Microsoft cuts deals in China with government organizations and companies.
Microsoft announced three new tie-ups in China on the same day that the country’s President Xi Jinping and a delegation visited its campus at Redmond, Washington. Nadella deserves another pat on the back for successfully persuading Baidu (NASDAQ:BIDU) to be one of Microsoft’s (NASDAQ:MSFT) partners in propagating the advertising-friendly Windows 10 operating system.Microsoft has unveiled new partnerships with politically connected Chinese companies in an effort to open doors to more sensitive and official business in the vast China technology market.
Microsoft announced today that it has partnered with Chinese web giant Baidu — the country’s answer to Google — as it continues its quest to push Windows 10 in the market.Microsoft unveiled a slate of agreements with Chinese businesses and government agencies on Wednesday, including a deal that will make China’s largest search engine the default home page for Microsoft’s new Edge browser in the country. Other companies like Cisco Systems and Hewlett-Packard have also announced ties with Chinese companies, a market that has been proving complex for U.S. companies because of the strong backing of the government for local players. Through the new partnership, Baidu’s 600 million users will be able to upgrade to Windows 10 through a distribution channel called Windows 10 Express. Microsoft, for example, announced an agreement with its cloud partner in Beijing, 21Vianet, and IT company Unisplendour to provide custom hybrid cloud solutions and services to Chinese customers, particularly state-owned enterprises.
Microsoft says it’s already got 10 million Windows 10 users in China, but the company has many hundreds of millions more using older or pirated versions of its operating systems. While at the Microsoft campus, the Chinese president met with senior company executives and board members, “watched technology demos and reviewed innovative new devices,” according to a Microsoft review of the meeting.
At the Build developer conference in April, Microsoft’s executive vice president of operating systems, Terry Myerson, said he wanted to get Windows 10 on 1 billion devices within the next two to three years. Yusuf Mehdi also points out that, “Baidu’s new Windows 10 distribution channel, Baidu “Windows 10 Express” will make it easy for Chinese Internet users to download an official Windows 10 experience.”
Microsoft will partner with some Chinese information technology vendors to offer Microsoft’s network of data storage and remote processing power to state-owned companies, and Chinese phone maker Xiaomi will adopt Microsoft’s Azure cloud-computing program to power some services for its users. To help gain traction in China, Microsoft has struck up partnerships with Internet gaming and entertainment company Tencent, internet security firm Qihoo 360, and PC manufacturer Lenovo. Microsoft also struck a deal with state-owned China Electronics Technology Group Corp. to explore ways to configure, deploy and maintain a “localised” version of Windows 10 for clients in Chinese government organs and state-owned enterprises operating critical infrastructure. This latest deal with Baidu continues that trend, giving it a reach in the lucrative Chinese market that Google — which largely pulled out of the country in 2010 — can’t yet match. Due to the emergence of China as a growing market for search/digital advertising, Baidu is now second only to Google when it comes to annual sales from global search advertising spending.
The Chinese consortium, known as CETC, provides technology for Chinese military and civilian use, including major communications and electronic equipment and key components. In other deals, Microsoft announced discussions for cooperation with Xi’xian New Area, a special development zone, on a variety of projects including big data, cloud computing and “smart” urbanization. Like I previously mentioned in my Microsoft article, Windows 10 has several invasive personal data mining and activities settings turned on by default. Also last year, China’s Central Government Procurement Center banned government agencies from purchasing computers loaded with Microsoft’s Windows 8 software. The shift toward a freemium strategy means Microsoft is now more inclined to give away free software in exchange for people’s data and their computing habits.
The economic benefit of having more Chinese people using Edge browser to surf online is also fairly obvious when we take into account that it is the only latest browser that doesn’t support third-party extensions. Unlike Apple’s (NASDAQ:AAPL) move to enable third-party ad blocking in its mobile/desktop Safari browser, Microsoft has not shown any interest in letting other people sell ad-blocking browser extensions for Edge. As long as Google’s services remain blocked in China, Baidu/Microsoft has a great chance of improving their market share in global search ad spending.