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www.idc.com
Exploring South China OpportunityDoing Things Right vs. Doing The Right Things
Wilvin CheeDirector, Software Research
Prepared for Oracle HK & China
Oracle today: Doing things rightOracle today: Doing things right
Historical success based on strong global identity with powerful leadership drive and superiorly-proven technology capabilities
A/P customers now seeking assurances for a strong regional commitment and direction
Granular and deep product functionality has enabled Oracle to penetrate far and wide
Mature users evolving in demand for end-to-end lifecycle support and ease of integration complexity
Consulting, implementation support and education services, provided directly or seamlessly through partners, will be critical for further market penetration, and to defend current mature accounts
Product level marketing and sales management has carried through an embryonic buying pattern
Customer segment, business process and application level demand generation will require additional dimensions to Oracle’s go-to-market resource alignment
AgendaAgenda
Overview Macro Economic Review Overall IT Market Review Software Market Review
Competitive Landscape Database Enterprise Applications Others
Vertical Opportunities
Macro Economic ReviewMacro Economic Review
Northeast
North
East
South
Southwest
Northwest
Central
Total # of legal establishments: 5,325.9 mil
430.4 (8.1%)
1,253.2 (23.5%)
793.5 (14.9%)
745.1 (14.0%)
573.6 (10.8%)
374.6 (7.0%)374.6 (7.0%) 1,155.6 1,155.6 (21.7%)(21.7%)
Source: China Yearbook 2004 & IDC 2004
2,2264,648
4,7078,093
15,73716,358
22,64925,940
27,14828,933
29,52529,633
29,73830,430
32,99334,143
44,18747,918
53,43855,956
63,11465,159
65,81872,407
75,40285,025
85,628113,329
150,011150,312
164,365
Tibet Ningxia
Qinghai Hainan
Gansu Guizhou
Xinjiang Inner Mongolia
Chongqing Shaanxi
Tianjin Shanxi
Yunnan Jilin
Guangxi
Jiangxi Beijing
Anhui Heilongjiang
Hunan Fujian
Hubei Sichuan
Liaoning Shanghai
Henan Hebei
Zhejiang Shandong
Jiangsu Guangdong
16.2%13.2%
14.0%9.0%
9.9%10.9%
11.2%15.4%
12.3%13.0%
14.3%14.3%
8.0%11.5%
10.1%12.2%
13.9%9.3%
10.8%7.9%
10.1%8.1%
10.8%8.7%
11.2%11.1%
11.7%15.9%
13.3%13.2%
12.1%
Tibet Ningxia
Qinghai Hainan
Gansu Guizhou
Xinjiang Inner Mongolia
Chongqing Shaanxi
Tianjin Shanxi
Yunnan Jilin
Guangxi
Jiangxi Beijing
Anhui Heilongjiang
Hunan Fujian
Hubei Sichuan
Liaoning Shanghai
Henan Hebei
Zhejiang Shandong
Jiangsu Guangdong
2003 GDP (US$m)
Source: National Bureau of Statistics
GDP CAGR 2000-03
423604
679680
748756
784801
803824
840867
880882
894999
1,0861,090
1,1251,171
1,2651,401
1,6441,720
1,8092,030
2,0662,422
2,9203,034
4,407
Guizhou Gansu
Guangxi Yunnan
Anhui Sichuan
Shaanxi Ningxia
Jiangxi Tibet
Hunan Chongqing
Henan Qinghai
Shanxi
Hainan Hubei
Inner Mongolia Jilin
Xinjiang Hebei
Heilongjiang Shandong
Liaoning Fujian
Jiangsu Guangdong
Zhejiang Tianjin
Beijing Shanghai
2003 Per head GDP (US$)
Guangdong in Top 5 for all categoriesGuangdong in Top 5 for all categories
Private companies are increasing in numbers and % splitPrivate companies are increasing in numbers and % split
2001 2002 2003 2004 2005 2006 2007 2008 03-08 CAGR
Private Company # (000) 1,320.0 2,435.3 3,487.3 4,753.3 6,188.7 7,705.0 9,215.2
10,625
.1 25.0%
Revenue 11,484.24 14,369.15 17,128.0 20,245.3 23,788.3 27,404.1 31,131.0
35,115.8 15.4%
Province Private Company # (000) Percentage
Jiangsu 286.2 11.8%
Guangdong 258.6 10.6%
Zhejiang 247.3 10.2%
Shanghai 224.7 9.2%
Shandong 176.0 7.2%
Beijing 150.9 6.2%
Others 1,091.6 44.8%
Total 2,435.3 100.0%
Source: 国家工商总局个体私营经济监管司 , 2003
Source: National Bureau of Statistics
& IDC Estimates, November 2004
Manufacturing consumed 32% while retail/wholesale trade took 40% out of the total private companies
SMB’s contribution to GDP already surpassed 50% lineSMB’s contribution to GDP already surpassed 50% line
SMBs with less than 500 employees remained the overwhelming majority of Chinese enterprises and accounted for 98.9% of all legal entities in 2003
China SMB Market Growth, 2004–2008
2004 2005 2006 2007 2008
SMB IT Spending Growth 20.8% 18.4% 17.3% 16.2% 16.5%
SMB Revenue Growth 16.2% 17.5% 15.6% 14.5% 13.8%
SMB Contribution Proportion to GDP 52.1% 52.9% 53.8% 55.2% 57.5%
China GDP Growth 8.7% 7.7% 7.8% 8.1% 8.0%
Source: 国家工商总局个体私营经济监管司 , 2003
Source: National Bureau of Statistics
& IDC Estimates, November 2004
2%
5%
8%
11%
14%
17%
20%
0%5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
5-Y
CA
GR
% Contribution for 2003
China
India
Australia
JapanKorea
Developed Countries
DevelopingCountries
Bubble Size = Relative 2008 Size
Source: IDC version March 2005
Overall IT Market ReviewOverall IT Market Review
0.1%0.3%0.3%0.4%0.6%0.7%1.1%1.2%1.3%1.3%1.4%1.4%1.5%1.7%1.7%1.8%1.8%1.9%2.2%2.3%2.3%2.3%2.5%
3.6%3.6%
5.4%5.4%
7.0%12.6%13.3%
17.0%
TibetQinghaiNingxiaHainan
InnerMongoliaGuizhou
GansuXinjiang
JilinJiangxiShanxi
GuangxiYunnan
HebeiTianjin
ChongqingAnhui
HeilongjiangHunanHenanHubei
ShaanxiFujian
LiaoningSichuan
ShandongZhejiangJiangsu
ShanghaiGuangdong
Beijing
Market Size (Value) Share, 2003
6.5%7.2%
8.4%9.4%9.6%9.6%9.7%10.2%10.2%10.2%10.3%10.4%10.7%11.2%11.2%11.3%11.6%12.1%12.4%12.4%12.5%12.6%12.6%13.1%13.2%13.2%13.2%13.5%14.1%14.6%
16.3%
NingXiaInner
GanSuHeBei
HeiLongJiangJiangXiQingHai
GuangDongHuNanShanXiHuBei
JiLinShanDong
XinJiangTibet
AnHuiGuiZhou
TianjinHenan
LiaoNingFuJian
ShaanXiChongQing
YunnanZheJiangGuangXiSiChuanJiangSu
BeijingShanghai
Hainan
2003–2008 CAGR
Guangdong is 2nd largest IT spender while Hainan expects to grow the mostGuangdong is 2nd largest IT spender while Hainan expects to grow the most
Source: IDC version Aug 2004
Impact on IT SpendingKey Developments Implications to Oracle
Stock market listing
Enterprises are expected to pay attention to analytics and integration applications in order to improve customer relationship and operational management
More China enterprises are listed in stock market. In order to be successful, they are expected to accelerate on IT investments
Major factors driving IT spendingMajor factors driving IT spending
Economic growth
China will maintain a fast economic growth with an average GDP around 8% in the next five years
IT investment expected to grow steadily especially services and software
WTO
Domestic enterprises expected to improve competitiveness with IT investment while increasing # of foreign establishments will also drive spending
Software addressable to Oracle are expected to increase as they are critical investment components to improve business competitiveness
Impact on IT SpendingKey Developments
CEPA effects on manufacturing, trading and services industries
Demands on middle-end application software like accounting, payroll, HRMS, and collaborative software should increase.Need to monitor closely further investment requirements – industry solution availability is next
Manufacturing are generally low-spending thus future is bright for straightforward IT investments.Trading and services industries will require higher level of investment components
Major factors driving IT spending (cont)Major factors driving IT spending (cont)Implications to Oracle
Emergence of joint venture insurance companies and foreign manufacturers
They located their China headquarters in SC thus IT investments are expected to be high
These enterprises will have their sights on analytics and integration requirements
Big TEMs in South China (Huawei, ZTE)
They will invest heavily in IT to offer better solutions to telecom carriers. As manufacturers, their own IT demands are high as well
Best to push through with a focused commitment to produce end-to-end solution for the industry, embedding both own and partners’ technology comprehensively
Industry opportunities for 2005 in Hong KongIndustry opportunities for 2005 in Hong Kong
Source: IDC version March 2005
Includes software licenses and maintenance
26%
22%13%
9%
3%
8%
6%
13%Manufacturing
FSICommunications
Government
Education
Wholesale and Retail
Transportation
Others
Competitive LandscapeCompetitive Landscape
Opportunities at a glanceOpportunities at a glance
MarketsMarket
Size* ‘08Market
Size* ‘04CAGR
Major Players Trend Highlights
Database
ERM
CRM
ProductSupply Chain
BI Software
App DeploymentPlatform
U$M U$M%
Global vendors dominance, mature technology widely accepted by enterprise, easy footprint for enterprise applications users as they increase data management requirements
IBM, Microsoft and Sybase
IBM, Hyperion,BO, SAS, and Cognos
IBM and BEA
Very nascent market at this stage – companies not ready at large; no clear vendor lead; mostly enterprise wins
Reasonably established technology acceptance at enterprise level; next target for vendors are the SMB
39.4 63.6 12.7%
4.4 11.8 28.0%
45.8 117.4 26.5%
78.6 199.5 26.2%
7.4 16.0 21.2%
72.0 131.2 16.2%
UfSoft, SAP and Kingdee
TurboCRM, and Asiainfo
BokeSoft, Fourth Shift, i2 and QAD
Local players winning current install base with simple and cost-effective products but scrambling to build next-level
Global players are slow to show successes but have better breadth of products to last
Market needs a lot of awareness-development especially on CRM investment returns
Fragmented market with low IT adoption in general; needs a lot of awareness-building, niche more popular than general unless properly packaged
Source: IDC version March 2005
Includes software licenses and maintenance
* South China region
Vendor Strategic Initiatives
Marketing Highlights
Partnering Highlights Industry Focus Key Challenges
IBM • Business model transferred from product-oriented to solution or industry-oriented (however, lately they have reverted back)
• Pushing total industry solution and educating acceptance via integration platform or on-demand computing architecture
• Decreasing VADs while looking to develop solution partners with in-depth industry expertise
• Finance, Telco and Government are still the top three industries
• Wants to pay more attention to SMB market
• Conflict between sales and partners in inventory control
• Though well-integrated, solutions are costly – customers finding hard to accept whole package
Microsoft • Focusing on producing strong localization features
• Keeping more attention to major accounts
• Trying to flatten channel delivery layers
• More evenly spread out in terms of industry coverage
• Wants to gain more government projects
• Product features seem limited to fulfill more sophisticated requirements
Sybase • Aiming to sell more both analytics and EAI capabilities as DB opportunities dry up
• Investing more resources to improve existing customer relationships
• Wants to depends a lot more on SI partners as they move away from direct sales approach
• Main focus are in the Telecom, FSI and Manufacturing industries
• Lacking behind the top 3 in terms of customer acceptance – considered second tier player in the market
Database market competitionDatabase market competition
Vendor Strategic Initiatives
Marketing Highlights
Key Partners Industry Focus Key Challenges
UFSoft • Contesting via globalization
• Pledges to invest at least 10% revenue for marketing campaigns
• Co-marketing events
• Relies heavily on partners with consulting and implementation services
• IBM, Oracle, HP, Sun
• Manufacturing, Government, Financial, and Wholesales/Retail
• Getting pressure to expand product offerings as current ones are rather limited
• Low profit not helping product development investment
Kingdee • Aggressively exploring global opportunities
• Pledges 9.5% revenue for marketing budget
• Investing a lot on product launch and customer conferences
• Seeks different partnerships for sales, services, government and technology
• MS, IBM, Brio, HP, Tsinghua University
• Manufacturing, Media, Wholesales & Retail, Resources and Financial
• Suffers from lack of product breadth and price competition in local market
SAP • 2-pronged: enterprise and SMB strategies
• Investing a lot on localization
• 5% revenue for marketing budget
• Focusing on winning mindshare as reliable and affordable solution provider
• Enterprise - consulting firms
• SMB - distributors
• Accenture, IBM, Bearing Point, Shanghai Gaoweixin
• Manufacturing (Steel, HT & Auto), Resources, Power, Financial, and Telecom
• Still perceived to be costly and complex
• No clear successes with SMB strategies
• Still some way to go in understanding local requirements
GenerSoft • Focusing on high-end users
• Investing in industry-based strategy
• 10% revenue for marketing budget
• Building product awareness
• Needs more distributors, technology, and consulting partners
• Sybase, Oracle, MS, Sun, IBM, Accenture
• Manufacturing, Resources, Financial, and Government
• Intense competition from both local and global vendors
• Lacks breadth of offerings
ERM applications competitionERM applications competition
Vendor Strategic Initiatives
Marketing Highlights
Key Partners Industry Focus Key Challenges
Asiainfo • Relies heavily on partnership
• Focused only on winning telecom deals
• All the major hardware vendors
• Telecom • Unable to prescribe to mass market due to complex products
TurboCRM • Deploys one-to-one sales strategy
• Does not spend much on marketing
• Relies a bit on word-of-mouth
• MS, Sun, Intel, HP, Lenovo, IBM
• Manufacturing
• Telecom
• Resources
• Limited resources
• Unable to expand due to market immaturity
CRM applications competitionCRM applications competition
Vendor Strategic and Marketing Initiatives
Partnering Highlights
Industry Focus Key Challenges
Hyperion • Wants to move away from tagged as BI software provider
• Positioning as BPM provider
• Dedicated distributors by industry
• Partners with local ISVs for product embedment
• Telecom, FSI, and Manufacturing
• Customers lack awareness of products
• SIs not trained enough to sell BPM concept
Cognos • Relies on VAD to push products to the market
• Poor marketing activities
• Focusing on working with partners that have strong government background
• No clear focus though has shown keenness for government deals in particular
• No strong direct resources to sufficiently commit to growing local businesses – VAD cannot handle burden
Business Objects
• Expanding its direct sales team in China
• Investing in a number of product awareness events
• Wants to build a stable distributor infrastructure
• Telecom, FSI, Manufacturing, and Government
• China office not experienced enough to be strategic while foreigners not familiar enough with tactical knowledge
BEA • Exploring SOA to the market
• Expanding partnership network to pursue best-of-breed strategy
• Needs ISVs and SIs to establish breadth of offerings for current install base Thus, are investing training for them
• Mostly focused on telecom industry (40%)
• The rest are from FSI and Gov
• Limited product offerings
• Depends a bit on others to help drive new wins
• Not strong enough in a variety of industries
Sun Microsystems
• Rather unclear direction in general
• Hoping to secure current install base with services provision
• Intensively channel-driven
• Strong in telecom but not so much in others
• Rely too much on hardware base to sell software
• Services are not flexible enough – too telecom-designed
Other relevant vendors to noteOther relevant vendors to note
Vendors’ vertical performanceVendors’ vertical performance
0% 20% 40% 60% 80% 100%
IBM
Microsoft
Sybase
UFSoft
Kingdee
SAP
Genersoft
Asiainfo
TurboCRM
Hyperion
Cognos
Business Objects
SAS Institute
FSI
Manufacturing
Retail & Wholesale
Telecommunication & Media
Public Sector
Transportation
Others
Source: IDC version March 2005
Includes software licenses and maintenance
Vertical OpportunitiesVertical Opportunities
Mfg
31.9%
Telecom
20.3%
FSI
18.0%
Government
5.0%
Transp.
5.5%
Others
10.7%
Wholesale &
Retail
8.5%
North28.5% East
25.2%
South17.8%
Others28.5%
Manufacturing IT Solution by Region, 2003
Most state-owned big manufacturing enterprises are in North China
Manufacturing in East are mostly high-tech enterprises
Manufacturing in South China are smaller capacity and focused on consumer products (shoes, clothes)
There are 10 big manufacturing enterprises including Huawei, ZTE, TCL, and Thomson in South China
Manufacturing industry - Opportunity reviewManufacturing industry - Opportunity review
Source: IDC version Aug 2004
Includes software and services
Top Vendors Share
Manufacturing industry - Spending type and vendor landscapeManufacturing industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
6.7%
6.6%
6.0%
5.6%
3.1%
3.0%
2.6%
2.5%
2.4%
2.2%
59.3%
UFSoft
SAP
Kingdee
Genersoft
Oracle
DCMS
PTC
EDS
Bokesoft
IBM
Others
ERP Apps
Mechanical Engineering Apps
Accounting
SC Management
EDA
PDM
CRM Apps
OA
Others
Major IT Solutions
North29.7%
East25.1%
South28.1%
Others17.1%
IT procurement is centrally done either at main HQ or head provincial offices
Beijing hosts major telecom providers South China’s high demand is contributed
primarily by the likes of Huawei and ZTE which are based there
The 2008 Olympics event is a major boost to IT solution demand for the country industry
Telecom industry - Opportunity reviewTelecom industry - Opportunity review
Telecom IT Solution by Region, 2003
Source: IDC version Aug 2004
Includes software and services
Telecom industry - Spending type and vendor landscapeTelecom industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
Integrated Accounting Systems
Billing Systems
Integrated Settlement Systems
CRM Call Center
Business Management Systems
Operational Analysis Systems
Others
Major IT Solutions Top Vendors Share
69.9%
7.1%
6.5% 3.5%
2.8%
2.6%
1.9%
1.8%
1.7%
1.1%
1.1%
AsiaInfo
Linkage
Neusoft
Longshine
Si-Tech
Digital China
Hisunsray
MCM
Newland
Zoom Tech
Others
North42.8%
East28.7%South
22.3%
Others6.3%
Generally, IT purchases involving core industry and management applications are centralized at HQs
North China (Beijing) is HQ to state-owned banks and many others
East (Shanghai) and South (Guangzhou and Shenzhen) China are HQs to some joint-stock banks
As the banks invest in more branch locations, there will be a lot of demand for data integration and management solutions
Banking industry - Opportunity reviewBanking industry - Opportunity review
Banking IT Solution by Region, 2003
Source: IDC version Aug 2004
Includes software and services
Banking industry - Spending type and vendor landscapeBanking industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
Top Vendors Share
Core Banking Apps
CRM Call Center
Channel Management Apps
Intermediary Business Apps
Online Banking
Card Management
ERM Apps
Credit/Risk Management
Payment & Settlement Apps
DSS Software
OA/MIS
Others
Major IT Solutions
6.6%5.1%
3.9%
3.6%
3.1%
3.1%
3.0%
2.9%
2.7%
2.6%
63.4%
IBM
Digital China
Vanda
Pansky
HP
Hi Sun
Beida Jade Bird
CVIC SE
Nantian
Founder Order
Others
Retail industry - Opportunity reviewRetail industry - Opportunity review
Retail IT Solution by Region, 2003
Source: IDC version Aug 2004
Includes software and services
North26.3% East
27.8%
South23.1%
Others22.8%
WTO realizes a huge opportunity for IT investment as the retail competition opens up
Chain stores opening up stores and operations, buying up franchises
Retail enterprises are increasingly requiring key applications such as Supply Chain Mgt, CRM, EAI and BI software to enhance their business effectiveness and operations
Retail industry - Spending type and vendor landscapeRetail industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
6.4%
6.4%
5.3%
3.8%
3.2%
2.6%
2.5%
2.5%
2.0%
1.4%
63.9%
Chang Yi
eFuture
Heading
Royalstone
UF Soft
Bokesoft
Hisense
Kingdee
Rezin
Novasoft
Others
Top Vendors Share
Point-of-Sales System
Sales Order System
Business Mgt
Warehouse Mgt
DB Software
CRM Apps
VRM Apps
BI Software
Others
Major IT Solutions
Transportation industry - Opportunity reviewTransportation industry - Opportunity review
Transportation IT Solution by Region, 2003
Source: IDC version Aug 2004
Includes software and services
Continuous logistics infrastructure development in Shenzhen, Zhuhai and Zhanjiang spurring companies to set up base there
As a result, IT requirements will be on the rise Other than industry specific solutions,
companies will be requiring functional applications such as ERM and DB
East (28.1%)
North (21.9%)South (15.7%)
Southwest(10.5%)
Northwest (9.4%)
Central (8.8%)
Northeast (5.6%)
Transportation industry - Spending type and vendor landscapeTransportation industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
Top Vendors Share
ETS
DCS
AFC
DMIS
OA/MIS
ACS
Financial Apps
EAM
CTMS
Others
Major IT Solutions
18.6%
5.5%
2.7%
2.4%
2.4%2.0%
1.8%1.7%
1.3%1.3%
60.3%
Travelskyi
Yunxingyui
BOCO
C&S Tech
Ziguangtietong
SEARI
Hongyuan
CVIC
CASCO
SCTD
Others
Power industry constitutes of Power Generation companies and Power Grid companies
Power Generation companies have huge IT investment, but mostly on hardware. Software adoption is still largely at OA level
Power Grid companies are deploying complex applications, have stronger demand for infrastructure management software
Due to lack of power resources and large industry SIs, South China has the smallest market share at 10.4%
However, the region has strong demand brewing. IT investment is expected to be very healthy
NE15%
South10%
East15%
North17%
SW15%
NW13%
Central15%
Power industry - Opportunity reviewPower industry - Opportunity review
Power IT Solution by Region, 2003
Source: IDC version Aug 2004
Includes software and services
Power industry - Spending type and vendor landscapePower industry - Spending type and vendor landscape
Source: IDC version Aug 2004
Includes software and services
Top Vendors Share
Product Automation
ERP
MIS
Electricity Trading
PMIM
SIS
Accounting
EAM
GIS
Others
Major IT Solutions
10.1% 6.2%
3.4%
2.3%
1.8%
1.8%
1.7%
1.6%
1.6%
1.6%
67.9%
Nari
Longshine
Yuanguang Soft
Kedong
Dalutech
SAP
Accenture
Oracle
Luneng Soft
UF-IFS
Others
Invest on direct presence enterprise account management and product development
Develop channel programs that are well-structured and effectively defined locally SME with vertical expertise
Cast net wide out for ISV partners physical presence and skill/knowledge transfer
Focus on buyers’ new requirements not the time to move in via replacement strategy
Talk the SME talk knows how to trigger purchase, not just interest
Build on functional strength HRMS module is key
Utilize other strengths integration, consulting, and training services
Collaborate with other component partners infrastructure and services providers
Leverage install base for relevant cross-sell technology with apps add-ons and vice-versa
Sell vision but not solution low cost starting point and continuous education
Oracle can get better: Doing the right thingsOracle can get better: Doing the right things
Thank youThank you