Chinese government won’t stop buying foreign software

The Chinese government is pushing ministries to buy more locally produced software but foreign vendors aren’t likely to be shut out of government contracts.

“It doesn’t look possible,” said Dorothy Yang, research director for software and services at IDC China. “For infrastructure software, like middleware and databases, I don’t think the government can buy it locally.”

The stakes are high for foreign software companies like Microsoft Corp. IDC last year estimated that the Chinese government will spend US$426.8 million on packaged software in 2003 and that figure is expected to grow at a compound annual growth rate of 28 per cent through 2006, when government spending on software is predicted to reach US$938.9 million.

Determining how much of that money goes to specific foreign software companies is difficult, but there are areas where foreign companies like Microsoft have built a strong presence, Yang said. “For office applications, Microsoft has quite a good percentage of government spending,” she said.

Whether the government intends to further restrict the purchase of foreign software, much of which is partly developed or localized in China, is unclear. For its part, Microsoft has so far not received confirmation from the government of any plans to stop buying foreign software, according to Helen Baric, a spokeswoman for the company.

China’s government last year began to promote locally-developed software in a bid to encourage the development of local software companies and to protect sensitive government data, according to the official People’s Daily newspaper, which reported last week that fifteen government ministries have opted to purchase Kingsoft Corp.’s WPS Office 2003 application suite.

Set for release on August 30, WPS Office 2003 is the latest version of Kingsoft’s WPS Office suite, which the Beijing company has long promoted as a Chinese-developed alternative to Microsoft Office. The Chinese government began purchasing WPS Office 2002 last year and is now the largest user of WPS Office, according to the People’s Daily report.

Despite this support from the government, WPS Office is unlikely to replace the use of Microsoft Office by Chinese government officials, IDC’s Yang said.

“Not everyone is familiar with WPS Office,” Yang said. “I don’t think it can fully replace Microsoft Office in the government.”

More significantly, WPS Office 2003 runs on Microsoft’s Windows operating system, which suggests the government plans to continue to purchase computers based on that operating system rather than switch completely to a Chinese Linux distribution or another operating system.

“Windows is a very popular platform and many applications are developed for it in China,” said Feon Lee, a spokeswoman for Legend Holdings Ltd., China’s largest PC maker and an important supplier of PCs and servers to the Chinese government. “I don’t think you can just change overnight.”

Legend has not received any notice that the Chinese government intends to stop buying computers running Windows or any other software from foreign vendors, Lee added.