I traveled to China in December 2008 to conduct interviews with several technology executives in Beijing, Shanghai, and Shenzhen.

My first interview was in Beijing with CCID Consulting vice president Zhang Tao. CCID Consulting provides customers with public policy establishment, industry competitiveness upgrade, development strategy and planning, marketing strategy and research, HR management, IT programming and management. It is the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235).

Headquartered in Beijing, the firm has also set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with more than 300 professional consultants.

Beijing Basics
Beijing's architecture seems to be a sort of cross between Washington, DC and Dallas. Its climate can roughly be compared with that of Chicago (so it is rough), and its infamous air quality can be fairly compared to that of a Lucky Strike. So it was a crisp and hazy morning when I set out to meet Zhang Tao, traveling past Tiananmen Square and thousands of new high-rises, before settling into the busy commercial neighborhood that houses CCID.

I never received a good explanation of why there were Christmas trees in every hotel and office lobby in Beijing, other than people seemed to think they "look nice." I was also confused as my interview with Zhang Tao progressed, because I had been told that China was lagging in SOA, let alone Cloud Computing, yet he wanted to talk about Cloud Computing above all.

We had a translator there, so that he could listen and answer in Mandarin. Although it was apparent his English is quite good, he strongly preferred to maintain the home-court advantage and speak in his first language, something I found true in most of the interviews I conducted on this trip.

This interview first appeared in Chinese in an international edition of NOW Magazine, published by TIBCO Software in Palo Alto, CA. The following is the interview rendered back into English.

Overall IT Industry
Roger Strukhoff: Let's look at some recent history first. How quickly has the IT sector grown in China during the last three years, and what kind of growth will we see in the next few years?

Zhang Tao: In terms of the IT sector in the past three years we divide things into two parts: industry growth and market growth. The Chinese economy was growing at about 9 to 10 percent annually, and IT is a major economic  driver for this growth. The IT sector's growth, in fact, has been over 20 percent annually, although it has been slowing down a little after 2007.

Software has been growing at 17-18 percent annually over the past two years. In terms of future growth, expectations have been lowered (slightly) due to the recent financial crisis, to 14 to 16 percent for 2009 and the year after.

SaaS
Roger: It seems that IT buyers in China thought mostly about hardware in the past-maybe five years ago--but are thinking more about software today. Does this mean that therefore software growth will be stronger?

Zhang Tao: I basiclaly agree with what you have said, but in terms of the timeframe, what you are mentioning was more like 10 years ago, not five. Systems and hardware architecture was more important (years ago), but people gradually realized that software has become more important.

So to answer your question: Yes, from our estimation, for the next four years there will be more investment in software--software as a service in particular-and this will be more important than hardware.

Roger: But there are still some very fast growth areas?

Zhang Tao: Yes. For software as a service in 2008, for example, we can see a growth number of 30 percent.

And Now, SOA
Roger: Where is China enterprise IT with respect to web services and SOA today?

Zhang Tao: In terms of web services and SOA the Chinese market is quite advanced. SOA for example has been a key criteria for the financial services industry (for awhile). After two years of nurturing in this market, it is quite accepted.

Roger: And financial services is always a leading-edge market...

Zhang Tao: Yes, SOA is popular elsewhere, too. Take SMEs (small to medium enterprises), for example. Some SMEs think web services can help them --there are some securtity and privacy issues, of course--but web services can help them in terms of efficiency.

However, there are some overall challenges in that SOA is only a process. And the (big) problem is there is no standardization.

Roger: How is that problem being addressed?

Zhang Tao: We have done a lot of research work in this area, of course. And the Chinese government also makes plans in addition to its standards work.

Local Landscape
Roger: How well do companies in China compete for enterprise software customers?

Zhang Tao: Well, first of all, Chinese companies are know how to play by local rules. And second, it's really the experiences and best practices behind the software that leads to success.

A third factor is establishing the ecosystem that customers want. Local companies are quite good at this, and with the global companies, IBM and Oracle have been successful because they studied how important it is to have partners in China.

Thought Leadership in China
Roger: What does the phrase "thought leadership" mean to enterprise IT buyers in China?

Zhang Tao: According to a lot of Chinese, IBM was the first initiator of SOA here. So the company has brought a lot of thought leadreship to China traditionally. But recently we have seen Sybase beating IBM twice, because they have the best technology, and you know Sybase Chairman John Chen pays a lot of attention to China.

But we don't exactly use the term thought leadership in China. We think more of the term "forward-looking, very influential."

Roger: So when buyers apply this principle of "forward-looking, very influential," what are the key factors that influence their decisions?

Zhang Tao: It really depends on the types of customers. For government, telco, and financial services, price is not as important as flexibility. And providing the best service.

China is quite unique, different from the US and Europe because all the industries grow so fast. Flexibility is so important. Something that is quite satisfactory last year may be unacceptable next year!

And Now, The Cloud!
Roger: Now lets talk about the fun stuff--cloud computing.

Zhang Tao: If not for the sudden change in the economy this would be a very hot topic! Even so, in China this year there will be some large datacetners with cloud compauting-based services.

Roger: Are all the assets virtualized? And what are the advantages? Being "cool" is not the only important thing.

Zhang Tao: Yes, the major hardware assets will be virtualized, including storage. And you are right, cloud computing is a hot topic in China nost just because it is "cool," but because takes us one step closer to the eternal dream of IT in which software is delivered like electricity water.

I personally do not think the software will be like electricity or water, though, because utilities just deliver one way, you just get it and you use it, while with computing you use it both ways. It is interactive.

Roger: And how important is predictiablity?

Zhang Tao: It is very important to be predictable. We call this "pay when you need," or as you say, "pay as you go". The true advantage of cloud computing is fundamentlaly it changes the way IT is served and deployed.