Yonyou 2013

Abstract

On January 22nd, 2013, Yonyou Software Co., Ltd. (“Yonyou”), the largest management software company in Asia-Pacific, unfolded its three-year business strategy to step up platform development. Following its decade earlier transition from financial software to management software, Yonyou's three-year business strategy was again a business model revolution.

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Resources

Appendix 1: Sales Volume and Growth Rate of China's Management Software Market 2008–2012

Unit for Market Volume: 100 Million Dollars

Source: CCID Annual Report on Management Software Market 2012–2013 (Provided by Yonyou).

Figure

Appendix 2: Workforce Statistics of Yonyou 2008–2012

2012

2011

2010

2009

2008

Production

28

43

38

19

14

Sales

3,089

3,205

2,983

2,438

2,167

Development

3,903

2,857

2,538

1,896

1,626

Consultation, Implementation and Training

3,680

-

-

-

-

Support Services

811

5,007

3,952

3,226

3,248

Finance

430

424

349

223

179

Administration

1,134

1,058

829

593

532

Total

13,075

12,594

10,689

8,395

7,766

Growth Rate

3.8%

17.8%

27.3%

8.1%

-

Note 1: In 2009, investment in human resources was increased with the implementation of a “thousand people” recruitment programme to cultivate fresh blood for the company's future development.

Note 2: In 2012, staff expansion was limited to 5% or below with staffing control measures and execution of lowest performer elimination.

Source: Yonyou Annual Reports and Mid-Year Reports 2008–2013.

Appendix 3: Brand Distribution in China's Management Software Market in 2012

Source: CCID Annual Report on Management Software Market 2012–2013.

Figure

Appendix 4: Sales Volume and Growth Rate of the Management Software Vertical Market in China 2011–2012

Market Volume (100 Million Dollars)

Percentage Share

2011

2012

Percentage Growth

2011

2012

Large Enterprises

64.1

77.15

20.4%

39.8%

40.9%

Medium Enterprises

61.23

69.14

12.9%

37.9%

36.7%

Small Enterprises

29.12

33.85

16.2%

18.0%

18.0%

Education

1.94

2.26

16.5%

1.2%

1.2%

Government

5.02

6.03

20.1%

3.1%

3.2%

Total

161.41

188.43

16.7%

100.0%

100.0%

Source: CCID Annual Report on Management Software Market 2012–2013.

Appendix 5: Yonyou's Products and Solutions

Figure

Source: Yonyou.

Appendix 6: Revenue Mix of Yonyou's Product Lines 2008–2012

Unit: RMB

2012

2011

2010

2009

2008

NC

378,101,043

917,203,079

635,529,145

487,292,822

388,793,382

60.8%

40.2%

36.9%

36.7%

34.6%

U8/U9

134,241,407

704,182,870

583,698,165

429,796,971

359,108,428

21.6%

30.8%

33.9%

32.3%

32.0%

T+

15,842,356

318,007,060

261,670,411

225,654,638

233,242,859

2.5%

13.9%

15.2%

17.0%

20.8%

Others

93,572,588

343,944,975

242,732,917

186,095,064

142,526,328

15.0%

15.1%

14.1%

14.0%

12.7%

Total

621,757,394

2,283,337,984

1,723,630,638

1,328,839,495

1,123,670,997

Source: Yonyou Annual Reports and Mid-Year Reports 2008–2013.

Appendix 7: Percentage Growth of Revenue and Cost by Business Types

Percentage Growth of Revenue

2009

2010

2011

2012

Software Sales

18.26%

29.71%

32.47%

0.89%

Technical Services and Training

64.96%

29.04%

72.01%

3.10%

Software Accessories Sales

122.59%

−3.60%

−27.38%

23.56%

Total

36.36%

26.81%

42.32%

2.51%

Percentage Growth of Cost

2009

2010

2011

2012

Software Sales

134.49%

52.79%

48.21%

−17.55%

Technical Services and Training

48.78%

52.88%

42.93%

15.41%

Software Accessories Sales

127.59%

0.81%

−37.22%

21.73%

Total

84.95%

32.98%

20.78%

8.31%

Source: Yonyou Annual Reports 2008–2012.

Appendix 8: Breakdown of Yonyou's Revenue and Cost in 2012

A. By Market Segments and Business Categories Unit: RMB

Types of Business

Rev by Biz Types

Revenue subcategorized by Market Segments

Cost by Biz Types

Software Products

2,303,740,308

High-End Market Services Revenue

1,104,033,249

125,223,986

(cost rate 5.4%)

Percentage Revenue

47.9%

Mid-End Market Services Revenue

891,581,954

Percentage Revenue

38.7%

Low-End Market Services Revenue

308,125,105

Percentage Revenue

13.4%

Support Services

511,830,897

High-End Market Services Revenue

311,546,672

34,382,070

(cost rate 6.7%)

Percentage Revenue

13.5%

Mid-End Market Services Revenue

197,540,514

Percentage Revenue

8.6%

Low-End Market Services Revenue

2,743,711

Percentage Revenue

0.1%

Consultation, Implementation and Training Services

1,236,383,172

High-End Market Services Revenue

880,885,775

399,917,067

(cost rate 32.3%)

Percentage Revenue

38.2%

Mid-End Market Services Revenue

334,451,996

Percentage Revenue

14.5%

Low-End Market Services Revenue

21,045,401

Percentage Revenue

0.9%

Others (See Note)

158,393,528

-

-

113,909,796

Note: Sales of Purchased Commodities, i.e. purchased commodities refer to the accessory commodities purchased on behalf of clients, such as Oracle database, hardware and integrated commodities.

B. By Business Categories Only Unit: RMB

2012

2011

2010

2009

2008

Software Sales

Operation Revenue

2,303,740,308

2,283,337,984

1,723,630,638

1,328,839,495

1,123,670,997

Percentage Revenue

54.7%

55.6%

59.7%

58.4%

67.3%

Operation Cost

125,223,986

151,877,976

102,476,541

67,068,698

28,602,091

Percentage Cost

18.6%

24.4%

19.9%

17.3%

13.7%

Gross Profit Rate

94.6%

93.3%

94.1%

95.0%

97.5%

Technical Services and Training 1

Operation Revenue

1,748,214,069

1,695,666,527

985,769,754

763,902,812

463,074,145

Percentage Revenue

41.5%

41.3%

34.2%

33.6%

27.7%

Operation Cost

434,299,137

376,306,830

263,285,399

172,218,889

115,754,709

Percentage Cost

64.5%

60.5%

51.1%

44.5%

55.3%

Gross Profit Rate

73.2%

77.8%

73.3%

77.5%

75.0%

Software Accessories Sales

Operation Revenue

158,393,528

128,191,240

176,532,994

183,119,108

82,266,761

Percentage Revenue

3.8%

3.1%

6.1%

8.0%

4.9%

Operation Cost

113,909,796

93,572,588

149,037,871

147,841,037

64,958,957

Percentage Cost

16.9%

15.0%

29.0%

38.2%

31.0%

Gross Profit Rate

28.1%

27.0%

15.6%

19.3%

21.0%

Total

Total Revenue

4,210,347,905

4,107,195,751

2,885,933,386

2,275,861,415

1,669,011,903

Total Cost

673,432,919

621,757,394

514,799,811

387,128,624

209,315,757

Gross Profit Rate

84.0%

84.9%

82.2%

83.0%

87.5%

Source: Yonyou Annual Reports 2008–2012.

Note

1. Due to the changes in the statistics base in 2012, Technical Services and Training was split into Support Services (which refers to operational and maintenance services charged per year or per service) and Consultation, Implementation and Training Services (which refers to implementation services upon project delivery). The new divisions are shown in Table A whilst the divisions are combined in Table B in order to compare with that of previous years.

Appendix 9: Yunda's Business Categories

Information Technology Outsourcing Services (ITO)

Business Process Outsourcing Services (BPO)

  • Customised Development of Enterprise Informatization Application System
  • Industry Management Software Design and Development
  • Software Integration Development
  • Development of such platforms as eGovernment, eCommerce, portals, etc.
  • Mobile Application Software Development
  • Software Testing
  • System Software Implementation based on NC Platform
  • Technical Support
  • Online Customer Services
  • Market Research
  • Operational Management

Source: Yunda.

Appendix 10: Sales Volume and Growth Rate of China's Management Software Channels 2011–2012

Market Volume (100 Million Dollars)

Percentage Share

2011

2012

Growth Rate

2011

2012

Agents

46.05

52.32

13.6%

28.5%

27.8%

Direct Sales

87.38

101.6

16.3%

54.2%

53.9%

Consultation Partners

21.68

27.16

25.3%

13.4%

14.4%

Other Channels

6.30

7.35

16.7%

3.9%

3.9%

Total

161.41

188.43

16.7%

100%

100%

Source: CCID Annual Report on Management Software Market 2012–2013.

Appendix 11: Development of SAP, Oracle and Kingdee

SAP

The SAP Annual Report 2012 stated that, whilst China's economic growth in 2012 slackened, the IT industry maintained a two-digit growth despite a sharp decline in the growth rate. SAP's growth and innovation strategy planned to have invested 2 billion US dollars by 2015. Apart from the considerable investment, SAP saw less than 10% growth of its software revenue in 2012 as IT investment was diverted to cloud computing. The slackening growth was attributed to changes in client purchasing habits due to the macroeconomic trough and the industry's transition to cloud computing. There was, however, a three-digit percentage growth in revenue on cloud computing services orders and support services, which was seen as boosting the two-digit overall revenue on software business and cloud computing business. SAP offered software or services to clients via three options, namely localization, public cloud and private cloud. With regard to the North America business, cloud computing was expected to account for up to 30% of the total software and cloud computing revenue in the third quarter of 2013.

HANA Cloud, SAP's PaaS product, was originally designed for client assistance, based on which independent software developers and business partners innovate to build an adaptive, mobile, social and collaborative business network. SAP had introduced multiple applications to SAP HANA since 2010 and believed that HANA would replace R/3, as Sap's best-selling product. HANA and cloud computing solutions were believed to have changed clients' habits in using software and in developing businesses.

According to the CCID Annual Report on Management Software Market 2012–2013, SAP had been transiting from the high-end market to the mid- and low-end markets and promoting its SaaS products in China. SAP's services partners in Asia-Pacific were consistent with the global ones which include Accenture, IBM and Deloitte, while channel partners in China included Neusoft and Digital China. SAP promoted its new technology and new product attributes in the market through new product release and industry seminars which highlighted its experience and successful cases.

Oracle

Oracle's cloud computing solutions included such SaaS products as the cloud versions of human capital management software and client management software, and such PaaS products as Oracle Database Cloud Service and Oracle Java Cloud Service.

Oracle's business was categorized into Software, Hardware and Services, with the Software business being divided into New Software Authorization and Software Authorization Upgrade and Product Support, Hardware business was divided into Hardware System Products and Hardware System Support, while Services Business included consultation services and cloud services.

Oracle's cloud computing strategy made extensive options available to clients, providing enterprise-level software and hardware products with private cloud and public cloud according to their needs. Oracle's background in the hardware industry catalysed the development and application of such cloud computing solutions as SaaS, PaaS and IaaS.

Oracle made a revolutionary move by withdrawing from Oracle Fusion application software, including Oracle Fusion HCM, Oracle Fusion ERP, Oracle Fusion CRM, Social and Insight Services and Cloud Computing, which provided all-round support to the SaaS cloud delivery model. Instead, it targeted various industries and provided over 100 product components, catering to the needs of various industry enterprises and market changes. Based on the standardised application platform, Oracle application software and Fusion applications co-constructed Oracle cloud applications in a SaaS realization. Clients could manipulate some or all of the kits in the way that suited them best, for integration and expansion.

In terms of PaaS, Oracle offered such platform products as application server, database and identity management, as well as comprehensive platform services including SOA/BPM, data integration and user participation. In terms of IaaS, such services as operation system, storage, virtual host and server were provided.

Oracle organized special topic seminars on management software, technology, services and businesses to gain influence in the industry, and developed and provided informatization solutions in collaboration with various business partners under the innovative united marketing scheme.

Kingdee

Founded and listed at about the same time, Kingdee and Yonyou had been almost in a dead heat business wise. Under the influence of the overall market environment in 2012, Kingdee's revenue dropped for the first time by 12.7% and it suffered a $160 million deficit. Furthermore, its $150 million profit in 2011 had decreased by half as compared to the $280 million the year before. Apart from cost control, the company had turned to active exploration of new technologies such as social networks, mobile Internet and cloud computing to enhance the industry chain with partner distributors, which facilitated its transition from a sales-oriented to a delivery-oriented business.

For the SME market, Kingdee had been trying to build a partner-based business model and had also released, under the theme of “Cloud Management within One Touch”, a collection of cloud management products targeting SMEs such as Kingdee KIS cloud management software, various mobile applications for different roles such as SME owners and sales personnel and the cloud-computing-based ERP product K/3 Cloud V1.0, creating third-party applications in collaboration with the industry chain and clients. For the large and medium enterprise market, the company launched a so-called “group socialization” ERP - EASV7.5 which demonstrated Kingdee's belief in their focus on innovative management and control models. The product was believed to be a breakthrough in group control, mobile social applications, personalized feature enhancement with the combined technology of social networks, mobile Internet and cloud computing.

In terms of consultation and implementation, as well as operational and maintenance services, Kingdee had accelerated its transition towards being an implementation- and delivery-oriented company. Since 2011, it reached out to connect with services partners, enhanced its project management, reinforced delivery systems and affiliated establishments, and built a services knowledge database. Kingdee's “Cloud+End” strategic transition focused on cloud services platform establishment, and desktop app service delivery, providing a one-stop-shop Internet experience.

Apart from the management software business, Kingdee was involved in enterprise Internet information services as well. Facing a new wave of application reform brought on by new Internet technology, Kingdee actively conducted business integration and expansion, establishing an Internet Division. It promoted new services such as enterprise social networks and SaaS, and was devoted to providing enterprise users with a private social working space for better communication, collaboration and management efficiency. Kingdee's enterprise socializing product, literally translated as “Cloud Home”, became the largest enterprise social network in China in 2012.

Having Pearl Club 1 as its core platform, Kingdee tried to build alliances with worldwide partners and advisory specialists to gather Chinese management wisdoms and meanwhile solicit potential clients. It had built a countrywide network of over 1100 partner channels by 2013.

Note

1. A club organized by Kingdee for entrepreneurs to exchange management ideas and socialize in informal activities hosted by Kingdee.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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