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Software AG remains cautious on China

Citing the need to have a more defined strategy for entering the country, the German software vendor says it is still evaluating its options before proceeding.
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Written by Victoria Ho, Contributor on

MIAMI--Germany's Software AG is still biding its time to come up with a "winning" strategy, before it takes its first step into the China market.

In an interview with ZDNet Asia, Software AG's executive board member David Broadbent, said China is "not the right market for Software AG for now". He explained that the company does not intend to go into the country without a "full, complete support structure".

We don't have the winning concept yet for these regions.
Karl-Heinz Streibich, CEO, Software AG, commenting on China and India

"To be effective for China, you need a much bigger strategy... You need a China-specific strategy," Broadbent said. Key to this strategy would be the setting up of "a complete consultancy bridge between the business and IT", he said, as well as establishing strong partner relationships--and this is where the company still needs to build in the China market.

Broadbent also serves as Software AG's COO for countries in Asia, which includes Japan and Australia.

In a previous interview in 2004, a company executive also noted that Software AG was taking a cautious approach to China. A member of its executive board told ZDNet Asia then: "We want to be careful as you can burn a lot of money in China very fast."

Driven by manufacturing

Opportunities for SOA (service oriented architecture) deployments are being drummed up in the manufacturing sector, said Software AG's executive board member David Broadbent. The market is further driven by the financial crisis, which has exerted downward pressure on prices and resulted in excess supply and crashing demand, he said, noting that the value proposition of implementing an SOA is in helping to reuse processes and reduce cost.
Broadbent noted: "This will be key in the region, which is strongly driven by its manufacturing sector."
However, Gartner released a report Monday that singled out SOA adoption in Asia as "lagging". By comparison, adoption in Europe and North America is "nearly universal" and "moderate", respectively.
The research firm said: "Adoption [in Asia] is less than half of that in other regions, and where the majority of organizations are not planning to pursue SOA within the next 12 months."
Broadbent did not comment specifically on the report, but said SOA is "growing out of the hype" in Asia, where executives are showing great interest in the technology. "Many recognize that SOA is not a product to buy, but the backbone for many solutions."

Broadbent said "to an extent" some of its strategies for the rest of Asia could be replicated in China, but noted that each country in the region is very different. As such, he said it would be "dangerous" to treat Asia as a single entity.

Karl-Heinz Streibich, CEO of Software AG, told ZDNet Asia in an interview, the biggest challenge facing the company in its expansion plans in the region is finding the right talent. "Our success in Asia is limited through our own capabilities."

"We don't have the winning concept yet for these markets," said Streibich, referring to Software AG's lack of a presence in both China and India. "We must develop a strategy for, and out of each of the countries themselves, and we must also [be prepared] for getting things wrong."

Streibich said Software AG had a "hard start" in the Latin American region, but has since recovered, with the understanding that a company has to be sensitive to local requirements for success.

He also cited some worries regarding intellectual property rights, which he described as "a key issue for China".

"We've spent millions on [developing] our WebMethods suite. If people copy it, that's it," he said.

But, when pressed, Streibich said it was very likely Software AG would enter China within the next five years.

Victoria Ho of ZDNet Asia reported from Software AG's Innovation World 2008 in Miami, Florida.

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