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Aches and Pains of China's Software Industry
Software industry as a trade hard to be carried on is widely agreed in China. So, when talking about the difficulties most people would immediately fall on and mount attacks on the rampancy of "piracy". Nothing seems wrong there, without doubt. But is this the only blame for all the complaints and dire straits of the country's software industry lamenting in aches and pains?
Let us make a comparison of India's software industry with China's: India's software industry in 1999 achieved an output value of US$5.6bn, 3.9bn from exports and 1.7bn from home sales, respectively. Meanwhile, China chalked a home sale at RMB$17.6bn, or around US$2bn. Software enterprises in today's India number some 1,000 compared to over 5,000 in China. In terms of home sale, the two achieved a near sum and a larger figure had even been notched in China's. But when speaking of the year's software exports China's were in so small a figure that it was almost negligible. India's exports showed a worth two times the whole home sale of China's. In the meantime, China has software companies five times over India's in number. But most of these are small workshop-type operations and the largest of these has been noted with a staff of no more than 50 personnel. Contrarily, India boasts 280,000 software engineers, 280 for each enterprise on average, contrasting a total of merely 100,000 software developers in China, scattered in over 5,000 companies.
When talking about software we usually look on India admiringly. But we should see that India's prosperity hinges on its exports. India's domestic sales are no better than China, as a matter of fact. But facing almost the same homegrown market conditions, India's software enterprises grow rapidly while China keeps on complaining about its dire domestic market.
Ache One: Workshop Operation, one of the aches plaguing China's software industry.
China currently has over 5,000 software companies and 14 software parks across the country. Most companies, with a staff of some dozen or merely a score, have been dabbling in small repetitions of software ordered by users. It is a waste of resources when taking the industry as a whole. Most people only regard software development as merely source code developing. A lack of management by these "workshops" has held them back from developing any possible large-scale software production.
Puny software companies can in no way develop industrial production and therefore are weak in staving off risks and, plagued by rampant piracy, they keep on struggling and gasping for carrying on, totally incapable of any software engineering, let alone technological innovations. Software development demands high cooperation and management. There will be no large software industry and new advances to speak of when numerous small operations are being developed.
Small software operations must be limited in number and be run by improved performance. With no outside restraints the software industry will inevitably fall into a vicious circle: There will be no end to an endless repetition of low-level developing works by numerous small companies, due to their own fragility facing harsh domestic market conditions to force more companies to become low-level operations.
What we should do is to weed out those fly-by-night companies to make room for developers doing real business. This requires a big shake-up of the country's software market to elbow those listless "booths" out and practice raised application standards for new setups.
Numerous small low-level developing operations as are being launched in today's China explains why the country's software industry has been lagging behind India's and the fact why many software projects have flowed into India instead of into China.
Ache two: Too Eager for Instant Success and Quick Results
The second ache of China's software industry lies in its being too eager for short-term success and quick results.
The current domestic software products mainly focus on the fields of Chinese language support system and application software, including Chinese language system, electronic publishing, CAD, financial software, education software, MIS and software developing tools. Meanwhile, no one dares to try on the most profitable and technology-demanding fields as operating system and database. They are even unwilling to touch common software on word processing, multi-media and Internet, for they may not make money from them or can not wait for that day. In fact, only those core software as operating system and database are able to reflect the technological level of a software industry and earn fame for a company.
It is fair to say that China's software industry is drawing nearer and nearer to markets and further and further from technology. Their being too eager for quick success and profits is partly because of poor market conditions, and partly because of low self-position of these companies.
When talking about domestic software products we can name only a few as WPS, foxmail, and Netant. A few individually developed free software, such as foxmail, are ironically reputed as representatives of the whole software industry, an irregular fact that highlights the backwardness, for most companies have turned to user-ordered ones, either unwilling to descend, or daring not to develop general software. Statistics show that of all general software used on domestic market only 5 percent are of copyrights, a terrible figure that frightened away most companies from the market.
How did Microsoft defeat homemade WPS with its Word? It was the pirated ones that took Chinese market, said Bill Gates, carelessly but frankly. It earns Microsoft fame, if not direct profits, which will, in turn, bring huge economic gains on enterprise market. If China, due to bad environment, entirely give up general software, it will lose both brand names and future markets.
If we owe the meager profit of general software to crazy piracy, then why we didn't see domestic companies trying their hands in the most profitable operating platform, database, and integrated software?
Because these supportive software, due to sophisticated technique, requests huge input, and Chinese companies are unwilling to put in so much. Instead they turn to second-hand development for short-term profits, depending on other's ready platform, language, data environment under ready standards and protocols.
But how long will they hold on? As Scott McNealy, CEO of Sun Microsystem, predicts, in the future the software industry will not, and should not, exist anymore. All the business will be service, not products. There will be no demand for second-hand developing, and what will come to the industry without any core software for support?
Ache three: a lack of computer industry for support
The third ache of China's software industry is short of a strong computer industry for support, and therefore missed the golden opportunity for development.
As everyone knows, prosperity of software is based on the transferred value from hardware industry, and without it software is by no means capable of any capital accumulation and thriving. Microsoft's success owes much to IBM in the form of numerous OEM orders at its primary stage of business. In a sense, Microsoft is marching forward on the shoulder of IBM.
What were we doing in mid 80s, the golden time for software industry in other countries? Zhongguancun has built itself up by starting from selling components and personal computers and our hardware production is totally blank. Under such conditions, China's software industry has almost no space to start from without support from domestic hardware producers. Up to now, China's hardware is still lagging behind software. The software industry, without capital accumulation from hardware industry, is just like a child deprived of milk ever since being born.
As a result, China's software can only pin its hope of capital accumulation on people using software with copyrights.
Doubtlessly, piracy is a big burden affecting the advance of China's software, but it is not as big as to form the largest enemy. In a view of economy and markets, any industry has a maximum of market capacity. That is, limited by market and economic environment, the 95 percent users, even not using pirated ones, are totally incapable of affording software with copyrights. They may either use pirated copies or give up software at all.
We are still standing firm in striking against piracy to ensure a healthy industry, but this doesn't mean we can take piracy as a fig leaf forever. The industry only has itself to blame if it continue to criticize outside markets without any self-examination.
By PD Online staff member Li Heng
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