Oracle plans to expand R&D in China

Ben Blanchard

SHANGHAI: Oracle Corp., the world's second-most valuable software company, is looking to pump up its research capacity in China, an executive said, hoping to plug its fastest-growing market into a global network.

California-based Oracle -- second only to Microsoft Corp. as a software producer -- runs two research facilities in China, one in the capital and another in the southern boomtown of Shenzhen.

Multinational companies are increasingly shifting more sophisticated functions such as research and marketing to China, which is eager to cast off its image as a mere shop floor.

Some goggle at projections that China is expected to turn out around 270,000 IT graduates annually by 2005, many of them willing to work at lower pay than in the West. But analysts say the country has a way to go before matching Taiwan or Korea.

Oracle, which employs some 600 people in China, would focus on the domestic market for now, said Kevin Walsh, Oracle's vice president of Internet technology and head of China R&D centers.

But that research will be felt beyond the country's borders eventually, Walsh said.

For instance, work done for clients such as China Mobile, the bigger of the country's two wireless operators, could apply to a broad range of clients, he said.

"If you work with them and your applications can support the needs of maybe 250 or 300 million mobile users..., that technology will work for any operator in the world," said Walsh, who shuttles regularly between Beijing and California.

"We believe that we're going to be able to keep pace with the growth here in China."

Siemens AG and Motorola Inc. are some of the multinationals active in research in China.

SHINING SPOTS

Apart from Microsoft, Oracle vies with BEA Systems Inc. and Germany's SAP AG. in the field of database systems, applications servers and business software.

China is Oracle's third-biggest market in the Asia Pacific, after Japan and South Korea. New software license revenues from the region rose eight percent in the fourth quarter ending May 31 to $226 million, according to its quarterly report.

For the full 2004 financial year, they went up 11 percent to $673 million, or about a fifth of the global total. China's IT sector is one of the world's bright spots, growing at 20 percent a year, with software sales expected to hit $30.5 billion by 2005, according to the International Data Corp.

Its business software market is growing at a compound annual rate of 35 percent and is forecast to hit $400 million in 2007 -- versus just $85.5 million in 2002, IDC says.

Oracle is now pondering new research bases in less prosperous western and northeastern China, as well as the booming Yangtze delta region around Shanghai, Walsh said.

"What I would like to do is essentially connect the dots and at some point in the future eventually connect the centers."