It was nearly a disaster when Cedar Chang, a government employee in Beijing, installed a Linux operating system in his notebook two years ago. He had a difficult time adjusting to the program, which was significantly different from Microsoft's Windows, and it was hard to find the Web browser and e-mail application.

Chang, who had switched the operating system to comply with the Chinese Government's requirement that all government agencies use legal copies of software, eventually reinstalled the Windows XP, bundled with his IBM notebook.

But when the 27-year-old technology buff downloaded Linux-based Firefox, a very popular Web browser readily available online, the experience was considerably different.

So Chang rethought his decision to switch back to Windows XP. He reinstalled his Linux operating system and, to his surprise, he easily found, and adjusted to, almost all of the software he needed for his work: From office software, a Web browser, e-mail application, to even DVD-burning software.

Chang's experience is just one example of the progress the Linux operating systems, which compete with Microsoft's Windows, have made in recent years, amid controversies on its business model, intellectual property issues, and total cost of ownership.

Always growing

Linux because it is an open-source software has been a key component in the Chinese Government's efforts to develop the nation's software industry.

Some industry analysts suggest Linux has a major advantage security over Microsoft's Windows operating systems. Other observers, such as US-based research firm Gartner, counter Linux is not necessarily more secure than Windows.

Another benefit of open-source operating systems is China's software developers can develop their products with the open-source code. That will help the nation's software industry grow.

The Chinese Government has veen trying to achieve a balance between Linux's advantages and Microsoft Windows' popularity among users.

Zhang Qi, director general of the electronics and information products with the Ministry of Information Industry (MII), said: "Computer users have a demand for the Windows platform and the Government has the responsibility to consider and help the users."

MII and Microsoft established a a Windows .NET -based technology lab, part of the National Software and Integrated Circuits Public Service Platform last year.

On the other hand, the National Development and Reform Commission, MII and the Ministry of Science and Technology have spent hundreds of millions of yuan in recent years to support the development of Linux software in China.

In addition to supporting the development of Linux software in money, the government has been the biggest purchaser of Linux products.

"Promoting Linux's applications and open-source software in government departments and enterprises is key to building an open-source industry eco-system," says Ding Wenwu, deputy-director-general of MII's department of electronics and information products.

He told the Open Source Application China 2005 conference in Beijing, on May 26, that provincial-level government departments purchased 45,000 copies of Linux's operating systems last year, about 40 per cent of China's total procurement of the systems.

According to US-based market research firm International Data Corp (IDC), the sales of Linux operating systems for servers reached US$6.85 million in 2004, and the sales from desktop-use copies were US$2.45 million. Government users in China purchased 28 per cent and 26 per cent, respectively, of those systems.

Meanwhile, large State-owned enterprises spent almost 30 million yuan (US$3.6 million) on Linux operating systems. About 30 per cent of large State-owned enterprises now run Linux operating systems.

While the Chinese Government is promoting Linux, a growing number of sources within the technology industry are backing the open-source software.

Chinese software developers have become more mature in the past year.

During government procurement last year, which involved 30 provincial governments, four Chinese office software developers won contracts to provide more than 67,000 copies of office software. That compared with 17,000 copies of Microsoft's Office program.

Ni Guangnan, an academic with the Chinese Academy of Engineering and a strong advocate of open-source software, estimates domestic office software has 80 per cent of Microsoft Office's functions, and that it is capable of meeting most of the government's requirements.

"Within two years, domestic products will be able to replace Microsoft's Office, in terms of functions. So, it is high time for us to promote the domestic office software," says Ni.

Several multinationals including IBM, HP, Intel and German enterprise software maker SAP have stepped up their support for Linux.

Stefan Liu, SAP Labs' business development director, says his company hopes to enable all of its enterprise solutions in China to run on Linux operating systems. The firm also hopes to develop Linux-based SAP solutions for the Chinese market.

SAP Lab partnered with China's Linux developer, Red Flag, and computer server maker Langchao in April 2004to develop Linux-based solutions for small and medium-sized business customers in China.

High expectations

Despite the progress achieved in the past year, this year may bring more opportunities.

Although government orders of Linux operating systems set a record last year, Ding believes government purchases of the open-source software will continue to grow.

The Chinese Government is working on a government-software-procurement regulation. The draft has already been made public.

Although there are some uncertainties, government departments will spend more money on domestic software.

Jiang Zhenpeng, a Linux analyst with IDC, believes the replacement of the old SCO Unix operating systems in Chinese banks will be the single biggest opportunity for the Linux industry this year.

He estimates there are hundreds of thousands of SCO Unix servers in Chinese banks. As they were purchased about five years ago, they are at the end of their life cycle and the banks are thinking about replacing them.

Jiang says China Construction Bank and the Industrial and Commercial Bank of China (ICBC) have started, or will begin to start, signing contracts this year. Linux, he suggests, will be a hot choice.

IDC estimates sales of Linux operating systems in China will grow about 22 per cent this year, and that the market will maintain a growth rate of 23.9 per cent annually, on average, until 2009. Last year, about US$9.3 million worth of Linux operating systems were sold.

Difficult choice

While it is believed the Linux operating system will foster the development of the nation's software industry, ease China's worries about national information security, and enjoy rapid growth in the coming years, it still faces huge difficulties.

Ashok Pandey, platform strategy director with Microsoft China, said:"It's all about product competition. Microsoft believes in deivering business value through innovation to customers, who care about security, total cost of ownship, and risks."

The anticipated 23.9-per-cent average annual growth rate until 2009 is a sharp drop from IDC's 39.4-per-cent projection for the 2003-07 period.

Linux, developed as an open-source and free software to rival Microsoft's proprietary Windows products, originated from communities of software developers on the Internet, which develop software for ideal, rather than commercial, uses.

So, commercial Linux developers have to struggle between the non-profit spirit of open-source software and commercial interests.

IDC's figures also reveal the difficulties Linux firms encounter when trying to generate profits.

Despite the 22.8-per-cent and 12.7-per-cent growth rates, respectively, in shipments of server and desktop-use Linux operating systems last year, sales grew just 4.5 per cent and 3.6 per cent, respectively.

Red Flag Linux, a major Chinese software development firm, says it is the first domestic Linux developer to break even. But it only did so last year, four years after its establishment.

Another obstacle for Linux is the intellectual property rights (IPR) issue.

Although Linux's kernel part is free, a complete operating system also requires development tools and libraries, some of which are free and some of which are proprietary. That means developers may have to pay for the patents.

SCO Group, developer of the Unix operating system, sued US-based IBM in March 2003. SCO claimed IBM used some of SCO's patents when it developed two Linux-based operating systems.

SCO asked for US$1 billion in compensation, which was later raised to US$5 billion.

In January, a US court ordered IBM to give SCO Group access to as many as 2 billion lines of source codes in its two Linux-based operating systems to verify if the products infringed on SCO's patents.

Lu Shouqun, chairman of the China Open Source Software Alliance and a strong supporter of Linux, agrees the IPR issue may be difficult for Linux, as some patents may be hidden in Linux's software.

If the IPR issue is not made clear, it might shake the foundation of the idea that Linux operating systems developed by domestic firms constitute Chinese proprietary software.

The open-source software is inexpensive, but without a mature business model and eco-system, its total cost of ownership, including management and maintenance, may not be cheap.

Without fair profits, software developers will not be able invest enough on services and support, development of sustainable families of products or design security patches. All those issues are critical for big enterprises, such as banks and telecoms operators, and government agencies.

However, despite these difficulties and many others, Linux operating systems are still a strongest competitor with Microsoft Windows in China.

"The reason we develop Linux software is not to beat Microsoft or fully take its place, but to give another choice to Chinese users and even global users," says Lu.

(China Daily 06/13/2005 page7)