Novell, the world's leading developer of open source software Linux, expects its China business to expand by six times this year by speeding up strategic investment.

 

"Our revenue target for the China market this year is to grow by six times from last year," Senming Chang, managing director and vice-president of Novell's East Asia operation, told China Daily in an exclusive interview.

 

"And we will resort to strategic investment in local partners to achieve that goal, in addition to organic growth."

 

China is Novell's most important market globally, with hefty investment plans involving billions of dollars to be executed over the coming few years, said Chang, who joined Novell last February after working for 18 years at IBM.

 

Novell is interested in investing in companies focusing on telecoms, banking and government sectors, with particular strengths in products, customer bases or distribution channels, he said.

 

"The specific approach could vary. It could be acquisitions or stake-holding," said Chang, hinting that the company already has found some ideal partners.

 

Strategic investment will be the major approach this year for Novell, which wants to rapidly expand in China following its firm base, set up by last year's organic growth.

 

"We had to first build up our strength by ourselves so as to better understand the market and to work out our target customers," said Chang.

 

"Now we want faster penetration, and that requires more business partnership with local vendors."

 

The Chinese Government encourages Linux, a computer operating system that is free to everyone, because of its better security and lower development costs, so Linux is widely thought to have a promising market in the country, he said.

 

Yet government procurement, which favors domestic players as a general principle, has prevented Novell, a fully foreign-owned company, getting wide access to the government market that is considered a shortcut to building a brand image.

 

"Strategic investment with local vendors will help enhance our official credit," Chang noted.

 

Apart from strategic investment, Novell will be devoted to building its research and development (R&D) centre in China, according to Chang.

 

"China still lags the global community in Linux development and faces a shortage of well-trained Linux engineers.

 

"The establishment of our R&D centre here hopefully will help China catch up with the industry average, or even better, to gain leadership in certain Linux technologies."

 

The R&D centre, which was set up in Beijing at the end of last year, operates as one of the company's R&D centres worldwide, focusing on carrier-grade Linux and desktop Linux.

 

With less than 10 engineers, it will recruit 30 to 40 more local employees by the year's end, said Chang.

 

An exchange program will be introduced during which three Chinese engineers will fly to Novell's R&D centre in Germany and some foreign engineers will be stationed in China.

 

A 4 percent personal computer (PC) penetration rate, much lower than that in the United States, estimated at 60 to 70 percent, means that desktop Linux will be more easily embraced by Chinese users as new PCs are installed, added Chang.

 

In addition to Linux business, identity management and enterprise resources management will also generate more revenue for Novell in China this year, he added.

 

With a decade of presence in China but few major moves, Novell has now turned its global attention to the country, betting on huge market potential and strong government support for Linux development.

 

Headquartered in Beijing, it has opened offices in Shanghai and Guangzhou. It has also established a Linux technical support centre for Asia-Pacific in Shenzhen. And the number of employees was up by almost five times by the year's end, compared with the beginning of 2005.

 

By the end of last year, Novell won a number of deals for server Linux from big enterprise users in telecoms, banks and the government. These users include the People's Bank of China (PBC), the central bank, the State-run Agricultural Bank of China, telecoms equipment manufacturers Huawei Technologies and ZTE, as well as three ministries.

 

Statistics indicate that Novell ranked No 1 in China's server Linux market in the first half of 2005. With a 32.9-per-cent market share by revenue and a 30-per-cent share by shipment, beating two major server Linux providers, Red Flag Linux and TurboLinux.

 

(China Daily January 11, 2006)