I. Affected by Vista, Linux growth slowed down.
As China's GDP grew by 11.1% in Q1, the Linux market also maintained a relatively fast growth momentum. On one hand, this was closely related to the overall situation of national economic operations. On the other hand, it also benefited from the continuous pull of strategies towards the rise of Central China and the revitalization of Northeast China. A steady increase in IT application demand drove up the growth of the software market.
Thanks to the radiative effects of such large-scale activities as the upcoming 2008 Beijing Olympics Games and the World Expo 2010 Shanghai China, IT applications in some industries are gathering pace. To a certain extent, this has pushed forward the growth of the overall software market. In addition, State policy support for the Linux industry is also one of the driving forces for continuous market growth. However, since Microsoft introduced its Windows Vista operating system at the end of 2006, particularly after it signed a series of pre-installation agreement with leading PC makers, Linux growth slowed down in 2007Q1. The increased demand was basically concentrated on server-end Linux.
CCID Consulting's analysis of the vertical markets shows that government departments and big enterprises are still the main Linux users, accounting for a market share of 67.2%. The "copyright software" policy jointly implemented by the four major ministries and commissions has also benefited Linux. Cooperation between vendors in the industry has directly pushed forward further market growth.
As for industry segments, Linux market growth was mainly concentrated in the government, financial services and telecom sectors, which accounted for a market share of 34%, 22.5% and 21.2% respectively. The implementation of some government procurements, telecom and netbar projects and the upgrading of banking services systems were the important driving forces for the growth of Linux applications. In addition, the education sector achieved a market share of 10.4%, basically level with that of last year.
II. Linux faced more grave external challenges.
In the report, CCID Consulting pointed out that data released by Microsoft at the end of March showed that 20 million sets of Vista Personal Edition were sold worldwide in the first month of its introduction to the market. Of this, the sales volume of Vista Personal Edition in China was twice the initial sales volume of XP. All kinds of fast upgrading strategies and the $3 copyright Windows XP provided to government administrative departments in developing countries were yet another "war" bugle call from Microsoft to Linux. Meanwhile, Oracle staged offensives to Red Hat in the Linux services market. The dispute which Novell induced in the open source software industry further intensified competitive pressures in the Linux industry, adding too many uncertainty factors to the originally relatively weak Linux industry.
III. Vendors played their respective skills and competed on various fronts.
As for industry standards, to strengthen the competitiveness of the Linux industry, the Open Source Development Laboratory (OSDL) and the Free Standard Group (FSG) were merged into the Linux Foundation. It will soon introduce new test tools and thus strengthen Linux standards. This will greatly improve Linux's ease-of-use and low cost advantages.
In the market, vendors came up with their tactics in the face of competition inside and outside the industry. In January, Red Flag Linux signed a joint operating system development agreement with MiracleLinux and Haansoft. The new edition of Asianux will be released this July. Novell released SUSE Linux Enterprise 10 at the BrainShare Conference. TurboLinux further strengthened its cooperation with Intel in virtualization technology. This made TurboLinux China's first Linux distributor to support VT in China. The continuous introduction of new products and new technologies is the very direct embodiment of vendors to meet external challenges and serve consumer demands.
Meanwhile, Linux vendors are stepping up their efforts to expand in the government procurement and SMB markets. In 2007Q1, Novell won the bid for central and State organs' Project of Centralized Procurement and Supply of Information Products. Red Flag Linux obtained the qualifications for "100 Piloting Innovative Enterprises". To a great extent, these have promoted the development of Linux in China. In addition, with the gradual reduction of government procurements and orders from big enterprises, strengthening abilities of sales towards small- and medium-sized customers and expanding marketing channels have also become the new areas of competition for Linux vendors.
To sum up, CCID Consulting's research shows that China's Linux market is still small in size at present. In the face of great competitive pressures, continuously improving their R&D strength, expanding marketing channels, forging cooperation both inside and outside the industry and carrying out M&As will become important strategies for vendors to compete for the market. Meanwhile, CCID Consulting forecasts that in the remaining 3 quarters of 2007, there will be unprecedented competition in China's Linux market.
