www.idc.com exploring south china opportunity doing things right vs. doing the right things wilvin...

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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


& 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


& 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


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



* 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



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



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



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


Includes software and services

Top Vendors Share

Manufacturing industry - Spending type and vendor landscapeManufacturing industry - Spending type and vendor landscape



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



Telecom industry - Spending type and vendor landscapeTelecom industry - Spending type and vendor landscape



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



Banking industry - Spending type and vendor landscapeBanking industry - Spending type and vendor landscape



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



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



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



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



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



Power industry - Spending type and vendor landscapePower industry - Spending type and vendor landscape



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

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Thank youThank you

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