Oracle and Dell kicked off a Linux-based alliance in China on Thursday that may spell trouble for Microsoft in the world's No. 2 computer market and also curry favor with Beijing.
Dell and Oracle executives said the tie-up, which tacks Linux-based Oracle software onto Dell computer servers, would edge out competing platforms, but they declined to say how it would help them expand market share.
Nonetheless, the alliance could threaten Microsoft and its Windows dominance because the Chinese government has been pushing for a national standard on open-source software to counter the reign of Windows in recent years.
Despite Beijing's encouragement, Linux-based personal computers are not popular in China now, accounting for less than 1 percent of the market.
"Linux adoption is increasing in China because the government is supporting it," said Loke Soon Choo, Oracle's Greater China regional managing director.
"The fact that it is open sourced also makes it more robust," he said after the launch in China's financial stronghold.
Microsoft, battling competition from Linux, said last year it would distribute its jealously guarded source code to China under an initiative to promote software security.
Analysts said that move was essential in Microsoft's fight to reverse its woes in the country, which include software piracy as well as top-level government support for Linux.
Unlike other tech hot spots such as India, where programmers use Linux as their basic system and then introduce it to customers, its adoption in China is government-led.
The government has said it wants to build a domestic software industry around Linux, a cheaper rival to Microsoft's Windows that can be copied and modified freely.
The Dell and Oracle joint effort takes aim at a business software market that technology tracker IDC says is growing at a compound annual rate of 35 percent, and which may hit $400 million by 2007 from just $86 million in 2002.
"We're not doing it because we want to see a shift (in operating systems), but it's something that is emerging," said Foo Piau Phang, head of Dell China.
"Linux has seen fast growth, especially in the last year," he added. "From a large-scale deployment cost and robustness standpoint, there are clear benefits."
A key focus for Oracle was China's 10 million small and midsize businesses, which are estimated to spend $26 billion (215 billion yuan) on information technology construction in 2005.
Redwood Shores, Calif.-based Oracle is second only to Microsoft as a software producer.
Dell said in February that, in a best-case scenario, it hoped to push its overall market share--currently pegged at 6.8 percent--into the double-digit range.
Dell's China sales soared about 60 percent in 2003, making the country its fourth-largest market behind the United States, Britain and Japan.