Document 18, in full title of A Basket of Measures to Boost the Software and IC Industry, will leave an indelible mark on the Chinese software enterprises, for which it has been ten years of rapid development since Document 18 was first implemented. Taking over for Document 18 is Document 4 – A Basket of Measures to Further Boost the Software and IC Industry, sometimes referred to as the “New Document 18”. Document 4 covers seven major aspects of the software industry of fiscal measures and taxation, investment and financing, research and development, import and export, human resources, intellectual property, and marketing; and presents 31 precise innovative measures to further boost the software and IC industry. Therefore, many enterprises are expecting a bigger leap forward for the software and IC industry from the implementing of the “New Document 18”.

 

 

For the last ten years, the Chinese software enterprises mushroomed in various regions of the country, and their efforts to upgrade the industrial system towards a self-innovative one have greatly driven the domestic economy. Chen Chong, director-general of China Software Industry Association, expressed his views on the promulgation of Document 18, “The domestic enterprises have blazed an innovative path of their own through self-innovation since Document 18 went into effect.

 

By the end of 2010, there have been more than 200 software district parks distributing throughout the nation. The ten years during which Document 18 was in effect was a time when the domestic software industry saw its fastest development. According to Chen Chong, the industry enjoyed an average of 30% annual increase during that period. Under the guidance and incentive of Document 18, the software enterprises have not only increased by number, but also found an innovative road of their own by boldly developing self-innovation and constantly improving technical merit. The development of software enterprises will inevitably facilitate the information industry, and finally boost the economic development as a whole. It is in this way that a virtuous circle comes into being that policies encourage the industry, and the industry then contributes to the economic development. The policies and measures have lived up to their original purpose.

 

Chen Chong said, the Chinese software industry has successfully explored a path starting with the development of application software to software platform and finally to middleware. Fact shows that the path is correct, for it fits the market mechanism and economic developing pattern of China, and helps the development of domestic market and the economic increase.

 

Ren Zhengfei, president of Huawei, that during an interview on Huawei’s ten-year expansion said it was impossible to survive in the high-tech industry without self-innovated technologies. There was no room for breaks in the industry, because falling behind even the slightest indicated the final death. Ten years ago when Huawei was extremely under-developed, the company had little confidence when the Party Central Committee appealed to develop high-tech industries. Ten years later, Huawei finally squeezes in the worlds leading position in SDH optical transmission, access network, intelligent network, signaling network, carrier-class Internet access server and 112 test head. System products like Dense Wavelength Division Multiplexing (DWDM), C&C08iNET, Routers, and mobile communication rank top in the world. Risks would be inevitable when a company decided to develop self-innovative technologies, and in no way should it back off due to these risks. Huawei would not have survived if it had chosen not to taken the risks and been satisfied to simply follow the world leading companies, let alone competing with the multinational enterprises.

 

 

Liang Haixia, executive vice president of Suzhou Gstarsoft Co., Ltd, sees Document 18 as a major accelerator to the domestic software industry. Software district parks prosper everywhere in the country. Software enterprises beginning to take shape have been increasing continuously. In addition to well-known enterprises like Ufida and Kingdee, some software developers specialized in professional products have also bathed the light of Document 18, for example, Gstarsoft, which has been persevering in self-innovation, also saw a fast annual increase of 50% to 60%. All those above-mentioned development of the software industry are the direct effect brought by a series of supporting policies of the government, as Document 18 helped to build a favorable environment for the enterprises. A group of competitive domestic enterprises took this opportunity to make full use as the advantages of domestic software for a rapid home growth, and finally broke through the situation where foreign products ruled the market of first floor software.

 

Copyright was the most prominent problem in the ten years’ development of the software industry. For one reason, as intellectual-intensive products, software required large input for its research and development, but were easy to copy. For another, consumers’ lack of awareness of IPR resulted in rampant piracy. In this case, the incomes could not cover the R&D input. Software enterprises were seriously confined for further development and found little motivation for self-innovation. Another major problem should come to the difficulty of setting up brands of Chinese enterprises’ own in the international market, for Chinese software enterprises had a late start and a relatively small scale, and were short of investment and technological accumulation. Therefore, apart from a small group of extremely competitive domestic enterprises, a larger number of software enterprises could only limit themselves in the outsourcing market which meant furious competition, high risk and small profits, let alone those with their own brands. The above-mentioned situation made it extremely hard for Chinese software to dominate in the global market.

 

This time, major articles of Document 4 involving the intellectual property are as follows. Article 26 writes that copyright registration the software enterprises is encouraged. The government will support software and IC enterprises to apply for intellectual properties abroad pursuant to the law. Those up to the specifications can even apply for fiscal support. IP service will be enhanced with great efforts to increase the policy support. Article 27 requires that the IPR institution of the software and IC industry must be strictly implemented so as to crack down torts of various kinds. Software copyrights and patent rights of IC layout design should be strengthened, and online copyright protecting technology should also be initiatively developed to effectively protect the intellectual property of software and IC. Article 28 highlights the importance of establishing long-term mechanism to further promote authorized software. All computers (maxicomputer, server, microcomputer and notebook) for sale in China must preload authorized software. Those preloading pirated software shall be banned in the market. The government institutions shall comprehensively implement the policies and measures regarding authorized software and bring expenses for software purchase into the government budget in other to facilitate the administration of the software property through centralized purchasing of the government. Efforts should also be made to guide other enterprises and the public to use the authorized software. Document 4 will provide a big opportunity to all Chinese software enterprises. It will both help to form a positive competition structure and cultivate a favorable operating environment for Chinese first floor software. To promote authorized software and to implement purchasing guidance and protecting policies for the domestic software industry so as to guarantee the sustainable development of the business.

 

Liang Haixia once said the attention from the government itself serves as a beneficial catalyst for the industry. However, in addition to the conventional directing policies, more powerful supportive policies, such as the government procurement, are also in need. Document 4 provides fairly clear supportive policies for the domestic enterprises to bring them a broader market. Article 29 encourages enterprises to outsource their information technology R&D and application business to the professional companies. Government institutions are encouraged to entrust the professional software and information service companies with the general business of e-government affairs and data processing through service purchasing. Meanwhile, departments involving must set up and complete provisions of security examination and secrecy administration. On the other hand, large and medium sized enterprises should also separate their information technology R&D and application departments and establish professional software and information service companies to provide the entire industry and the society with high-quality services. In Article 30, further improvement of the order of the software and unicircuit market is highlighted. The specific measures include reinforcing the anti-monopoly conducts; cracking down any abuse of the intellectual property rights to eliminate or limit the competition, and any abuse of the market power to conduct illicit competition; giving full play to the industrial associations for a favorable developing environment; accelerating the criteria enacting on relative technologies and services; and protecting consumers’ legal rights and interests. Moreover, the Internet protecting system of the consumers’ privacy and the confidentiality of enterprises are attached with importance in Article 31. In addition, the governments and public institutions at all levels must adopt software up to the security mustard. To sum up, enterprises are expecting deeper and more detailed explanation from the responsible authorities on Document 4, and more effective implementation of the supportive policies.

 

 

According to experts, government, electricity, finance, insurance, military institutions and other sectors have purchased many industrial application solutions and products, and received huge positive results in the actual application. Therefore, the software industry is playing the role of “blood” to the human body, and has become a significant force driving the government institutions, the society and the economy. The rising status of the software industry requires it to concentrate more on the self-innovative technologies.

 

At present, big gaps still exist between the domestic software enterprises and the multinational giants on product’s technology and service. This is mainly because most of the domestic enterprises rely on the foreign technologies rather than the originally innovated ones. As major functions are mainly simulations of the foreign maturity technologies, few integrated solutions can be seen in the market.

 

In the second place, software enterprises of the other countries expand rapidly and take up the bigger half of the global market. Their products even dominate the thoughts of consumers. Therefore, it puts great pressure on the domestic software enterprises to make further improvement.

 

“Nowadays, new concepts and business models like Cloud Computing, Internet of Things and SaaS mushroom, resulting in changes to the traditional developing model of the software industry. What’s more, traditional enterprises see more and more correlation between the work flow and IT, which provides the software industry with tremendous opportunities.” A domestic SaaS provider said. He further explained that Chinese enterprises should try to obtain the initiative on making the standards and framework critical technologies through self-innovation and key problems resolving in the soft environment built by the government, especially considering the situation that new rules and technological frameworks emerge in endlessly.

 

In 2010, the Ministry of Industry and Information Technology issued the list of Chinese top 100 software enterprises. Huawei took the crown with an income of 72.57 billion Yuan. However, the sum income of all top 100 enterprises – USD 36 billion – was still far less than that of Microsoft’s – USD 58.4 billion for the 2009 fiscal year. Among all disadvantages, IP problems were regarded as one of the major defects of the domestic software enterprises.

 

According to the 2010 statistics of WIPO, China took the fourth place, one place up compared with last year, on the ranking of global patent applications, with 12,337 pieces. The top three were the U.S.A. (44,8 thousand pieces), Japan (32,2 thousand pieces) and Germany (17,2 thousand pieces). ZTE, Huawei, Datang and Tencent still took the leading position as Chinese enterprises. Therein, ZTE and Huawei owned 27% patent applications of the national sum. This implied a giant gap between China and the leading countries on the whole competitiveness of the industry.

 

Ren Zhengfei summarized, “We would be replaced for sure if we stopped stepping forward even for a day. We are compared with those most reputable Western companies on every aspect and in every occasion. Once failing to meet the required conditions, we’ll be abandoned. The situation has been pushing us forward to catch up with or even exceed our Western rivals. Were it not for their excessive demands, we would never have sensed the death threat and the necessity of self-innovation, and could not have reached today’s leading position.” The improvement of an enterprise’s core competitiveness lies in its inexhaustible innovation. Only with the improvement of core competitiveness could an enterprise survive in such a world of dramatic technological renewal and fierce competition.

 

The idea to “strengthen IPR” posted by the Ministry of Industry and Information Technology is of vital importance to the Chinese software industry. It not only helps the enterprises to protect their own interests, but also does good to promote the wholesome development of the entire software industry, to advance the IP awareness of the industry and to further enhance the IPR.