While Linux grew steadily in China last year, the open-source operating system (OS) still faces some challenges in the country, according to IDC.
The analyst firm noted in a report that it will take "some time" before the Chinese Linux market is able to grow dramatically. This is due to various factors that hinder market development, including shortage of expertise in the OS, and a low acceptance of Linux among the general population.
Notwithstanding, China’s Linux market revenue reached US$11.8 million in 2005, up 27.1 percent from 2004. IDC attributed the growth to the huge volume of government procurements, and large-scale SCO Unix replacement efforts by banks and industrial projects in the country.
The Linux desktop market also got a shot in the arm last year, thanks to an influx of Linux desktop applications developed by China Standard Software and Red Flag Linux.
Said Nielse Jiang, IDC China's analyst for software and services, in a statement: "In the past, Linux desktops thrived on its low-cost OEM [original equipment manufacturer] value proposition." But in 2005, the strategy shifted as China Linux vendors identified more ways of enhancing Linux desktops to improve demand and profitability, he added.
China Standard Software, for example, offered bundled multimedia, online education and other applications with Linux desktops sold by OEMs. Red Flag Linux also worked with partners to develop e-commerce applications based on its Linux desktop OS.
"Given the sizeable Linux desktop government contracts, the market bodes well with the proliferation of new solutions that will pave the way for expansion into online transactions, office automation and home PC environments," Jiang added.
The Chinese Linux market also saw more competition last year, with global players Novell and Red Hat marketing their wares actively, and participating in industry projects.
In key industries such as telecoms and finance, global vendors were able to demonstrate their competitive advantages, IDC said. However, Chinese companies continued to dominate government procurements and sectors that were not accessible to global players.
Jiang said: "The China Linux market featured unprecedented competition in 2005, which will continue well into 2006."
"As a direct result of such intense competition, price wars will be inevitable in 2006. Most of the public tenders closed with relatively low prices in 2005," he added. "Keen price competition continues to serve as a major barrier to the China Linux market."
According to IDC, China’s Linux market is expected to grow at a compound annual growth rate of 34 percent and reach US$51.1 million within the next four years.
China has been one of the most active supporters of open source, due in part to the platform's lower cost and the government's aim to drive the local software industry. Its efforts this year has focused on ensuring local Linux distributions adhere to global industry standards so that there is better interoperability between Linux systems.