China's WTO entry boosts Linux

The Linux operating system is gaining ground in China at the expense of Microsoft's Windows, according to a new report from Gartner Dataquest. A recent contract awarded by the Chinese government, which favoured Chinese software vendors over Microsoft, shows that even with China's entry into the World Trade Organisation multinationals will still find it difficult to gain entry into China's potentially vast market.

The Beijing city government last month awarded contracts to several vendors to supply software for PCs acquired without copyrighted software. The move is part of China's renewed drive to use legal software on all PCs -- instead of the traditional practice of relying on low-cost pirated software. This drive might be expected to give Microsoft a better foothold in China, since black-market versions of its products already dominate the market, but the awards all went to China-based firms. These included Red Flag Linux, developed by the Chinese Academy of Sciences.

The award shows that even while moving toward legitimate software, China prefers to support local firms and to find the lowest-cost option, according to Gartner.

"Gartner believes that Microsoft's failure to win this particular bid is indicative of the challenges that multinational companies face when doing business in China -- issues such as unique deal negotiation processes, and the criticality of building ongoing relationships with key parties, such as the Chinese government," said analyst Louisa Liu in a statement.

GNU/Linux, usually known simply as Linux, is based on an "open source" development model, which means that any improvements to the software are made freely available to other developers. The open source model allows Chinese organisations to develop their own distributions of the operating system without requiring ties to foreign firms. Linux is seen as the only credible competitor to Microsoft's Windows monopoly, because of its solid design, its wide use in the Web server market and its low cost.

But low cost, stability and government support alone will not necessarily make Linux a success in China, Gartner says. The same issues that have kept the operating system from becoming a mass-market desktop platform in the West also apply in China, including the availability of mission-critical applications, support and training capabilities. "For mission-critical functions, Linux still needs to catch up, and Chinese enterprises should ensure that applications running on Linux can meet their business requirements," Liu stated.

In the shorter term, Gartner recommends that Chinese firms lobby for greater discounts from Microsoft in return for switching to legitimate software.

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