Kingsoft Updates Techniques to Compete with Microsoft

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Last updated at: (Beijing Time) Tuesday, June 25, 2002

Kingsoft Updates Techniques to Compete with Microsoft

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Competition in the office-software sector in China is intensifying. Last Tuesday, Kingsoft - a domestic flagship provider of office applications - released WPS Office 2002, the latest version of its word-processing system, to contend with its powerful US arch-rival Microsoft's Office XP.

And both competitors are staking a lot on a large-scale government procurement drive to fuel their market expansion.

Kingsoft President Lei Jun said at the software's launch ceremony: "We are banking on our new version of WPS and huge government purchases to expand our market share."

Lei's remarks followed Kingsoft's successful bid for a purchase order by the Beijing municipal government last December. Microsoft, the world's dominant office software vendor, lost out.

"The purchase order placed by the Beijing local government gave a strong boost to Kingsoft when we were in our most difficult period," Lei said.

Kingsoft's Chinese processing system had a market share of about 90 per cent in 1994. But it hit rock bottom due to competition from the Microsoft Word system.

Microsoft is now believed to have about 90 per cent of the Chinese market for word-processing software.

The debut of Kingsoft's new version of WPS follows the release last year of WPS Office 2000.

According to Lei, the successful Beijing bid facilitated the release of the new version.

With integrated processing that supports over 80 languages and auto picture-text typesetting technology, WPS Office 2002 compares well technologically to similar Microsoft products, while its retail price is only about one-tenth or one-fifth that of its foreign counterparts, according to Kingsoft.

"The strong interest the Beijing local government showed in Kingsoft's products is setting a lead in the country. With the new powerful version leveraging the competitiveness of WPS, I expect more local governments to buy Kingsoft products," Lei said.

Kingsoft produces a special version of word-processor tailored to the needs of government administration. Its applications include an electronic stamp that conveys official authorization.

The scramble for government purchase orders is now expected to heat up between Kingsoft and Microsoft.

New WPS to pose challenge for Microsoft

Tang Jun, president of Microsoft (China), said: "The launch of the new version of WPS is sure to pose a challenge for Microsoft.

"But we will wait and see how big the challenge will be," he said.

Microsoft is believed to be playing a "diplomatic" card in China to secure government purchase orders after losing the bid in Beijing.

Microsoft will announce several co-operation agreements with the Chinese Government this week. These are expected to significantly increase its bargaining power in the large-scale government procurement of software products.

Government procurement of software in China is estimated at US$30 billion this year.

Microsoft's software revenue from individual users accounts for only about 10 per cent of all its software revenue in China due to the rampant piracy here, so the software giant is focusing on business and government users.

Tang told Business Weekly that Microsoft had secured several huge purchase orders in recent months from the State Council, China's cabinet.

Ge Ke, Kingsoft vice-president, told Business Weekly that last December's order is worth only millions of yuan, not tens of millions as reported in the local media.

"Despite the small amount, it's a strong signal that the government is determined to give priority to the indigenous software makers in its procurement and give a shot in the arm of the laggard domestic software industry," Ge said.

According to Ge, Kingsoft aims to sell 100,000 copies of WPS Office 2002 this year.

In last December's deal, the Beijing local government bought 10,000 copies of WPS Office 2000.

Yu Cisheng - director of the Beijing municipal government's Science and Technology Commission, the major decision-making body for software procurement - said: "The government will continue to give top priority to home-grown software products in procurement in the coming two years."

According to Yu, China did not sign the Government Procurement Agreement under the framework of the World Trade Organization, which allows the Chinese Government to give priority to domestically developed software for two years.

She said that the major reason for Microsoft's failure to win the bid was the "exorbitant price" that it was asking.

Yu said the Beijing local government's spending on software products this year will be double that of last year.

Fang Xingdong - president of Chinalabs.com, a leading Chinese information technology consulting firm - said: "I expect that Microsoft will have to adjust its price strategy under the low-price pressure from Kingsoft.

"Otherwise, Kingsoft will take more government purchase orders from Microsoft," he said.

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