How big is the current SaaS market size gap between China and the US? 5 times, 10 times, 50 times, or 100 times? The hot topic in the SaaS field this year is the listing of Beisen Holdings. In the field of Chinese enterprise management, there are not many SaaS companies with a relatively large scale, and products with a single product exceeding 100 million are not common.
According to the latest prospectus, Beisen’s revenue for the fiscal years ending March 31, 2019, 2020, 2021, and 2022 will be RMB 380 million, RMB 459 million, RMB 556 million, and RMB 680 million. What is more important in SaaS companies is subscription revenue. The subscription revenue of Beisen Cloud HCM reference solution has been RMB 210 million, RMB 260 million, RMB 350 million and RMB 460 million in recent years.
Beisen 2023 prospectus: https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0330/2023033000236_e.pdf
According to the following materials, Beisen’s revenue in 2014 and 2015 was RMB 74.02 million and RMB 100 million respectively, and it has maintained a revenue growth in the range of 20-30% for so many years.
https://www.neeq.com.cn/disclosure/2016/2016-02-26/1456480348_165835.pdf
So how big is the HR SaaS market in China? According to data from an HR SaaS industry research report by iResearch Consulting, according to iResearch’s calculations, the scale of China’s digital human resources market will be about 20 billion yuan in 2021. According to iResearch, the overall penetration level of HR SaaS is currently low, estimated to be 3.8 billion in 2021, and expected to reach 14.2 billion in 2025.
https://pdf.dfcfw.com/pdf/H3_AP202109261518619161_1.pdf
https://pdf.dfcfw.com/pdf/H3_AP202207121576077646_1.pdf
In addition, according to a report by EO Intelligence, Beisen accounts for 15% of the HR SaaS market share. If judged according to Beisen’s 2022 revenue of 680 million yuan, the entire HR SaaS market share is about 4.5 billion yuan.
Analysis of American benchmarking company WorkDay:
Compared with Workday, a listed SaaS company in the HCM field in the US stock market, the following 2022 Workday report to analysts shows the company's historical development and important data disclosure. Among them, the fiscal year 2022 revenue is US$5.1 billion, of which subscription revenue is US$4.5 billion, and HCM-related subscription revenue is as high as US$3.8 billion. The market value of the latest WorkDay has reached 56 billion US dollars, close to 400 billion yuan.
https://www.workday.com/content/dam/web/en-us/documents/other/workday-2022-financial-analyst-dayv2.pdf
For the HCM field, WorkDay believes that the future HCM software market size will be as high as 50 billion U.S. dollars. Even with the current WorkDay subscription revenue of 3.8 billion U.S. dollars in this field, the market penetration rate is less than 10%. If converted into RMB, according to the current exchange rate, the market size of HCM is as high as 350 billion RMB, which is predicted to be much larger than the current size of China.
Comparison of HR SaaS market size in China and the United States:
How to calculate the HR SaaS market size in China and the United States? If you are the CEO of an HR SaaS company, you will probably first look at the total annual budget of the HR department and the proportion of digital spending in the total budget to judge the overall market size.
Here, based on the following hypotheses, we roughly estimate the market size of the HR SaaS field on both sides of China and the United States:
-
U.S. residents’ income-to-GDP ratio is higher than that of China
-
In China's job market, there are a large number of rural employees and self-employed people. It is estimated that the proportion of employment and revenue of large-scale enterprises is lower than that of the United States. There are a large number of self-employed companies that have nothing to do with HR services and software.
-
The status of the HR department of most enterprises in China is relatively higher, and the overall budget ratio may be higher
-
In the budget of China's HR department, the proportion of digitization may be relatively small, and the proportion of company culture and organizational training and recruitment may be more
-
Many large enterprises in China have customized needs, and solve customized needs through self-research
-
The acceptance of SaaS by large Chinese enterprises is still significantly lower than that in the United States
-
American products are easier to enter other markets through various multinational companies; while Chinese products are more difficult to expand overseas due to language barriers
The following is the calculation process:
| China | U.S. | |
| Total GDP | 120 trillion RMB | $25 trillion |
| Proportion of residents' income | 33.3% | 50% |
| GNI | 40 trillion |
12.5 trillion |
| Scale Enterprise Employment Population Income Ratio | 60% | 80% |
| Employment income of scale enterprises | 24 trillion | 10 trillion |
| HR accounts for the proportion of enterprises |
1.5% | 1.4% |
| Benchmarking of HR income and social average income | 100% |
100% |
| Total income of HR staff | 360 billion | 140 billion |
| Proportion of External Procurement/HR Staff Income | 100% | 50% |
| Total HR external procurement | 360 billion | 70 billion |
| Procurement digitization ratio (others are training, courses, recruitment, etc.) | 15% |
50% |
| HR Digital Spending | 54 billion | 35 billion |
| Proportion of digital outsourcing (Large companies have their own research) |
50% | 80% |
| HR Outsourced Digital Expenditure | 27 billion | 28 billion |
| Proportion of outsourced software SaaS | 20% | 75% |
| HR SaaS software scale | 5.4 billion RMB | $21 billion |
| International market coefficient | 1.05 | 2.0 |
| Scalable total market size | 5.67 billion RMB |
$42 billion |
Calculated in this way, the current potential market size of China's HR SaaS companies is about 5 billion yuan, which is almost 50 times the potential market size of similar companies in the United States.
However, the overall market size of human resources services in China may not be so different from that in the United States. The following human resources special report of Guosen Securities also pointed out that in 2019, Chinese companies spent a total of 161.9 billion yuan on talent acquisition services, including online recruitment, campus recruitment, and headhunting.
https://pdf.dfcfw.com/pdf/H3_AP202105261494086500_1.pdf
According to statistics, the market size of headhunting in China alone is about 100 billion, with 400,000 employees. If a simple estimate is made, the overall employment income of large-scale enterprises in China is 24 trillion yuan; among them, the income of key positions requiring headhunting services accounts for 15%, which is 3.6 trillion yuan; assuming that 15% of these positions change every year, there are 5,400 yuan. The transaction volume is 100 million; assuming that the transaction commission is calculated at 15%, it is a market of 81 billion a year. There may be some differences in the actual data, but this market size should be much larger than the current HR SaaS market size.
Future development trend:
The following picture is the growth curve of SaaS products and enterprises in the US market in the past. It can be seen that after 2015, due to the maturity of infrastructure such as cloud computing, the market size of SaaS products has expanded rapidly, and the market size of HR SaaS is in various The growth rate of the product also ranks among the top.
If the market size of HR SaaS in China is to develop rapidly in the future, it may require several major changes in the market in the future:
-
More rural employed population and self-employed people turn to large-scale enterprises for employment
-
Enterprises increase the proportion of digital software and content in HR external procurement, such as replacing offline courses with online course training, which can reduce travel expenses; enterprises popularize more digital recruitment and digital management
-
The HR SaaS platform includes more businesses, not just the internal management of the enterprise, such as recruitment, training and headhunting services. The HR SaaS platform can provide platform services to individual headhunters like Lianjia, forming a comprehensive product and service system combining internal and external
-
Enterprises adopt specialized division of labor, large enterprises reduce self-developed customization, and try to use standard HR solutions and software on the market
-
Enterprises increase their acceptance of SaaS products in the HR field
-
Merger and acquisition of overseas HR SaaS professional software, enter other English, Spanish and other markets, and improve the international expansion coefficient of products
Among the above factors, if any one factor can be improved by 20% every year, then the 50-fold difference in the HR SaaS market size between China and the United States can be caught up in 20 years.