Recruiting in China

GUANXI (THE ART OF RELATIONSHIPS)
Microsoft, China, and Bill Gates's
Plan to Win the Road Ahead

The Good Argues that Microsoft's Beijing research lab has played a pioneering role in high tech.
The Bad Misses key developments and rarely goes beyond the lab to explore issues facing Microsoft.
The Bottom Line Flawed, but it shows the importance China has for American high tech companies.

Last summer a Taiwanese-born PhD named Kai-Fu Lee was at the center of an intense battle between Microsoft (MSFT ) and its latest challenger for high-tech dominance, Google. (GOOG ) Lee, an expert in speech-recognition technology, had been working at Microsoft for seven years, recently in Redmond, Wash., and before that at the company's China research lab in Beijing, which he founded in 1998. But he had become increasingly frustrated by what he described as Microsoft's "incompetence in China" and last July abruptly announced that he was leaving to join Google. A nasty lawsuit followed over the terms of a noncompete agreement. During the trial, another Microsoft defector revealed that Microsoft Chief Executive Officer Steve Ballmer had vowed to "f---ing kill Google." Lee ultimately won permission to leave, becoming a prime example of the recent talent exodus at Microsoft.

You might expect that a new book in which Lee is prominently featured and extensively quoted would have juicy insights into that drama. Alas, the flawed Guanxi (The Art of Relationships): Microsoft, China, and Bill Gates's Plan to Win the Road Ahead, by journalists Robert Buderi and Gregory T. Huang, has little to say about this key moment in the Microsoft-Google rivalry. Indeed, it appears Microsoft executives weren't the only ones surprised by Lee's departure: Although Buderi and Huang seem to have spent many hours over many months talking with Lee, they apparently had no inkling of his dissatisfaction. They devote one late chapter to the custody battle. But it feels tacked on, almost as if they realized at the 11th hour that Lee had upended the whole premise of their book, which tells how Microsoft successfully built its Beijing research center.

Microsoft Research Asia was only the second center for high-level research opened by the company outside the U.S. (The first was in Cambridge, England.) The authors argue persuasively that Microsoft's Beijing center has played a central role in developing products and served as a model for the company as it expands in countries such as India, where Microsoft opened a Beijing-like research center last year. In setting up the center in the late 1990s, long before most other multinationals had started to take China seriously as a research and development location, Microsoft was a pioneer in recognizing "the imperative of looking at emerging nations not just as potential markets but as sources of talent." Contrary to the book's subtitle, though, this is not a story about Bill Gates's strategy in the world's largest country, and the authors spend almost no time discussing Microsoft issues beyond the lab. For example, there's very little about problems with China's counterfeiters. And while mentioning a botched Microsoft pledge to invest $100 million in the country, they don't offer any insights into what went wrong.

Guanxi is at its best when it describes the brilliant collection of experts recruited by Lee, such as multimedia whiz Ya-Qin Zhang. (Buderi and Huang use the Western convention of given name first, family name last for most of the Chinese in the book.) A former child prodigy who entered one of China's top universities before his 13th birthday, Zhang took over as director in Beijing in 2000 after Lee relocated to Redmond. Zhang is adept at wooing Chinese officials. For instance, he scored a coup when he won permission from the government for the Beijing lab to award post-doctoral degrees, a first for a foreign company. And Zhang boasts about his ability to cut through red tape by making one phone call to the vice-mayor. "Problem solved," Zhang tells the authors.

Buderi and Huang also profile Jian Wang, an engineering psychologist who at first was reluctant to give up his position as a professor at Zhejiang University but went on to lead the team that developed the handwriting-recognition software used in Microsoft's Tablet PCs. Wang, who has come up with a "universal pen" that can instantly take writing from a piece of paper and put it on a computer screen, also created Thought Explorer, a computer interface custom-made for Gates that the chairman uses during Think Week, his semi-annual retreat.

Yet as fascinating as these characters are, the book suffers from its almost exclusive reliance on them for its information -- and its numerous boosterish quotes. Significantly, we don't hear from many Chinese officials, even though one of Buderi and Huang's themes is the importance of building relationships, or guanxi, with government leaders.

For all its shortcomings, though, Guanxi does show the importance that China has for American high-tech companies. With Kai-Fu Lee now back in Beijing to launch another R&D center, this time for his new company, the competition for Chinese talent is only going to get rougher.