Free Software in Korea: Part One -- The Microsoft Connection
Oct 04, 1999, 06:05 (43 Talkback[s])
(Other stories by Randy Leganza)
Desktop-as-a-Service Designed for Any Cloud ? Nutanix Frame
[ The opinions expressed by authors on Linux Today are their
own. They speak only for themselves and not for Linux Today.
Leganza, Special Korea Correspondent for Linux Today
When Dwight Johnson of Linux Today asked in late
July if I'd consider a doing an article on Linux in Korea, I had no
idea the amount of time or the countless e-mails it would require.
Even though there had been several recent stories in the Korean
English press and the government's announced support for Linux in
July, I grossly underestimated the "Linux in Korea"
When the Korean government's Ministry of Information and
Communication announced in late July that it would "provide
government support for the development and proliferation of Linux,"
it was not only one of the first official endorsements by a
national government of the free operating system but one of the
largest defeats ever for Microsoft.
To appreciate the Microsoft connection to the Korean
government's embracing Linux requires relating events extending
over two years. In the end, despite its best efforts, Microsoft
Korea would not only fail to dominate the local word processor
market it had targeted, it would suspend its "campus license"
program and see its president suddenly resign.
These days hardly a week goes by without Microsoft's local
ventures being mentioned in the English language Korean dailies.
But Microsoft's interest in Korea extends back at least 15 years
with a partnership
agreement in 1984 and a branch office opening in 1992. Over the
years, Microsoft developed
relationships with numerous Korean companies.
Bill Gates has traveled to Korea several times. In 1994 Gates
traveled to Korea to sign a source code licensing agreement with
the Korea Advanced
Institute of Science and Technology (KAIST). Then in June 1997
he traveled to Korea again to address the CIO
Forum, a support group for Korea's CIOs organized by the
Federation of Korean Information Industries.
Microsoft's trouble with the Korean government first began to
surface in October 1997 when the Korean Fair Trade Commission
an investigation into Microsoft's business practices. This
investigation mirrored that of the U.S. Department of Justice. (No
resolution of this investigation has yet been seen in the local
English language press.)
While Korea was struggling in May 1998 to recover from its worst
financial crisis in history, Steve Ballmer, then a Microsoft vice
a $77 million software donation to Korean schools and
Although Microsoft's gift was graciously accepted, some thought
it mostly an attempt to get Korean students on the Microsoft gravy
train. When queried at the time about making an investment
comparable to those made by Hewlett Packard and Intel, Ballmer
reportedly said, "We think that an investment in knowledge is more
important than any factory." Little did Korea know then what was up
Ballmer's sleeve, nor did Ballmer then suspect that Microsoft would
end up with egg on its face.
At the time of Ballmer's announcement, the maker of the
country's only indigenous word processor, Hangul and Computer
Company (H & C), was nearly bankrupt because of the bootleg
software market for its product, Hangul. Microsoft negotiated a
bailout plan for the ailing company -- in exchange for a Microsoft
investment, H & C announced it would cease development of
the Hangul word processor and end support for it a year later.
Only a month after Ballmer's announcement of the software gift,
the deal was scheduled to be closed when, according to the plan,
Bill Gates would fly in for a two day promotional tour.
But as soon as it was announced, there was an immediate public
outcry and the deal ran
afoul of both the Korean populace and the Korean Fair Trade
Commission. Suddenly Koreans saw Microsoft's offer for what it was
-- an attempt to monopolize the local word processor market. They
took it as an assault on their national pride, a sort of "cultural
The Koreans had more than just their ire for Microsoft's
business tactics on their side. The indigenous Hangul word
processor could correctly
display more than 11,000 combinations of the Korean language's
phonetic characters, as contrasted with Microsoft Word's 2,500. And
the Korean word processor could display western
fonts as well.
Bill Gates still flew in but left empty handed after a meeting
with the Korean President.
A grass roots fund raising campaign quickly began to revive H
& C. The Korean Venture Business Association (KVBA) offered
$7.3 million to save the company. Approximately two thirds of
the investment would come from association members, and the
remaining one third would come from contributions by Korean
individuals. The company accepted
the KVBA offer, wisely created a limited license version with a
price to encourage paying customers and called
for the Korean government, itself a flagrant
violator, to began a campaign against bootleg software.
H & C survived and in September 1998 announced
its plan to raise $7.3 million dollars in a public stock
Facing mounting opposition,
but not to be out done, Microsoft continued with its aggressive
drive to inundate Korean educational institutions with artificially
cheap software. In August 1998, Microsoft released a Korean version
of Windows 98 to an eager,
but often disappointed,
public and reported
27,000 copies sold within only the first four days, a figure
comparable to Windows 95's sales.
Although Microsoft had not been able to buy out its chief word
processing Korean competitor, its marketing machine was undaunted.
It vowed to improve the Korean Microsoft Word's ability to display
the older Korean characters and began to hype its Korean Microsoft
Word 2000 in January 1999.
But Microsoft made a disastrous marketing miscalculation. While
the schools and universities were getting bargain
basement discounts to entice students onto the Microsoft gravy
train, individual software buyers were still paying full price.
In early 1999, local software resellers, squeezed mercilessly
from both sides, denounced
Microsoft's pricing strategy. The Korean retail marketplace is
still mostly a mom and pop operation. These small chains and
individual stores could not turn enough volume to warrant the large
discounts that retail giants and OEMs obtain. In addition, these
resellers were the target of a crackdown
on bootleg software. They objected to Microsoft's
alleged entrapment of bootleg resellers, a charge denied by
Microsoft. The resellers went so far as to hold a rally
to protest Microsoft's pricing policy.
Then in mid May, the Korea Times
published the results of a survey which reported that "87.2
percent said the Windows operating system is ``unsatisfactory'' but
that they have no choice but to use it."
The May 1999 resellers anti-Microsoft protest was accented when
Hangul and Computer charged
that Microsoft was "dumping," selling its wares at 10% of its
To this accusation, Microsoft responded (according to the Korea
Herald), "We introduced the site license program, in which we sell
our software package at cheap prices, to the Korean market to help
spread the use of genuine software products among students."
Microsoft also countered that H
& C was guilty of its own accusations because they had slashed
their price to less than $10 for their one year license version.
The government said it would investigate.
Microsoft finally relented and
withdrew its "campus license" policy pending a final decision
by the Korean government. Microsoft Korea had now suffered its
second setback in its drive to dominate the Korean word processor
Amidst all this negative attention, in June 1999, Microsoft
its Korean Microsoft Office 2000. As an answer to H & C's
discounted one year license version of Hangul, Microsoft offered
the Korean Microsoft Word 2000 with an annual subscription option
of under $10. A Korea Herald article claimed it could now process
11,172 Korean syllables, 1.6 million old Korean characters and
27,000 Chinese characters.
Meanwhile, the Korean government continued its crackdown on
bootleg software. Even though government agencies were as guilty as
everyone else, the crackdown
on bootleg software was hurting
Korea's schools far more than the government. Many schools were
forced to suspend computer classes because they could not afford
the software license fees.
The Korean government was under pressure from all sides.
Consumers and resellers complained that Microsoft's products were
too expensive and that there was no alternative to Windows. The
software industry wanted its license fees -- yet this unbudgeted
expense was a monstrous burden on both small business and the
educational system. Koreans wanted Hangul and Computer to survive
-- yet they didn't want to appear anti-Microsoft and alienate
another foreign business when their economy badly needed foreign
The logical alternative seemed to be software without burdensome
license fees -- enter Linux!
In July 1999, the very same day the Korean Ministry of Information and
Communication announced it had formed a group to discuss
support for Linux, the JoongAng Ilbo reported
Microsoft Korea's President Kim Jae-min had abruptly resigned.
Microsoft said the resignation was voluntary but some believed that
he was held responsible for Microsoft Korea's failures over the
past year. The government soon confirmed
its support for Linux saying it would promote its use in public
Ironically, hard on the heals of this announcement came the
release of a Federation of Korean Industries' survey picking
Microsoft as the number one business role model, followed by
General Electric and Ford.
Was it merely a coincidence that Microsoft Korea's president
resigned at the same time the government announced its interest in
Linux? No one is saying. Regardless of the government's motivation
for supporting Linux, the support is there. Linux and Free Software
in Korea is on the move.
[ Next by Randy Leganza: Free Software in
Korea: Part Two -- The Linux Side ]
Randy lives in Taegu, Korea and is on his third,
most fun and least stressful career. He's the QA/Test guy on a
small team supporting a large Solaris WAN integration project, with
a few Linux boxes scattered about. He gets to play with computers
all day and intentionally break them -- then complain about it, and
usually see things get fixed. When he can, he likes to fly
airplanes, lift weights, hunt and fish.