Case
Teaching Notes
Supplementary Resources
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.
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
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).
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.
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
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) |
|
|
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