November 2009

CRISIS in Chinese…

Wei : Danger Ji: Opportunity

Formal name: People’s Republic of China (PRC)Capital: BeijingPresident: Hu Jintao Language: Mandarin Currency: Renminbi (RMB/Yuan)Land size: 9.600,000 km2, the third-largestPopulation: 1.36 billion (10% have western life standard)System: The Communist Party of China (CPC) Capitalist The Five Year Plan

Country profile

Organisation

• Administrative organization:– 23 Provinces– 5 Autonomous regions– 4 Municipalities– 2 SAR (Hong Kong and Macao)

• 171 cities > 1 M Citizens• 20 cities > 5 M Citizens

1981

1990

2005

Source: World Bank

0

20

40

60

80

100

South East Asia China Africa Latin America India

% of population living on < $1.25 a day

Internet population

Source: World Bank

GDP forecast (in b. US$)

Source: IMF

• Shanghai’ population = 18,88 M people (including 5.2 M migrants and 152,100 foreigners)

• Shanghai’ GDP = Brazil’ GDP

ie: Shanghai

Consumption

« In this current financial crisis, IDC expects to see governments coming up with various stimulus packages »

Source: Moody's Economy.com

Where money is invested

1990 Q4 2008Share in

Asia Pacific, %

Share in Asia

Pacific, %M USD

Nbr of listed cpies

Colombo SE 0.0% 0.0% 4,863 234Philippine SE 0.0% 0.1% 52,276 246New Zealand Exchange 0.1% 0.1% 22,871 172Indonesia SE 0.2% 0.6% 82,567 396Bursa Malaysia 0.4% 0.5% 176,805 976The SE of Thailand 0.6% 0.7% 90,367 525Singapore Exchange 0.9% 1.6% 245,35 769Hong Kong Exchanges 1.4% 10.7% 1,249,195 1,259Australian SE 1.6% 7.1% 634,465 2,012Osaka SE 10.0% 1.5% 134,524 469Taiwan SE Corp. 29.1% 3.9% 341,414 716Korea Exchange 3.1% 9.7% 405,263 1,791Tokyo SE 52.6% 40.3% 2,882,863 2,392Jasdaq NA 0.3% 82,322 927Shenzhen SE NA 5.2% 341,361 740National SE India NA 4.1% 529,756 1,407Bombay SE NA 1.6% 562,836 4,928Shanghai SE NA 12.1% 1,450,681 863

ICT Import (in b.US$)

source: OECD

#4 Germany105.502

#5 Singapore80.674

#1 USA273.360 # 3 China HK

154.416

#2 China255.195

ICT growth in 2009by IDC

« Certain markets can expect higher growth, such as BRIC »

• Brazil 9.0% (#10 GDP, #26 ICT import)

• Russia 7.5% (#11 GDP, #19 ICT import)

• India 10.0% (#12 GDP, #22 ICT import)

• China 9.0% (#3 GDP, #2 ICT import)

Foreign prospects

More than 500,000 foreign-invested enterprises

• US$ 1 billion foreign investment per week

• Over 430 of the Fortune 500 are present in China

• 90% of the leading IT companies are in China

Source: OECD

14,90%

28,70%

16,80%

39,60%

Less than 50 employees

More than 50 and less than500 employees

More than 500 employees

More than 1000 employees

Chinese prospects

• Fortune 500 list includes 37 Chinese companies (11 in 2003)

• Chinese companies are going international

July 2009

in Telecom

• 7 Principal Telcos in China

• Hundreds subsidiaries all over China

in Banks

• 31 Nation wide Retail banks + Thousands Regional banks• 90 Foreign banks

in Insurances

• 86 Chinese insurance companies • 40 foreign insurance companies & JVs in China

• 27 airline companies• 16 state owned 8 privates 3 JVs

in Airlines

in Distribution

• +150 major Retail / Distribution companies• Fully open to foreigners since Dec.2004 • Some Chinese:

– Bailian Group– Beijing Gome– Dalian Dashang– Suning– Beijing Hualian– Wu Mart– Nonggongshang– Yongle– Chongqing General Trading Group– HOYODO

in Utilities: Electricity

• More than 200 suppliers:– China Southern Power Grid Co., Ltd (CSG) – North China Grid Co., Ltd – East China Grid Co., Ltd – West China Grid Co., Ltd – North United Power– China Huaneng – Datang Power– China Huadian– China Power Investment Corporation (CPI)– Shenhua Group– …

• Shanghai Water• Beijing Water• Shenzhen Water• Chongqing Water

• Exist in all the cities

• … one per large city !

in Utilities: Water

in eCommerce

Purchase value of 325 billion €

Jan - Nov 2008

vs Jan - Nov 2007

(%)

Jan - Nov 2008

vs Jan - Nov 2007

(%)

Jan - Nov 2008

vs Jan - Nov 2007

(%)Beijing 4426 ￥146 804 26,7 ￥61 076 27,9 ￥37 277 27,3Tianjin 267 ￥11 742 20,5 ￥663 26,2 ￥484 29,5Hebei 165 ￥2 398 16,6 ￥1 268 17,6 ￥862 15,3Shanxi 60 ￥385 12,8 ￥201 -3,7 ￥114 151,2Inner Mogolia 61 ￥1 645 25,5 ￥1 045 124,4 ￥139 8,8LiaoNing 500 ￥32 332 66,4 ￥17 262 55,8 ￥7 726 46,6Jilin 211 ￥9 000 20 ￥2 700 14,9 ￥3 300 17,9Heilongjiang 317 ￥5 143 14,3 ￥1 769 15,6 ￥1 832 1,8Shanghai 1166 ￥56 000 24,4 ￥24 000 26,3 ￥12 000 17,6Jiangsu 1354 ￥110 273 34,9 ￥27 936 38,1 ￥14 953 43Zhejiang 886 ￥31 717 28 ￥8 046 32,7 ￥8 230 22,9Anhui 105 ￥2 350 17,7 ￥1 010 10,2 ￥1 129 22,3Fujian 391 ￥25 412 30,2 ￥7 759 33,1 ￥8 714 34,4Jiangxi 53 ￥2 167 46,1 ￥621 80 ￥1 058 33,9Shandong 541 ￥32 189 19,5 ￥90 178 23,2 ￥8 253 25,1HeNan 193 ￥6 097 32 ￥2 433 29 ￥2 716 33,1HuBei 208 ￥8 496 31,6 ￥5 342 31,2 ￥1 629 35,3HuNan 400 ￥9 743 35,9 ￥4 716 37 ￥1 890 32Guangdong 2804 ￥147 586 31,1 ￥108 864 28,3 ￥11 462 23,2Guangxi 60 ￥2 196 20,7 ￥1 120 20,2 ￥670 19,7HaiNan 26 ￥141 46,7 ￥51 39,8 ￥1 967 20,6Sichuan 345 ￥28 997 48,2 ￥13 580 55,6 ￥8 500 43,2Guizhou 70 ￥1 570 51,9 ￥625 40,7 ￥918 88YunNan 21 ￥1 065 27,7 ￥390 49 ￥623 17,3Chongqin 129 ￥6 681 19,7 ￥2 874 21,2 ￥1 762 15,2Shaanxi 620 ￥13 940 5,1 ￥3 761 121,2 ￥4 940 -20,1Gansu 50 ￥750 2,2 ￥189 -3,7 ￥435 4Ningxia 21 ￥129 35,3 ￥30 74,1 ￥33 35,2Xinjiang 107 ￥781 19,3 ￥152 18,2 ￥524 19,8

Total 15557 ￥697 729 ￥389 662 ￥144 141

Revenue from integration services

Total revenue (M RMB)

AreaNbr of cpies

Revenue from software

2008 software sales revenue in Mainland China

Piracy?

• Punishment

• CCPC

Large accounts

Medium

SME

SOHO

Consumer

Chinese culture and mindset

• Remember– 5000 years history

– 23 Dynasties

– 56 ethnic groups

– 2000 years of wars

– Confucius

– Guanxi (关系 )

– Mian Zi (面子 )

– Feng shui

Confucius

• Confucius’ teachings and philosophy have deeply influenced Chinese thought and life

• Core concepts– Ren (仁 ): humanness– Li (礼 ): Social level

and customs

• Chinese social system: Hierarchical (Rank)– Son & Father– Employee & Leader– Women & Man– Young & Old

Tip: Always negotiate with similar persons (gender, age, title)

• What is Guan Xi?

- Literal: Relationship

- In the business sense: social connections • Now, any business, including local companies as well as

foreign investors and marketers, inevitably faces Guanxi dynamics.

• - The right Government officials

- Key personnel in companies

Guan Xi (关系 )

Tip: To succeed in business it is not what you know, but who you know

• What is Mianzi?– Literal: Face– The dignity of the person

• “Men live for face as trees grow for bark.”

Mian Zi (面子 )

Tip: You only suggest ideas and let your interlocutor to take the leadership

Motivations of buyers• Price

– They negotiate to be sure they make the best deal. « Guanxi »

• On-site Support– Tangible: To use the technology– Emotional: To take leadership

« Hierarchy »

• Technology and innovation– Proud to buy the latest one « Face »

• Strength of the foreign brands (Technology: Germany, Home appliances: Japan, Cosmetic: France)– To be secured– To enforce his image and reputation– Again and again: « Face »

Business models

Best model• First or two first years

• Sales partners + 1 local Pre-Sales Consultant (Virtual Office)

• 2nd / 3rd and following years• Opening of your own subsidiary (WOFE, not Rep. Office)

K… (BJ)

M…. (BJ)

Q… (SH)

E… (SZ)

• German ISV specialised in Document Management

• Actions:– Four Distributors– One Pre-sales Consultant (Virtual

office)

• Complex solution: EAI-EDI-BtoB integration• Strong competition: IBM-Websphere, BEA-Weblogic, Seeburger,

Influe, etc.• Expensive products• No PR budget• Unknown in Asia or

In China• Targeting medium &

large enterprises

EDI

B2BEAI

TradeXpressTradeXpress, Business , Business ProcessProcess IntegratorIntegrator

Customers

Suppliers

Banks

Administrations

Suppliers

ImportLogistics

Transporters

Terminauxmobiles

CustomersSuppliers

WAPWAP

WEBWEB--EDIEDI

EtebacEtebacTedecoTedeco

InternetInternetFaxFax

RNIFRNIFAS2AS2

X.400X.400

RVARVAEDIEDI

Market Placese-procurement

electronic catalogs

HTTP(S)HTTP(S)FTPFTPALEALE

CFTCFTPELPEL

SQLSQL

MQMQ

ERPs

SCM

Datawarehouse

FTPFTPJMSJMS

TradeXpress

XML

WML

EdifactGencodOdette

Spec 2000Tradacom

XML …

ASCII

IDOCBEMISXMLASCII

ASCIICfonbSwift

XMLPDF

in-house applications

Remote

Sites

Factori

es, sto

res, ..

.

Customer applicationsB2B, WEB

FTP(S)FTP(S)

XML

ODBCJDBC

– Chinese CEO,

Mr. Alfred Chuang– 30 Distributors– 3000 Partners

Tough competition, ie: BEA

– 2000 customers in China– 200 employees– December event « limited » to

4200 attendees

Actions:• Strong leverage with the best players:

– Chan… (Beijing), the leader in retail– Dea… (Shanghai), the leader in SCM– Ebiz…. (Taiwan), the leader in EDI for

Greater China and ASEAN countries– Core (Hong Kong), the #1 one VAN for

Greater China

• Local support with Presales Engineer

Results:• Break even on the first Fiscal Year• Indirect ROI for the North American

and European businesses• A positive impact on employees and

external relationships

French ISV specialised in ERP forFashion and Distribution market• 2005: Two market Discovery• 2006: Detailed market study• 2006: Appointment of two

Distributors (ERP for fashion)• 2006 – 2008: Virtual office (local

support)• 2008: Set-up of their WOFE

Dec 2007: Prize

PME France - China

German ISV specialised in CAD for

The harness automotive industry

(narrow market)

• Discovery of the Chinese market• One strong local Support

Engineer (Virtual Office)

Kun… (BJ), large

Governments

Imo… (SH) large

Enterprises

Newd… (FZ, BJ) Telecom

• US ISV specialised in application & IT monitoring for large accounts

• Actions:– Three Distributors– One Pre-sales Consultant (Virtual

office)

Chinese ISVs also needs « Guanxi »:

An Hong Kong ISV ranked 12th worldwide,

Listed on US Nasdaq,

1700 employees,

50 offices,

300 M US$ revenue

Needs of four additional Distributors

Chin… (Shenzhen)

Eas… (Shanghai)

Tal… & Vis… …. (Beijing)

• UK ISV specialised in EAM/CMMS mainly for the manufacturing market

• Four Distributors• One Sales and One Support

Ewa…. Shanghai. Xiamen

.Guangzhou(Manufacturing)

High-C…. Beijing

(Manufacturing)

Yoy T… . Beijing

(Telecom)

SoftDatabase profile

• Established in 1992• Key differentiators

– Entirely and ONLY dedicated to the software industry.

– 200 satisfied customers– Average of 4 missions per customer

• Shanghai subsidiary (WOFE) started in 2004• Atlanta subsidiary started in Oct 2008• A unique database

– 95% of the world enterprise software ISV, VAR, SI– « Manually » updated

200 satisfied customers

谢谢 (Thank you)

www.softdatabase.com.cn

gpardon@softdatabase.com.cn

ljfan@softdatabase.com.cn