Microsoft loses China contract at last minute

By Steve Malone

Posted on 29 Nov 2004 at 15:30

The Beijing municipal government has pulled out of a deal to buy Microsoft software. In a victory for local suppliers, the local authority is instead expected to sign a deal with indigenous suppliers according to the Chinese website Pacific Epoch.

The deal, in which the local government would gain the right to unlimited licences of Microsoft software over three years in return for $3.5 million, was expected to be signed over the weekend.

However, in the end the final approval from the Beijing procurement office was not forthcoming. Under pressure from local suppliers and central government, Beijing municipal government has instead opted to replace Microsoft Office with Kingsoft WPS and Windows with Red Flag Linux.

Last week many inside China expressed unhappiness at the way Microsoft appeared to win the contract to supply Beijing municipal government in contravention of local laws which specify a China First procurement policy. The law is intended to nurture the country's nascent software development community. Despite building a large software development lab in Beijing, Microsoft is still seen as a 'foreign' supplier.

The retreat by the capital's municipal government will signal to other pending local government negotiations that central government expects the law to be obeyed.