China Security Market Tough to Crack for Foreign Vendors

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Major security vendors looking to crack China's market have met obstacles localizing their products and securing distribution channels, analysts said Tuesday.

McAfee, Symantec, Trend Micro and other vendors have offered antivirus and other security software in China for years, but their Chinese rivals still dominate the market. Another problem they have faced is equipping their software to shield against attacks on Chinese programs, such as popular instant messaging client QQ, that the companies have not had to deal with outside of China.

"Foreign vendors are bound to face a localization problem," said Chen Shousong, an analyst at Chinese technology consultancy Analysys International.

One problem for foreign security vendors is that local rivals often undercut their prices, said Chen. Products from foreign vendors are usually more advanced, but that can also make them more expensive, and most Chinese individuals and companies are still more concerned about price than about the sophistication of their security software, he said. Foreign vendors will benefit as Chinese users slowly begin to demand higher-level security software, Chen said.

Symantec, Kaspersky and McAfee were among China's top five vendors of consumer security software in 2008, according to Gartner. Three of the top five enterprise security software vendors were also foreign, but those figures, based on revenue, overstate the position of the foreign companies, said Matthew Cheung, a Gartner analyst.

Local Chinese security vendors such as Rising, Kingsoft and Jiangmin need to sell many more copies of their lower-priced software to match the revenue of foreign rivals, Cheung said.

Building local distribution channels has been another obstacle for foreign vendors. Companies like McAfee were late creating ties with China's network operators, through whom local users often pay their subscription fees for antivirus programs, said Cheung. Vendors including Symantec have partnered with local PC makers to bundle their software with new computers, but many Chinese users prefer downloading antivirus software or directly using an online virus scanning tool, he said.

Foreign vendors have done poorly at distributing their products through online channels in China, said Cheung. Top Chinese search engine Baidu, for instance, has a Web page dedicated to security software downloads. Symantec and Kaspersky are the only foreign security vendors whose software appears on the page.

The vendors themselves say tackling the Chinese market requires adding protection in their products against a wide range of local malware. McAfee has hired a team to research exploits in common Chinese applications so protection against them can be added to the company's intrusion prevention product, said Rees Johnson, general manager of McAfee's network defense business unit. Expanding coverage against local security threats is an important part of McAfee's efforts to grow in China, Johnson said.

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