By Jason Simpkins
Associate Editor
Less than a week after withdrawing its bid Yahoo! Inc. (YHOO), Microsoft Corp. (MSFT) broke ground on a $280 million research and development campus in Beijing.
The center, to be completed in 2010, will be the company's largest outside the United States with enough room for 5,000 employees, according to a report from Bloomberg. The center will add to a base of operations in the world's most rapidly developing nation that already includes centers in Shanghai, Shenzen and another in Beijing.
The company had approximately 3,000 employees in China as of November, half of which were full-time, according to a company spokesperson. Microsoft hopes to double the amount of full time engineers to 3,000 by 2010.
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China has some 225 million Internet users, according to the China Internet Network Information Center. BDA China, a Beijing-based consulting and research firm, thinks that figure is closer to 228 million. And in the next year, another 60 million China consumers are expected to join the online world.
According to Ministry of Industry and Information (MII) statistics, China's software industry recorded of $20.7 billion (144.36 billion yuan) in sales revenue in the first quarter of 2008 up 29.9% year-over-year.
Software technology service was one of the nation's fastest growing sectors, with 46.4% year-over-year growth. Software sales grew 26.2% to $7 billion (49.3 billion yuan) and accounted for 34% of total software industry revenue. Software export revenue reached $2.4 billion, up 54.3%.
Chinese authorities are also stepping up their efforts to tackle a piracy epidemic that has robbed software companies of an estimated $5.43 billion in revenue. In 2006, about 82% of software run on PCs in China was pirated, according to the Business Software Alliance. However that's an improvement over 92% in 2003. Just a 9% decline in piracy reportedly saved software companies $864 million in lost revenue.
"Piracy in China is putting pressure on companies to develop software products that aren't as vulnerable to illegal copying," Liu Ning, an analyst at BDA China Ltd., told Bloomberg. "Piracy is getting better in China but will stay a problem in the short term."
For several quarters, Microsoft had been seeing a drop in piracy rates, which generally improved business in its Windows unit. However, the company saw an increased rate of piracy in the first quarter of 2008, Colleen Healy, Microsoft's general manager of investor relations, told CNET News.com last month.
"Q3 was a tough quarter on the unlicensed front," she said. "We had been making gains there for the past several quarters."
To help combat the problem itself, Microsoft has begun experimenting with a Web-based application called Live Mesh, which gives users access to software over the internet. Software offered online is more difficult to copy and therefore less susceptible to piracy, BDA's Liu said.
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