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How do I licence my software for the Chinese market?

In this week’s column, a Canadian company that licenses software for plant breeding and agronomy (and sells it in 40 countries) asks what it takes to grow his business in China—a market that has eluded him so far.

Ask the Trade Commissioner Service

If you are a Canadian entrepreneur and you have a business-related question, ask us! We might even post your question and the answer on our website. (We'll ask you first of course.)

Dieter K. Mulitze, President of Winnipeg’s Agronomix Software Inc. asks:

Our company, Agronomix Software licenses software for plant breeding and agronomy into 40 countries, but we haven’t yet sold into China.

I did visit China in 2007 so have some feel for the country. However, what’s involved in licensing our software in China? We license our software via downloads from our website and once payment is made for the desired license, we release a software registration code. We license to seed companies, universities, and government research organizations. Any suggestions and direction would be greatly appreciated.

Regards,

Dieter K. Mulitze, PhD
President
Agronomix Software Inc.

James Kim, Trade Commissioner at the Canadian Embassy in Beijing, writes:

Dr. Mr. Mulitze,

Thank you for your message regarding licensing software in China.

Indeed the software market in China is large and growing at a rapid pace. However, it is a challenging market even for the largest software vendors. With respect to selling software in China, there are many factors to take into consideration.

  1. Intellectual Property Rights (IPR) concerns. IPR issues remain a key concern for many industries in China, but especially so for software given that it is very easy to copy. As long as there is market potential or demand for a product, there is a risk that your product will be copied.

    Software piracy is still rampant in China. Ensuring that your product has sufficient encryption built in will be important. There have been cases where foreign know-how or technology was "stolen" by Chinese partners (e.g. distributors, system integrators, employees). It should also be noted that companies should consider getting their product patented and registered in China before engaging in sales. Unless the product is patented in China, it will not be protected in the case of infringement.

  2. Localization. This doesn't simply mean getting your software translated into Chinese. Products will need to be tailored to meet Chinese client requirements. Software designed for use by North Americans or Europeans won't necessarily have the same appeal to a Chinese audience. Certain features may need to be modified to suit the needs of a Chinese user

  3. Distribution channels. Downloading software and paying online is not common in China. Most Chinese consumers would be reluctant to purchase software in this manner. For enterprise customers, given that their software needs are more specific, they prefer to go through companies that specialize in reselling software that has technical and aftersales support. For this reason, we find that most foreign software companies tend to employ their own sales force or agents. Visiting trade shows that target your potential users (in your case seed companies) would be one way to meet with companies that carry complementary products to yours.

  4. Sales and Technical support. The end users of your software will not likely be IT experts. In China, the sale of your product is just the start. Be ready to provide installation guidance and aftersales technical support on an ongoing basis. Chinese customers will demand this if they encounter a problem with the software.

  5. Competition. To be marketable in China, your product's value proposition must be clear. According to our research, there is a Chinese company (Beijing China-Agri BRAINS Science and Technology Co. Ltd.) that has developed a similar and well-known software product called "Nong Bo Shi". This company was founded jointly by China Agriculture University and the China Academy of Agricultural Sciences. In comparing your software with "Nong Bo Shi", it appears that the functionality of each are similar. It will be important to be able to communicate with potential agents or customers the advantages of your software over your competitor’s in terms of price, functionality or both.

  6. Opportunity. All that said, other organizations in China may be interested in your product. The China National Seed Group is one example. We recommend that you translate your product into Chinese so potential clients can understand the product and its benefits. In China, it is not necessarily the best product that will sell, but the one that is best marketed.

Mr. Mulitze, please do not hesitate to contact us if you require further clairification or assistance.

Regards,

James Kim
Canadian Trade Commissioner Service in Beijing

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