Chinese Companies Pick Linux to Boost Their Own Skills

By Maria Trombly  |  Posted 09-30-2005
The last couple of years have seen one disaster after another in China's financial sector: financial scandals, record losses, a stock market at six-year lows.

The fact is that the industry's existing technology infrastructure can't meet its urgent need for better customer service, oversight and compliance, much less the crash program in process improvement needed to compete globally.

Cost is a major advantage, confirmed Shuo Bai, chief technology officer at the Shanghai Stock Exchange.

"This is a very important reason," he said, adding that the exchange currently uses Red Hat Linux for some applications, such as index analysis. The exchange also uses Sun, HP and IBM Unix, and Microsoft Windows.

Bai said that China has Linux experts available to help with deployment and that the Linux operating system gives users more control.

Migrating to an open-source operating system also gives companies more flexibility to do things the way they prefer, rather than the way packaged software is designed, according to a technology manager at a leading Shanghai brokerage. Using Linux, the brokerage has found a low-cost way to improve processes and eliminate data silos.

The manager—who asked to remain anonymous for social and work reasons, rather than political—said that his firm began its Linux pilot project a year ago.

The company's goal is to move operations from the front office to the back office, he said. This is an issue not just for brokerages in China, but for the entire financial system.

When business is conducted in retail branches, opportunities for error, corruption and fraud multiply. For example, without a good records management system, a customer who defaults on a loan at one bank branch can simply walk over to another branch and open a new account.

The ability to open up the software and look inside—or change it to fit local requirements—is a major selling point for Linux in China, said IDC analyst Nielse Jiang. But Linux's price point—under an open-source license like the GNU General Public License, many distributions cost you nothing—and its low operating costs don't hurt, either.

As a result, Linux server shipments in China rose to $9.3 million last year, up 20 percent from 2003, said Jiang. By 2008, IDC expects the Chinese Linux server and client-end operating system market to reach $41.9 million. The Chinese Linux market will average a compound annual growth rate of 23.9 percent for the next four years, Jiang predicts.

Global Linux vendors are investing in the China market as a result, opening sales offices and research centers. But local vendors are heeding the call as well, developing custom software for local enterprise customers.

Given China's size—it has recently passed the milestone of 100 million Internet users, putting it second to only the United States—large-scale Linux adoption is likely to make a big impact.

"Any time there are large-scale installations, regardless of where they are located physically, it has an impact on what the open-source community knows how to do," said Dan Kusnetzky, an analyst at Framingham, Mass.-based IDC. Developers can learn what users need, and don't need, he said, and help make desktop Linux a better product.

China isn't unique in its focus on desktop Linux. "We're also seeing some fairly large installations in Europe and South America," Kusnetzky added. "The open-source community is learning from all of these."

China, however, is ahead of most other areas in developing not only technology, but talent.

In April, IDC predicted that the Asia-Pacific region will surpass North America in the overall number of professional developers beginning in 2006. China in particular will see compound annual growth rates of 25.6 percent in the number of developers in the next three years, predicts IDC analyst Stephen Hendrick.

Wendy Yu contributed to this report.