China In Depth: Where Research, Startups, And Endless Opportunities Are Changing The IT World

CHAIRMAN HU AND CHAIRMAN GATES
Thursday, Nov. 9, Microsoft Research

I'm sitting across from Harry Shum, head of Microsoft's Asia research lab, on the day Microsoft released Windows Vista to manufacturing in the United States. The 300-person research group has contributed some 200 technologies to Microsoft products, including computer speech capabilities in Vista and features in Office 2007.

Shum's got another big responsibility: When Bill Gates comes to China or Chinese leaders go to Seattle, he moderates the meetings. Shum has brokered several summits between Gates and Chinese President Hu Jintao. In April, Shum helped host Hu at Gates' house in Seattle. "Chairman Hu and chairman Gates get along very well," he says.

That's important, as Microsoft tries to take advantage of a huge potential market for its software in a country where it's the victim of widespread software piracy. Gates has said China could become the world's largest software market within a few years, and the company has been striking bundling deals for Windows with Chinese PC makers.

During Hu's April visit to Gates' house in Seattle, the Chinese president told his host he boots up Windows when he arrives at his office each morning. That pleased Microsoft's founder, who offered to serve as the president's personal help desk should he run into trouble. Says Shum, "Gates smiled like a baby."

A GUANXI PREMIUM
Friday, Nov. 10, InformationWeek China conference

In the ballroom of a state-run Chinese hotel off one of Beijing's most expensive shopping districts, InformationWeek China is holding its second annual conference of CIOs. About 300 Chinese IT leaders have turned out for the event, along with an American and an Indian, who, along with me, constitute pretty much the entire non-Chinese population in the room.

This morning, the director general of the government's information ministry took the stage to assert China's need for IT independence from foreign vendors. Then he singled out "foreign operating system vendors" as a particular problem. Wonder who he meant?

Now it's the CIOs' chance to take the stage. CIOs don't have as much clout here as in the United States--the title is actually pretty rare. Many of them are in this room. But it's the foreign guys who make the most forceful points.

Sirsij Peshin, director of business technology for Pfizer, whose $250 million in annual sales in China is growing 30% a year, laments the difficulties of doing business here. Each province has its own laws, and China's business tradition of guanxi, which emphasizes personal relationships, can impede efficiency. Australian transplant Foong Tai of Johnson & Johnson points to 30% IT staff turnover in China. And Steve Phillips, CIO of electronics distributor Avnet, says computer systems are just keeping up with wildfire growth.

Peshin's critique has me intrigued, so I pull him aside for an interview. "China is a relationship-driven market," he says. "Sometimes the relationships get too informal." In mature markets, business managers hand Pfizer's IT department a set of requirements to build to. In China, ideas get parceled out slowly over dinners and drinks--too much information too soon cuts against guanxi. It also adds 15% to 20% to Pfizer's IT costs here, he says, when developers have to rebuild things that didn't satisfy.

The Middle Kingdom is rich with opportunity, but its abstruse ways can foil those who don't invest the effort to understand.