Alliance of titans: Microsoft goes to China

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Guanxi: Microsoft, China and Bill Gates' plan to Win the Road Ahead by Robert Buderi and Gregory Huang; Random House; 306 pp; US$26.

Guanxi (pronounced ‘gwan-shee'), which is Chinese for ‘mutually beneficial relationships', sets out on an ambitious endeavour to convey through the story of Microsoft's foray into research in China, the blueprint for businesses looking at expansion into new territory. Setting a lofty goal and falling short of achieving it should never be criticised; the problem with Guanxi is that the authors do not even try.

The journey begins with various interpretations of a number of Bill Gates' visits to China over the past 15 years, and his interactions with senior members of the Chinese government. The accounts are told through multiple sources: first take is an objective brief like a short news story, then interpretations are supplied by multiple sources - all Microsoft employees. While it becomes clear that the richest man in the world is a fast learner and doesn't repeat mistakes, what remains a mystery is how the Chinese evaluated the meetings. The lack of any information about the other side is a recurring, and significant problem for a book that continuously promotes relationships as a cornerstone of success. All we get is one side: Microsoft's.

The authors offer a caveat in the prologue. "The book is not about outsourcing manufacturing or software-testing jobs. We have not delved deeply into the company's sales or market projections."

Although the caveat did not stipulate the following, the authors also would not examine the case of Juliet Wu, a former company president who published a scathing indictment of Microsoft's operations.

Even though the authors decide to tell a largely uncritical story about Microsoft, their access to senior executives and their knowledge of technology give us a glimpse of one of the biggest industries in the global economy.

In 1998, Microsoft decided to enter China using a different strategy than most of its competitors. Of course, the software giant already had a major presence in the Middle Kingdom, but it was all on the development side.

The new venture, a full scale research centre, was in the works since the early 1990s. It made sense given the demographics, the quality of China's universities, and the quantity of computer scientists and engineers graduating each year. (As the saying goes: ‘If you are one in a million in China, that means there are 1300 people just like you').

To head the new Beijing-based research lab, Microsoft Research Asia, the company searched near and far, and decided to recruit Kai-Fu Lee, a rising star in Silicon Valley. Telling the background stories of the players behind the research lab is the strongest part of the book, and the authors paint colourful profiles of the techie wunderkinds. For those who are actively involved in computer science research, or for business leaders on the verge of creating new teams, Guanxi gives a detailed outline of how to recruit and retain the best and the brightest.

From the get-go, Lee was only interested in hiring the most promising students from the top universities in China. The top calibre recruits in China coupled with heavyweight Chinese expatriates from the US were the two factors that led to the research group's phenomenal success. Just five years after its inception, the lab was responsible for "seven out of 58 accepted papers for ...the world's largest and most prestigious conference on information retrieval... and five papers out of 80 at ... the top graphics conference... No other lab or department came close to these numbers, even those many times larger than the Beijing centre." The lab also transferred more than 100 technologies to Microsoft products.

The success of Microsoft research in China is undeniable, and although the book glosses over many of the challenges it faced during the early days, the authors surprisingly let loose on page 246, presumably rewarding readers who have stuck with it.

Given their inordinate access to top executives, Buderi and Huang were in the thick of an exciting defection: Lee, the founder of the research lab, was poached by Google, Microsoft's current arch-nemesis. Guanxi lays out full emails, contract terms, and details of the US$10m package. The authors also reveal the nastier side of Microsoft's head honchos. Steve Ballmer, the CEO, candidly tells Lee: "If you leave, we would have to do something, and when we do something, please don't take it personally." It was unclear if Lee felt that being sued by the company he loyally served for years across multiple continents hurt him personally, but Bill Gates' deposition during the suit stung.

How do you repay a man who launched an incredible institution for your company in double time, someone you consider a friend? Gates said: "When Dr Lee was an employee at Microsoft, I-I thought of him as trustworthy. There's a lot of things around his leaving Microsoft that I wouldn't have expected." Lee joined Google, and it seems that things are going well at its research lab. Perhaps a more suitable title of the book might have been: ‘How Microsoft ultimately treats its friends.'

Verdict: overall this is a good source of ideas for those interested in managing techies in developed and emerging economies. For everyone else, the book doesn't deliver much insight into China.

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