Top Microsoft China Exec Leaves For Baidu

Microsoft Asia R&D head jumps ship for Baidu

A new report on the resignation of the head of Microsoft’s (Nasdaq: MSFT) huge Asia R&D labs to take a job at homegrown Internet giant Baidu (Nasdaq: BIDU) is shining a spotlight on the growing challenges that multinationals may soon face in retaining some of their top Chinese employees. Just a decade ago, jobs at foreign companies were highly coveted by ambitious Chinese in the high-tech sector, mostly because China didn’t have any of its own big names in the space.

But the emergence of companies like Baidu, Tencent (HKEx: 700) and Lenovo (HKEx: 992) have created a whole new set of opportunities for these workers. What’s more, improving working conditions at Chinese-owned firms, combined with Beijing’s subtle anti-foreign bias against high-tech multinationals, could ultimately lead many of China’s brightest tech workers to abandon their jobs at the multinationals for domestic names.

The move at the heart of the latest buzz has reportedly seen Zhang Yaqin resign from his post as head of Microsoft’s Asia-Pacific R&D labs, which are headquartered in Beijing and have more than 3,000 engineers. (Chinese article) Zhang will leave the job to take up a new position as Baidu’s president of new business development, reporting directly to CEO and company founder Robin Li. The reports say Microsoft will make a formal announcement later this week.

Zhang has spent the last 15 years at Microsoft, and quite possibly thought he would be spending his entire career at the company when he first joined in 1999. But much has changed in China since then, including the rise of some of the world’s most valuable Internet companies as well as its biggest PC maker in Lenovo and 2 of the world’s biggest telecoms equipment makers in Huawei and ZTE (HKEx: 763; Shenzhen: 000063).

There are a number of ways one could interpret Zhang’s departure. Some might say he’s jumping from a sinking ship, since Microsoft hasn’t had a very easy time in China despite its long tenure and heavy investment in the market. The company only recently got permission to sell its Xbox gaming consoles in China (previous post), and is currently being investigated by one of China’s antitrust regulators for uncompetitive business practices. (previous post)

That same antitrust investigation reflects a broader bias by Beijing against foreign tech-firms in general. Leading smartphone chipmaker Qualcomm (Nasdaq: QCOM) is also facing a similar antitrust investigation, and global smartphone giant Apple (Nasdaq: AAPL) is a regular target for criticism by Beijing-based central media that accuse the company of everything from double standards to arrogance.

At the same time, working conditions are rapidly improving at many of China’s top tech firms, as they try to adopt more western business practices to retain the workers they will need to remain competitive. Lenovo is frequently cited as one of China’s best employers, and many of the big Internet firms are also taking steps to become more professional and help employees develop their careers and find a suitable work-life balance. Of course not all Chinese appreciate such efforts, as we saw earlier this year when hundreds of IBM (NYSE: IBM) workers quit at a south China plant when they learned it was being sold to Lenovo. (previous post)

Despite such setbacks, the bigger picture is that major Chinese tech firms are quickly becoming competitive with major multinationals in terms of their attraction to Chinese workers. If I was one of those upwardly mobile young Chinese with job offers from Microsoft and Baidu, I would give serious consideration to both companies before making my decision. That could make life more difficult for the big multinationals in the future, as  they lose some of the nation’s most talented workers to domestic competitors.

Bottom line: The defection of Microsoft’s Asia R&D chief to Baidu reflects the growing attraction of major domestic firms for Chinese tech workers, creating potential staffing headaches in the future for big multinationals.

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