“Entrepreneurship is the solution to all the world’s problems,” according to Google executive chairman Eric Schmidt, who was in Hong Kong today to launch a new program to foster greater start-up talent within the Chinese SAR.
Schmidt’s visit was something of an anti-climax in the end. Media were not invited to ask any questions and what we finally got from the Google man after a half hour delay was less than insightful.
He trotted out the usual argument that more innovation and technical invention will likely gravitate to this part of the world because there is a “numerical advantage” in terms of graduates with degrees in STEM subjects.
Several times he also repeated the notion that “the native underlying Chinese culture is entrepreneurial”.
“We all know this, it’s been true for 1000 years. It’s a great asset of Chinese history,” he said.
The inference here is that the region and its people should be more inclined than most to producing innovative technology start-ups.
However, we heard very little about why that’s simply not happened thus far, in Hong Kong at least, although Schmidt did acknowledge that there wasn’t enough of a VC industry here and that, although entrepreneurial, the locals are also culturally afraid of being “different”.
Google’s announcement today – a program of mentorship and incubation with the Chinese University of Hong Kong – is surely yet another indication that the SAR government has singularly failed to foster the kind of innovation that can start local and grow internationally.
It’s a view I’ve heard time and again – even from successful international technology companies who came to Hong Kong with an impression of a hi-tech city and found instead something much less mature to work with.
The conversations at most local tech conferences I’ve been to are still at a “what is the cloud?” stage. It’s difficult to believe sometimes.
When asked whether Google was thinking of founding a formal incubator project even Schmidt had to admit: “You don’t have a big enough software industry. Your lack of software … will hurt you in terms of your global ambitions.”
The one year project announced today is unlikely to change that much.
We don’t know exactly how much access to Silicon Valley “mentors” and help with start-up costs local entrepreneurs will get as part of the initiative, but at first glance it seems like a pretty good way for Google to cream off some of the best of that limited Hong Kong talent.
Asia’s unique combination of large numbers of entrepreneurs and software developers offers tremendous opportunities for dynamic cloud growth, while European and Australian companies continue to lag in the shadow of the US.
That’s the view of Nigel Beighton, VP of technology and product, for managed hosting-cum-open cloud company Rackspace, who was in Hong Kong this week to discuss how the “sleeping software giant” of Asia will soon awake.
He argued that European and Australian firms are 18 months to 2 years behind their US rivals and suffer from the same issues around legacy infrastructure.
“Asia is fascinating because it doesn’t track what happens in the US. It has its own culture and personality and if you think about software development in Asia it’s different. Even the code they write looks different. The way people think about mathematics and structure and architecture is different,” he said.
“Cloud enables business to be agile and Asia is very good at that – at being entrepreneurial. At the same time it’s cool to be a software developer here and cloud is enabling software developers to do what they want to do immediately.”
The US market, while it still has a “degree of creativity”, is very much in a phase of consolidation at the moment, dealing with legacy infrastructure and looking at changing business models, Beighton argued.
To an extent, Europe and Australian firms are in a similar boat – held back by a large legacy application estate going back 10-15 years which makes it difficult to scale vertically in the cloud, he added.
However, there aren’t many examples of cutting edge cloud innovation in the region – he gave China’s indigenous search engine companies led by Baidu as one – because it’s still early days. As a result, education remains an important part of the cloud provider’s role.
It’s worth bearing in mind here that even though it now has a successful enterprise business, Rackspace began life serving entrepreneurial SMB-type companies, which is why the firm is always keen to enthuse about this end of the market. It’s also part of the reason why it located a regional datacentre in Hong Kong rather than rival IT hub of Singapore which is geared more towards servicing larger financial organisations, according to Beighton.
“For us the entrepreneurial aspect of Hong Kong was really interesting, and how that would work in conjunction with China,” he said, adding that public cloud capabilities from the datacentre would be available in Q4 this year.
Rackspace is not the only cloud provider waxing lyrical about the huge potential in the Asia region. EMC Greater China president Denis Yip argued at a conference in Hong Kong last summer that China is actually trumping the US and the rest of the world at the cutting edge of cloud computing deployments.
However, despite huge building projects by local government in China, there is a real risk datacentre capacity will lie idle because not enough thought has gone into working out what to use it all for and how to generate profits once the infrastructure is completed.
I’m not one to believe everything I read in the papers, especially if that paper happens to be one of China’s state run media outlets, but an interesting stat caught my eye in a recent article in China Daily.
The piece detailed how China – infamously a country which has a huge trade imbalance with the rest of the world, flogging it cheap exports – is actually importing more technology products than it exports.
The tech trade deficit apparently stands at $10bn – imports at $32bn and exports $21bn – which is a far cry from its huge overall trade surplus with the US which stood at around $300bn in 2011.
It is an interesting one because with China becoming an increasingly affluent and sizeable market in its own right it’s likely that more and more goods made in the country will not be exported but sold to its own consumers, so it’s hard to see how the government is going to be able to close this gap.
That aside though, the article pointed out that 89 per cent of China’s exports were in the sphere of “computer software”.
Really? The country famous for being the technology manufacturing centre of the world? Where the huge Taiwanese ODM/OEMs have plants the size of small towns, building everything from iPhones to children’s toys?
Yes, China has its successful web companies like Baidu, Tencent and Alibaba, but could its computer software industry really be that successful on the world stage?
Well, no is the short answer.
Gartner’s Matthew Cheung explained to me the likely reason for the unusually high figure is that they have counted revenue from a certain type of outsourced service in that figure.
Companies such as HiSoft, Beyondsoft and VanceInfo offer a raft of services to big name foreign companies looking to localise their own software products in China.
These services, Cheung said, have effectively been calculated as exports, as they are carried out on behalf of foreign companies, even though, aside from some work for the Japanese and Korean market, they are basically China-centric.
I have to say it’s a market I never knew existed but will be an interesting one to follow, because while China may not be the software centre of the world yet, it’s certainly an area where it could end up dominating if it decides to devote the full weight of its resources.
These companies are by no means minor players; some are NASDAQ listed, $10-$100m businesses and they’re already acquiring foreign rivals, said Cheung.
This could yet be the first stirrings of a Chinese software revolution to match that which propelled the country to become the pre-eminent tech manufacturing hub.