During a recent visit to Toronto for the Can>Win 2004 conference, Microsoft Corp. CEO Steve Ballmer talked about the challenges facing Microsoft, especially in the developing world where the market opportunities are the biggest, but so too are the challenges.
Always an impassioned speaker, Ballmer said the biggest opportunity for any corporation starts with innovation rather than focusing on specific geographical areas. Ballmer pinpointed China as the market to watch, though admittedly a market not free of challenges.
Microsoft uses the acronym BRIC (Brazil, Russia, India and China) to identify the four biggest developing world players but it is really “China and the other guys, he said. This year China will become the number two market for PCs, ranking behind only the U.S in units sold – and that number is continuing to rise, he said.
But Ballmer wanted to clarify that for all the growth in computer sales in China, the country still is quite a small market for Microsoft. In fact, Norway is a bigger market for the Redmond giant than China, he said. Most of this has to do with the scourge of the global software market: piracy.
Ballmer said the Chinese market situation is a little “tricky.” Though the piracy situation has improved in China, it is still over 90 per cent (2002 statistics), according to the Business Software Alliance. One of the problems in the developing world is that intellectual property protection does not have a long history of being tied to economic opportunity. Though most nations have intellectual property laws there is inconsistent enforcement, especially in the developing world, Ballmer said. Without enforcement and protection of intellectual property there is no incentive for research and development, and the process “all breaks down,” Ballmer said. He said businesses need to get involved in lobbying governments to reduce intellectual property abuse.
In the case of China, Microsoft is working with the Chinese government to help build an export market, thereby increasing its own stake in the protection of intellectual property.
But even with the added strain that sometimes exists when doing business in the developing world, Ballmer said companies have to think globally to succeed. “You’ve got to go global or go home.” In the case of Microsoft, “we were never not global,” he said.
Since Microsoft decided to focus on software, Ballmer said the company quickly realized it needed and extensive group of local partners to succeed, or as he calls it, a “local partner ecosystem.” In the case of Canada, Microsoft has tens of thousands of companies it works with.
Though the conference focused on Canada-U.S business relations, Ballmer (answering questions from host Alan Gregg) spent less time discussing Microsoft’s extensive Canadian business relationships than on the population, albeit not yet economic, giants India and China. He said that Microsoft does most of its developing in Redmond but that with 35 to 40 per cent of future computer science graduates coming from India and China, it could potentially move some development there in the future.