Does Microsoft Need China?

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...'"

Comments

It's Not Just The Price

[ackthpt]

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.

"Does Microsoft Need China?"

[JeanBaptiste]

A better question would be: "Does China need Microsoft?" No, I dont think so.

Re:"Does Microsoft Need China?"

[Mateito]

A better question would be: "Does China need Microsoft?"

I think the answer to that question is an undisputed "no", and that's why the reversed was asked.

As you stated, China doesn't need Microsoft, as they have shown again and again that they are able to produce/reverse engineer (depending on your point of view) something a comparable or better (as in more suited to their needs) product than the west.

Thus the original question, "Does Microsoft Need China?" is the true discussion point. IE: Asking the reverse: "Can Microsoft continue to grow the marketshare at the rate expected by its executives and investors if it loses the billion and a half potential consumers found in China". I think the answer is probably "Yes, they can, but not under their current business model", so the longer answer to the original question is:

"No, Microsoft doesn't need China, but they need to come up with a refreshed business model that reflects this".

All business models have cycles, and Microsoft's has lasted a lot longer that it should have.

Doomed!

[BalorTFL]

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.

Of course they need China...

[IronMagnus]

What would M$ do without China to produce all of the CDs on which windows is distributed.

Mirror, Mirror on the wall

[MikeMacK]

If you looked in the mirror one morning and discovered you were Bill Gates, how would you regard China?

Probably not the first question I'd ask, probably more like, what the hell am I going to buy today?

It's the government

[Pranjal]

Microsoft knows that the market in the developing countries in Asia is not in the home segment but in the corporate and government segment.

The home segment will continue to pirate software as there is little enforcement of law, if they exist, and primarily because it is so much cheaper to buy pirated copies.
For example here in India the cost of a pirated copy of windows is 1/10th of the cost of a legit copy. Nobody cares about support anyways.

The government offices are the next target. In Asia and specially in countries like communist China the biggest employer is the government. So you can easily guess that more people=more desktops=more sales. But Microsoft is frustrated that it cannot use it's traditional tactics of getting people to resist change by not switching from windows as in most cases people are starting out from scratch and if they latch on to Linux as a desktop OS they will resist changing from that as that is what they have been used to. An example is how the Chinese goverment is developing it's own version of Linux to counter dependence on Microsoft.

It will turn out to be an interesting fight.

Yes, they need China

[bokmann]

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.

Re:Does China want Microsoft?

[razmaspaz]

Hmm...Here's an interesting (maybe) thought. If China begins to use Linux as an alternative to windows, will they contribute their changes back to the community? China has no real incentives for doing so other than to keep on a standard. Other arguments suggest that China does not want to be dependant on a US corporation, so I can imagine a "Western" standard is no better. If China does not contribute back its changes is there any way to enforce the GPL? Somehow I don't think the WTO will be interested in defending the GPL. My guess is that the WTO is not a big fan of the GPL as it threatens IP and profitability of software trade.