Microsoft plans large expansion in China to push cloud services

IDG News Service - To benefit from a growing Chinese market, Microsoft on Thursday said it is increasing its investment in the country, with new hires, more research for local requirements, and an expansion to additional cities and provinces to bring cloud computing services to its enterprise customers.

Microsoft's so-called "go big" strategy for China, includes hiring 1,000 additional employees over the fiscal year, that will work in research, enterprise services, and support for the company. The company has about 4,500 employees in the country.

The company also plans to increase its research and development investment in China next year, bringing it up by 15% from the current annual amount of $500 million.

As part of the overall strategy, the company will expand its presence in 15 provinces and 20 cities in China by bolstering its staff and management and working with local government offices.

The investment is expected to help promote Microsoft's cloud offerings -- including Windows Azure, Office 365, and Windows Server 2012 -- in China. It will also help as the company prepares for the upcoming release of Windows 8 and Microsoft Office 2013.

While announcing the strategy, Microsoft executives emphasized, during a Thursday briefing with journalists, China's importance in the world market, and how Chinese companies and local governments are increasingly looking at ways to improve productivity. Already, China has become the world's largest market for PC and smartphone shipments.

"We are uniquely positioned to help China," Ralph Haupter, chairman and CEO for Microsoft's Greater China Region, said. He said the company can help drive innovation in the country and address the technology needs of its Chinese enterprise customers, many of which want to compete abroad.

Microsoft plans to develop more technologies and products specifically for China, said Ya-Qin Zhang, chairman of Microsoft's Asia-Pacific Research and Development Group. Currently, about 80% of Microsoft's research in China is for the global market, but the company will increasingly devote more research to the local Chinese market.

"It's the most ambitious and audacious plan we have had for China in the last two decades," he added.

While Microsoft executives said China is rich with opportunities, the country also has its own challenges. China has a high level of software piracy, a problem that continues to hinder Microsoft product sales. PCs in the country are also still overwhelmingly installed with Windows XP, with its user share at 76%, according to data analytics website CNZZ.com

China, however, has been one of the biggest adopters of the Windows 8 preview release, Haupter said. "If not the biggest, (China) is one of the top two markets adopting right now the Windows 8 beta," he said. Microsoft is currently working with many Chinese developers and companies to bring their apps to the platform, he added.

The strategy Microsoft is pushing in China relates to all its products, and not only Windows 8. "As much as we love Windows 8, the opportunity is at least in servers, at least in the Office products, at least in the (Windows Phone) product, and yes obviously in the Windows platform," Haupter said.

The company estimates about 40% of the enterprise users in China use some kind of Microsoft private cloud-related software. The company is also working on providing a public cloud offering to China.