Emphasis on domestic software development may be new hurdle for foreign companies

The government will issue a five-year information security plan that aims to safeguard State secrets and data in strategically important industries, a senior official from the Ministry of Industry and Information Technology said on Wednesday.

The government will focus on strengthening the safety of software in the financial sector and for applications used by government departments and State-owned enterprises this year, said Chen Wei, director of the software bureau at the ministry.

Chen did not disclose details of the proposed guidelines, which will emphasize domestic development and the authorities' control of key technologies. The guidelines will be part of an array of national information technology strategies for the 13th Five-Year Plan (2016-20).

"We are expecting to see breakthroughs in advanced domestic software development within the next five years," Chen said, adding that the proportion of Chinese software acquired by way of government procurement has seen steady growth.

Charlie Dai, principal analyst at Forrester Research Inc, said that more specific requirements are likely to be announced for mobile, big data and cloud computing.

The guidelines may constitute a new hurdle for overseas vendors, because government-backed projects tend to buy domestic software due to security concerns.

WPS Office (offered by Kingsoft Office Software Corp Ltd) and other made-in-China office suite software products, which challenge Microsoft Corp's Office series, accounted for about two-thirds of the government procurement sector as of the end of last year, according to the MIIT.

Chen said the country aims to lift its ability to develop basic software such as operating systems and code used for databases.

Domestically developed programs have less than 30 percent of the market for basic software, but the figure rises to 70 to 80 percent in application software, according to Chen.

The world's top software providers, including Microsoft and Oracle Corp, have faced difficulties in getting orders from government bodies in China since whistleblower Edward Snowden disclosed the United States National Security Agency's mass surveillance programs in 2013.

A long list of overseas IT hardware and software products have since been removed from the Chinese government procurement list.

"Overseas companies should deepen their collaboration with existing partners and consider more team-ups in manufacturing, joint ventures and patent transfers with them," said Dai.

Foreign players should focus more on openness, local standard compliance and the value ecosystem when doing business in China, he said.

China is one of the largest software producers in the world.

The industry's annual revenue could exceed 10 trillion yuan ($1.61 trillion) by about 2020, said Chen. Industry revenue hit 3.7 trillion yuan last year, a 20 percent jump from 2013, the MIIT said. Revenue for the first four months of this year reached 1.2 trillion yuan, a 16.7 percent year-on-year increase.

Fan Xin, president of Beijing-based hardware and software maker Tongfang Co Ltd, said that the company is working with local partners to tap the market.

"Information security is becoming a fundamental requirement for Chinese customers," Fan said.

gaoyuan@chinadaily.com.cn

(China Daily USA 05/28/2015 page13)