Startling Shifts in Business Computing Ahead?

In 2007, ChinaSoft will begin to eat into Microsoft's market share for Office and will loom on the horizon as a possible threat to Windows itself. In 2008, small businesses in the U.S. will increasingly buy ChinaSoft's "office" product, call it BusinessSoft and reap major savings in the process. You're thinking you've never heard of ChinaSoft, but have you heard of Lenovo? Or ThinkPad?

Over the past decade, IBM developed a line of notebook computers and branded them ThinkPad. Today that brand is marketed world wide with one major change. ThinkPad is owned by a Chinese company, Lenovo. Lenovo bought IBM's PC division and has wisely marketed the brand name ThinkPad while simply adding the name "Lenovo" behind it.

In China, one report says, Lenovo enjoys about 90% of the notebook computer market. Perhaps only the Chinese know how big that market is and can become, but I predict that a Chinese company, call it ChinaSoft here for convenience, will make a serious run at Microsoft's Office software product.

ChinaSoft's "BusinessSoft" will challenge Microsoft's Office because it's a highly lucrative market. Just look at the numbers. The AP and other news services routinely report that China has 100 million Internet users. Now suppose only 10% of them, or 10 million, are potential users of a Microsoft Office product - Word, Excel, Outlook, PowerPoint. Microsoft's retails Office at as much as $399 per license. Corel wants $299 for its new WordPerfect Office X3 Standard.

Suppose ChinaSoft could gain a 90% market share and sell BusinessSoft at $99 to 9 million users in China. That's nearly a billion dollars in revenue. Alternatively, the Chinese government could do nothing and look forward to sending 2-3 billion to Redmond, Washington every year.

By the way, Microsoft already employs Chinese software engineers in a think tank Microsoft operates in China. The Chinese can form a new company, siphon these people off, train another 50,000 programmers, and pay them a billion dollars, (at $5 per hour) to create BusinessSoft. Given that BusinessSoft might be the only product on the market in China, and largely compatible with Microsoft Office, it's a winner.

Like Windows, the key to Microsoft Office's success is not so much that it's a great product but more that everyone in business uses it. For compatibility reasons, then, nearly everyone in the USA feels compelled to continue to use Office. In China, however, the government can create that same compatibility by dictating that BusinessSoft is the product that everyone must use.

If the ramp-up time to build BusinessSoft from scratch is too great, ChinaSoft could buy Corel. Corel, now privately held, owns WordPerfect Office, which features a new X3 version that competes with Microsoft on price - WordPerfect Office is typically at least a $100 cheaper than Microsoft Office. In this scenario, ChinaSoft would acquire the WordPerfect brand name, too, which would go along nicely with the Thinkpad.

While they're at it, the Chinese can dictate that WordPerfect Office is loaded up on every Thinkpad for, say, $49. Or, the Chinese could put WordPerfect on every Thinkpad for free. On a Dell notebook, WordPerfect Office costs $99 and Microsoft Office up to $399. Now, especially for home use, would Americans rather pay $399, $99, or $0 for an office suite of products?

Once ChinaSoft becomes profitable selling WordPerfect Office throughout the world, why couldn't Microsoft's Vista (it's new Windows product coming out early next year), become the next target? A Chinese company might compete with Vista by acquiring Red Hat, or some other Linux software company, and developing a Linux OS that might make Windows seem ordinary and expensive by comparison. Of course Linux evangelists think Linux is already as good as Windows XP.

You may be thinking that ChinaSoft's rise seems as likely as Apple ruling the PC market - just another dreamy David versus Goliath story. However, Apple's impossible MAC versus PC struggle represents a completely different business ecosystem from one in which the government of the world's largest nation decides that Microsoft's profits are simply too enormous to pay, or permit.

Will the Chinese decide to send billions to Redmond when they could be sending that same money to Shanghai? Will they pass on possibly collecting billions in sales of WordPerfect from across the globe? Lenovo, as the new owner of ThinkPad, represents just the tip of the technology iceberg that's headed out of China. And there's a billion reasons to think that countless American company's may profit - or shipwreck - as Chinese business technologies emerge.

This article first appeared as a column written by Dave Tedlock, NetOutcomes' president, for Tucson Business Edge, a monthly magazine published by the daily newspaper, the Tucson Citizen.

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