4. Re:It's Not Just The Price by mrbnsn · 2004-09-07 21:08 · Score: 3, Insightful
  
  "And, as you've mentioned: non-democratic and illegitimate. Would you agree that sometimes these words are not so easy to be defined clearly?"
  Consider this. You claim that the people of Taiwan are Chinese people. The current Communist Party government already has an agreement with the Chinese people in the form of the Constitution of the People's Republic of China. This agreement guarantees free speech, freedom of assembly, freedom to organize labor unions, etc.
  Can you tell me why the Chinese people of Taiwan should trust the Communist Party to respect the terms of a new unification agreement while the Communist Party has no shame about breaking its current agreement with the Chinese people on the mainland?
"Does Microsoft Need China?" by JeanBaptiste · 2004-09-07 07:00 · Score: 5, Insightful

A better question would be: "Does China need Microsoft?" No, I dont think so.
Does China want Microsoft? by evangellydonut · 2004-09-07 07:00 · Score: 3, Insightful

with the government pushing for Linux, how much impact will Microsoft really have on the Chinese market? That's a more relevant question.
Depends on IP laws. by Anonymous Coward · 2004-09-07 07:01 · Score: 3, Insightful

Microsoft may not need China if they can monopolize SW intellectual property in the West. If they can pull that off, they can happily increase revenues by doubling the prices of software domestically.
On the other hand, if Linux is allowed to compete in a free market both here and in China, Microsoft will need to find a new strateghy anyway.
Perhaps they'll have to start innovating instead of charging large amounts for commodity components like filesystems and operating systems.
Doomed! by BalorTFL · 2004-09-07 07:03 · Score: 5, Insightful

I think MicroSoft's efforts at a tiered pricing scheme are doomed. The "Broken-Windows" effort (only 3 apps can run at a time, only low resolutions, etc.) will do little to nothing to curb piracy, no matter how cheaply it is available. On the other hand, if the full version is released at a greatly reduced price, then why would anyone pay the the higher one? It's only a matter of time before people realize that spending $400 for their OS is a ripoff, and M$ is forced to lower prices in China, the U.S., and everywhere else to maintain its market share.
Re:Rather... Does China need Microsoft? by e9th · 2004-09-07 07:05 · Score: 3, Insightful

Yes. And China tends to look towards the long term. The question is, what direction will their software enterprise take? Will they go the FOSS road, or keep their stuff proprietary.
My guess is that they'll try to capitalize (heh) on it.
Wrong Approach by d2_m_viant · 2004-09-07 07:15 · Score: 4, Insightful

The only way that Microsoft can successfully market their Windows OS in China is to stop piracy first. The only way to stop piracy is to strategically align themselves with the government of China.

Microsoft can't defeat the 90% piracy by themselves, that's insane. They have to encourage (or entice) government enforcement if they want to successful transform a nation that only knows theft into a nation that is a legal consumer.

A restrictive operating system is a pitiful attempt at making in-roads into China. Microsoft's approach is completely misguided.
Yes, they need China by bokmann · 2004-09-07 07:24 · Score: 5, Insightful

China is too large a market to leave to 'alternative' operating systems.

1) Most other multi-national corporations need the emerging market of China in order to keep their growing revenue.

2) Microsoft needs the business of those multi-mational corporations in order to keep their marketshare and revenue.

3) Those multi-national corporations are opening offices and hiring employees in China.

If Microsoft doesn't have China as a market, then these new offices and new employees will be able to introduce 'alternative' operating systems within the corporate infrastructure.

This will probably be happening anyway - but Microsoft can't afford to let it happen without a fight. In fact, it is arguable that piracy in China is actually in Microsoft's best interest at this point.
It's not about the revenue by JimDabell · 2004-09-07 07:51 · Score: 4, Insightful

Microsoft has plenty of money, it's not going to run out any time soon.

The real issue is what China will do instead of using Microsoft software. They have to use something. That's an incredible amount of resources the Chinese government and businesses have that will go to Microsoft's competitors.

When the German government decided to shift its employees to Linux, they provided resources that greatly improved the KDE groupware infrastructure. Imagine what the whole of China could give us. Now see why it's important for Microsoft to dominate the Chinese market?
MS needs Asia by baggins2002 · 2004-09-07 08:18 · Score: 3, Insightful

If an alternative OS takes root in Asia, it could very easily become the defacto standard for business and commerce. This would hurt the US economy even more.

Because we're going to be sitting around pointing fingers at each other, bitchin' about IP's,while people in Asia are just using there frickin computers to get shit done.

Hey, whatever we can do to keep the lawyers off unemployment.

I'm glad I had poor schooling, if I had a proper education, this would drive me insane.