baosteel3.jpgJust a month after opening a Chinese subsidiary, French software company Ilog has bought a minority stake in Shanghai FirstTech, a systems integrator that provides Ilog's main route into Chinese market.

The move shows the growing sophistication of China's IT market as FirstTech develops complex systems in areas such as process automation, scheduling and supply chain management. It also suggest that Ilog has had second thoughts about going it alone in China and instead has opted to participate in a JV.

FirstTech was set up in 2003 by Baosight Software, the IT arm of steel giant Baosteel.

At a time when many western companies in other industries are opting for the wholly foreign-owned foreign enterprise (WFOE) model, Beijing believes JVs like FirstTech still have an important role to play in the hi-tech sector by encouraging technology transfer to local companies.

Kevin Zhu, FirstTech VP and member of board of directors of Baosight, said:

This alliance with ILOG will help FirstTech further establish itself as a leading solutions provider to the Chinese IT market, at a time when the Chinese government is encouraging home-grown innovation.”

FirstTech designs and develops custom IT systems based on Ilog software, which uses rule-based techniques to solve complex scheduling and optimisation problems in a range of industries.

Not surprisingly, the steel industry is a key market and BaoSteel recently deployed a supply chain planning system based on Ilog software.

But FirstTech has Chinese customers for Ilog software in other sectors, including semiconductors, telecoms, banking and insurance. Taiping Life, one of China's largest insurers, has based a new insurance underwriting system on Ilog's business rules software. China Everbright Bank also uses the product to automate loan decisions.

Ilog is paying 14.4m yuan to acquire 35 percent of FirstTech. Baosight Software will maintain a 41 percent stake in the company, and First Technologies (Cayman), Baosight Software's original JV partner in FirstTech, will see its holding reduce its 24 percent.

Ilog has had a presence in the Chinese market since 2002 when it opened a sales office in Beijing. In September, it opened a WFOE in Shanghai's Pudong Software Park.

The Chinese connection relationship goes back further as the French company has been partnering with Chinese universities since 1999. That's because its software is heavily underpinned by academic research in areas like object technologies and linear programming. You don't need a PhD to understand Ilog's products, but it probably helps.

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