Microsoft's Perspective On the Chinese Market -- WSJ

Alain Crozier explains why tech companies must change their mind-set to succeed in China

Western tech companies have had a turbulent relationship with China -- particularly over issues concerning the protection of intellectual property. How does one of the biggest players handle it? The Wall Street Journal's Jason Anders spoke with Microsoft Corp.'s chairman and chief executive for greater China, Alain Crozier. Here are edited excerpts of the discussion.

Recent success

MR. ANDERS: Microsoft has been doing business in China for something like 25 years, How would you say it's going?

MR. CROZIER: It's going very well. In the past 10 days, as an example, we've done two very large announcements. First, we did the first world-wide launch of any product out of China with the new Surface Pro. That's a big sign that the Chinese market is very important for Microsoft. Most, if not all, products are launched out of the U.S. Already, this is our second-largest market for Surface. If everything goes well, China is going to be the first market for Microsoft from a hardware standpoint.

The second one is also very important. We have now a Windows 10 government edition available for the Chinese government but also for the state-owned enterprises.

With another big piece of Microsoft's business, a cloud business, a joint venture that we started some time ago here in China, is experiencing very nice and very solid growth.

MR. ANDERS: I know this process involved some amount of sharing some proprietary code with your Chinese partners. Western companies have long been cautious when it comes to sharing technology in China. Was this something that you considered to be a risk?

MR. CROZIER: When you are a software developer and you put a lot of effort and research and development into code, it is clear that when you develop a solution or product, you want to keep the code for yourself.

And the reality is at some point you have to also decide what is best for customers, what is best for government and what is best also for Microsoft. And I think we've decided that now was a time to open up as a software company to initiatives like this one. Is there a risk? I'll tell you that in 10 years.

It's a decision that I know a lot of people don't really want to take. But I think a lot of things are changing in China, from an IP standpoint. I think there are also more reforms that really help companies like Microsoft make decisions like this one.

MR. ANDERS: With Windows 10, while Microsoft has said this software is as robust as the software anywhere else, this still puts some doubt in someone's mind that perhaps you weakened something like security to break into the Chinese market.

MR. CROZIER: Windows 10 is the most secure operating system Microsoft has ever built. When you look at how Windows 10 is used by all types of governments, including some very conservative governments, Windows 10 is by far the best operating system.

We have also been very transparent. If you are a government and you want to see exactly what's going on with Windows 10, our doors are totally open.

MR. ANDERS: I want to ask you more broadly about the experience of a Western company, especially a Western technology company, doing business in China in 2017. Obviously, Microsoft has a couple of decades of experience here. You've worked in a lot of places yourself. To be blunt, how level or not is the playing field today, for Western firms, especially technology firms?

MR. CROZIER: The field is a great field. But the thing is, every company's built on some values. You have some strict values. You also have some strict principles. And we live in a world today where sometimes maybe some of those principles will evolve because the times are different and because the customers are different and because the competition may be different.

You have a lot of forces that at some point will maybe have you change your mind a little bit on how you want to do things.

A lot of players come and only have one play, which is an IP play. And it is, "I protect my IP, and I'm going after piracy." And, "I'm fighting that on my own." As a software company, you have to change that. You have to, first of all, work with local partners, extensively.

So you have to potentially change the way you think. You have to change your business model one way or another and say, "Hey, you know what? I want to really do something in this country. I find a partner. I work with this partner. I share maybe more than I used to share."

A different mind-set

MR. ANDERS: We were talking about what it takes to be successful in China. And you were saying it takes a very different type of person, really, a different kind of mind-set than it does to work in Silicon Valley or Europe. Can you elaborate on that a bit?

MR. CROZIER: You have to be long-term focused when you come to this market. That's the first thing.

The second thing is, the people you hire to be in this market, they have to be long-term focused.

And for that, you need maturity. You need to be careful. When the wind is coming here or it's coming there or it's snowing or it's too cold, people start to say, "Hey, I don't like this weather. I don't like this. I don't like that."

So, you need to have people who have a certain maturity at saying, "Yeah, you know, this isn't going to be easy. But I need to stay put. And I need to make sure that when I come to China, I love the place."

Because I've seen too many people coming and saying, "Hey, I've been sent by my company to come here." And then a year later they say, "Oh, this place, I don't like."

Why? Because it's very difficult. Because it's complex. Yeah, sure. But you know what? If you do well, if you have a long-term mind-set and if your company is committed to doing business in China, you'll experience a fantastic life, I can tell you that.

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June 14, 2017 02:48 ET (06:48 GMT)