As China’s appetite for technological advancement through acquisition grows, will we see a global Chinese-based software vendor emerge?
I’m reading a really interesting book titled “China Shakes The World” by James Kynge, ex-China bureau chief for the Financial Times. I’m about three-quarters through it and would recommend picking it up.
One of the points that Kynge make that struck a cord is how China is going about acquiring technical know-how. This knowledge ranges from steel making, to fine cloth manufacturing to engine design. In all of these cases, instead of using R&D to develop the technologies required, China is simply purchasing companies that have this knowledge. Kynge writes:
“The difference between China’s technological emergence and that of developed countries is that it is driven not so much by research as by commerce. Chinese companies, by and large, derive their technologies by buying them, by copying them or by encouraging a foreign partner to transfer them as part of the price for access to a large potential market”.
Kynge starts off the book with an example of one of Germany’s largest steel mill being dismantled, packed, shipped and reassembled in China. The process involved 250,000 tonnes of equipment and 40 tonnes of documentation on how to put it all back together. Just think about how amazing, crazy and scary that is.
Reading this book I couldn’t help but think about how dramatically the software landscape could change if China were to get serious about (open source) software. With piracy rates sky-high and IP legislation and enforcement in its infancy, the rise of China’s open source dragon is still far off in the horizon. But I think we’ll see strong IP protection in China in my lifetime. I’d go on a limb and guess that it will take 20 years. During this same time, I also expect China to grow its ability to build global Chinese brands.
The combination of strong IP protection and experience building strong global Chinese brands will pave the road for large IP-based (i.e. software) companies and industries in China. Throw in the countless engineers graduating from Chinese universities yearly, and a 20 year horizon for a global Chinese-based software company doesn’t seem outlandish.
An acquisition of a global software company such as SAP could jump start the Chinese global software industry. The use of the open source business model or SaaS could be effective in side-stepping the issue of software piracy in China.
What do you think? Will we see a global Chinese software company in the next 20 years? Will it be using some form of the open source business model?