13.2. SWOT Analysis of OSS in ChinaWe have come up with the strengths, weaknesses, opportunities, and threats (SWOT) and have done comparisons among China and other geographies with regard to OSS adoption. In Table 13-2, we summarized the SWOT analysis of OSS, to further separate factors common with other geographies from those unique to China. In the sections that follow, we examine strengths and opportunities for OSS in China.
13.2.1. StrengthsThe future of OSS in China is bright because of the government's strong support, as the traits of OSS match well with what China is in pursuit of:
The strategic value proposition of China's developing OSS capabilities includes:
The packaged software market was calculated at U.S.$264.3 million or RMB 3.5 billion, in 2003 and represented 9.5% of overall government IT spending. Along with the increasing standardization of government application software and government emphasis on software, especially security and storage software, the packaged software market will maintain a fairly high CAGR of 21.7% in the next five years and will eventually reach U.S.$706.3 million or RMB 5.9 billion in 2007.[16] That spending may help jump-start the local software industry to be profitable and create a revenue stream for OSS.
Policies such as File 18[17] and File 41[18] have been published to support growth of the local software industry. It is suggested that for IT spending, government agencies consider support to domestic products/services.[19] If there are no appropriate local products/services, foreign ones can be considered. As such, certain governmental IT purchasing projects have favored indigenous vendors.
For example, the Beijing Municipal Government's IT purchasing by the end of 2001 had approved all six local vendors plus Microsoft, the only foreign vendor in the bidding.[20] The local Linux vendors and ISVs that provide products running on the Linux platform therefore have been given chances to make inroads into the public sector. That kicked off the first round of government purchasing of local software vendors.
The execution will be run from the top downfrom central government to tier-one government agencies in places like Beijing, Shanghai, and other provincesto tier-two and tier-three ones. Apart from the efforts of the government and Linux distributors, multinational vendors (MNVs) are another significant force to foster growth. The MNVs include Dell, HP, IBM, Intel, Sun, and SAP, to name just a few, many of which are the founding members of OSS communities, such as Open Source Development Labs (OSDL). Some of the endeavors that these MNVs have made include:
These efforts have helped contribute to the rapid development of OSS on computer systems in China, with more boxes sold with more services and hardware (mainly servers); and with more PCs for market segments such as education. But to China's software industry, their involvement escalates a healthy growth circle. Last but not least, the impact of government's strong push has a ripple effect throughout the whole economy, at different levels. Momentum has built around the ecosystem of Linux/OSS. As previously stated, the Chinese government has taken the lead in adopting open source products in IT systems. This pattern continues and gradually carries over into hardware, business applications, and the IT services sectors. Some of the major Chinese hardware manufacturers, such as Lenovo, have preinstalled Linux in desktop PCs and ISVs, such as Kingsoft, have provided applications that can run on the Linux platform. Educational institutions also appear to be rapidly adopting Linux, as do financial services and telecom companies. Communications and process manufacturing verticals will likely be the most aggressive adopters, with plans to deploy Linux in two to five years. As for SMEs, they have also shown signs of moving toward Linux, mainly due to consideration of total cost of ownership. Some mission-critical applications have been seen in these verticals. Another recent trend of OSS effort in China is that of standardization. First is Asianux, initiated by Red Flag and Japanese Linux vendor Miracle Linux, and created to standardize Linux distribution in Asia. Asianux involved validation of major ISV applications for compatibility. Recently, Korea also joined in the Asianux effort.[26] At the same time, a China-level Linux standardization effort was initiated in 2004 by China Electronics Standardization Institute (CESI). This standardization effort was later aligned with the Linux Standard Base (LSB) effort of the Free Standards Group (FSG).[27]
All these efforts and contributions have greatly strengthened the local OSS community's development, as well as helped government to roll out its Linux/OSS initiatives. 13.2.2. OpportunitiesCurrently, many OSS efforts and activities are centered on the Linux OS and Linux applications. Much of the effort is based on driving compatibility with other alternative OS or proprietary software applications. Compatibilities come in various forms, ranging from file formats, GUIs, user experience, plug-in availability, and so on. Rampant piracy in the China market means that OSS software is expensive compared to pirated incumbent software, which is effectively free and thus cheaper and better, as OSS is trying to catch up. To convince end users to switch to something inferior and more expensive can be a very difficult value proposition. While such attempts will continue from current players leveraging OSS to their advantages and strong government support behind the scenes, we believe success can also come in a different formthat of treating OSS as a form of disruptive technology and leveraging China's current strength to build successes in the software industry. The disruption cannot be based on chasing after the incumbents in a well-established market. Only when OSS-based software offers unique end-user values unavailable from alternatives will end-user adoption follow. This conclusion follows from the theories laid out in The Innovator's Dilemma (Christensen). There are at least two implications:
Let's look at these two sets of opportunities. 13.2.2.1. The market for embedded software outside the conventional desktop or server opportunitiesChina is the world's largest consumer of cell phones and an emerging force in cell phone handset design and manufacture. With the world transitioning to next-generation cellular and wireless technologies, there are tremendous opportunities for Chinese cell phone manufacturers to use OSSwhether operating systems or applications software or software toolsto build a credible and sustainable cell phone handset business. Similarly, China is in the forefront of producing consumer electronics devices, ranging from DVD players to next-generation digital TVs to set-top boxes. As the world of entertainment goes digital, such consumer electronics devices will demand more software, from operating systems to media codecs to GUI software to supporting new usages such as Personal Video Recording (PVR) capabilities. The availability of OSS software potentially allows these consumer electronics manufacturers to more easily create the entire software stack and to build the entire system with greater ease. The Chinese embedded market players, which are good at producing high-volume systems at competitive price points, may view OSS as the foundation on which to add innovative usages and to deliver new business models for this age of digital communication and entertainment. The creators and suppliers of such software stacks may be ISVs, rather than the system manufacturers themselves. 13.2.2.2. Delivering innovations and unique end-user values on top of available OSSvalues not currently served by the presently available software.For example, the difficulty entering Chinese characters using alphanumeric keyboards means opportunities to create value-added pen-based or other, better input methods for Chinese characters. This type of end-user value can be delivered on top of OSS and can help to offset some of the current shortcomings of the current OSS offerings. Another example specific to China is the strong focus on education by Chinese families and society at large. The opportunities here would be in the form of better learning software for schools and homes and easier-to-manage e-classrooms, the values of which would be delivered and built on top of already available OSS software stacks. The preceding two cases present the potential opportunities for OSS as a disruptive technology when combined with China's strengths and core competencies. Another opportunity that is also unique to China lies in the intersection of the growing Original Design Manufacturing (ODM) base in China and Chinese Taiwan, and the recently announced open source implementation of a next-generation BIOS technology code-named Tiano,[28] formally known as Intel Platform Innovation Framework for Extensible Firmware Interface (EFI).
The open sourced Foundation of Tiano, combined with the standardizations of the firmware interface via EFI, opened up opportunities for ODM and its partners to deliver more platform-level values to end users, in particular in areas of manageability, security, serviceability, and administrative interface, which are otherwise more difficult to implement in the old BIOS environment. This also represents the first example of serious OSS effort in the firmware/BIOS layer in the software stack shown in Figure 13-1. |