Localized software will be key to Chinese success

China will be the biggest single source of smartphone growth in the near future, but the software platform battle will play out with different rules from those in more established markets. There is a rising trend to rely on homegrown operating systems and highly localized applications, which may prove challenging to Google's or Apple's one-size-fits-all approach.

Chinese search giant Baidu recently unveiled its own twist on Android and the first step in an ambitious plan to deliver a full cloud/browser operating system for mobile devices. But the firm is not alone. According to researchers at IDC, local OSs are on the rise because they integrate indigeneous mobile and web services, which are familiar to consumers.

While the currently fragmented OS market will consolidate, several players will survive, reflecting Chinese players' desire to control their own destinies rather than rely heavily on western technologies. "Many of these developers are utilizing homegrown OS as a platform to create additional revenue streams," commented ID research manager Ian Song.

By localizing the user environment and integrating well known services, an OS - or in some cases, a simpler Android overlay or fork - can drive greater mobile data usage and create revenues for operators and apps suppliers. Several localized platforms have been created by carriers, including China Mobile's oPhone.

"Although many locally developed Chinese mobile OS are thinly disguised attempts at increasing the vendors' bottom line, there are gems in this group that truly shine. These vendors know that having a great OS is half the battle," concludes IDC. Baidu, Alibaba and China Mobile would fall into this group.

IDC predicts that smartphone shipments in China will eclipse those of featurephones by 2013 as operators build out 3G and offer incentives, such as subsidies, for consumers to upgrade from low end devices.

Nokia and Microsoft claim they will be in a strong position to take advantage of Chinese users' taste for localized interfaces and content. Nokia has a long history of working with local software partners in emerging economies to create tailored apps. Michel van der Bel, Microsoft's COO for Greater China, recently said that WP7 had gained 7% share on Chinese smartphones in its first two months of availability, overtaking iPhone on 6%.

A research study by Strategy Analytics found that handset vendors must offer highly tailored content to succeed in China. Mobile apps in highest demand include local shopping sites, stock market reports and restaurant reviews, commented analyst Alvin Wu. "Chinese consumers seek a mobile application store that should not only be easy to use and well structured, but provides a specific Chinese consumer experience."

Paul Brown, director of the firm's user experience practice, noted that smartphone vendors "must meet unique Chinese consumer needs for integration of native applications and social networking services, contacts and messaging, file management, security, privacy and customization".