Internet & Tech

Doors closed to Windows

Microsoft keeps missing out on government contracts

Nadella CEO of Microsoft attends the session "The Transformation of Tomorrow" during the annual meeting 2016 of the WEF in Davos

Satya Nadella: Microsoft boss

Early this month, Microsoft released a one year ‘anniversary update’ to its latest operating system, Windows 10. According to ComputerWorld, the topic of Microsoft and its updates has been fraught in recent months. For example, the industry publication says many users of older versions of Windows were shocked to find the new version of Windows 10 installed on their machines during Microsoft’s automatic updates. By default they were “served with a Windows 10 upgrade, whether they wanted it or not,” reported ComputerWorld.

Microsoft’s aggressive attempts to encourage users to stay up-to-date may have persuaded some to turn away from the brand, amongst them the Chinese government. China first banned the use of Windows operating systems on government computers in 2014 a month after Microsoft announced it would no longer provide service support for Windows XP – an operating system (OS) that was 13 years-old.

Consequently, the central authorities refused to allow government computers to run Windows 8 – at the time the latest OS that Microsoft was promoting. Reporting on the ban, Xinhua explained: “The Chinese government obviously cannot ignore the risks of running OS without guaranteed technical support. It has moved to avoid the awkwardness of being confronted with a similar situation again in the future if it continues to purchase computers with a foreign OS.”

Many foreign media commentators suggested, however, that the ban was in retaliation to the US Department of Justice’s decision to charge Chinese government employees with hacking into American firms, announced just one day before. Since the initial embargo on Windows 8, the Central Government Procurement Centre (CGPC) has also refused to add Windows 10 to its list of approved purchases.

In a bid to soothe Chinese concerns Microsoft entered a partnership with the military-affiliated China Electronics Technology Group Corp (CETC) in September 2015 and in December the same year the two announced the imminent launch of a joint venture, C&M Information Technologies. The Wall Street Journal explained that C&M’s purpose was to “licence, deploy, manage, and provide technical support for Windows 10 for government agencies and government-owned institutions”.

Despite these efforts, Windows 10 is still on the CGPC’s list of prohibited items and it seems destined to remain there. On the launch of the anniversary update, Ni Guangnan, an academic with the Chinese Academy of Engineering, reiterated the block on Windows OS, telling 21CN Business Herald that the Chinese government had found the “core” of Windows 8 and Windows 10 to be “essentially the same”, and so would not add it to the list of acceptable purchases.

This explanation suggests that the reason for banning Windows 8 was related more to its design than its identity as a foreign OS, as stated at the time. More likely, however, is that the government wants to support China’s ‘domestic’ OS, Linux NeoKylin (see WiC297).

Failure to secure government support also shreds Microsoft’s chances of cracking down on pirated versions of its products, which have stifled its profitability in China for years. In 2011, then Microsoft CEO Steve Ballmer said that the company’s China profits were roughly 5% of what they should be, due to piracy. (Windows operating systems occupy 97% of the Chinese PC market – and are mostly counterfeit says CBN).

Nor have Microsoft’s commercial fortunes been helped much by its opening of an R&D centre in Beijing in 2014.

That’s a lesson for Apple as it seeks to open an R&D hub in the country (adding to others it already has overseas in Cambridge in the UK and in Israel). CEO Tim Cook has responded to a slowdown in sales in China by announcing the facility will be up and running by year end.

Cook’s goal will likely be to get this new R&D team to look in depth at Chinese consumer behaviour and incorporate new ideas they inspire into its products.

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