From Made- in-China to Innovated- in-China: which macro- economic factors are still needed?

After ten years of efforts, SAP Labs China made its first achievements and has grown from a software development center providing software localization and project-outsourcing services for SAP Headquarters in Germany into a knowledge hub playing a strategic role in the global SAP R&D system. It has built a complete innovation value chain in the fields of small-and medium-size enterprise solutions and is maintaining a complete Smiling Curve aiming at the global software application market. From Made-in-China to Innovated-in-China, SAP Labs China has been able to create a new path for the domestic software industry – a path that differs from the Indian software outsourcing model. I hope that our efforts will convince more of China’s local software companies, multinational R&D institutes in China, the Chinese government and universities to accept that there is no need for China’s software industry to follow the Indian model characterized by software outsourcing due to a lack of domestic demand. Based on the high demand for software and the boom in innovation in China, we can build a Smiling Curve that will cover the whole software innovation value chain and the core competences for the future. During the development of SAP Labs China over the last 15 years, we have experienced and enjoyed many successes but we have also encountered some difficulties. The problems SAP Labs China has been faced with did not only come from the global SAP R&D system and from inside the company itself, but were also brought about by the bottlenecks and barriers caused by the lack of macro-economic key factors, such as software education, the cultivation of innovative thought, innovative culture and national policies in the field of science and technology as well as the lack of corporate policies. To overcome these difficulties, we had to make additional efforts, which, to a great extent, increased the operational costs of SAP Labs China and reduced its operational efficiency. In the final two chapters, on the basis of SAP Labs China’s experiences with the external environment during the past 15-years, I would like to share my views on China’s shortage of macro-economic conditions during the transition from Made-in-China to Innovated-in-China.