(This article is not a technical article, it belongs to Internet anecdotes and strange stories)
When Xu Shaochun founded Kingdee, UF has gone through 5 years.
Before that, Wang Wenjing, who had just passed his 24th birthday, pulled his civil servant colleague Su Qiqiang to set up UFIDA Financial Software Service Agency in Zhongguancun. At that time, most enterprises still kept accounts by hand. Wang Wenjing wanted them to build their own financial system by using software. Just like Bill Gates vowed to earn 1 million US dollars before the age of 23, the plan he set for himself is to earn 30 million US dollars in ten years.
Back in the early 1990s, Zhang Chaoyang had just gone to study in the United States, Shi Yuzhu was still selling health care products, Qiu Bojun’s WPS with more than 100,000 lines of code attracted Lei Jun, and Xu Shaochun borrowed 5,000 yuan to start Aipu Software Company, which has not yet changed its name to Kingdee , the rapidly expanding AsiaInfo has just been listed on Nasdaq in the United States. IBM, Hewlett-Packard, and Microsoft entered China one after another following Oracle. In that golden era, they all set their sights on this hot land.
Later, the names of Neusoft, Kingsoft, UF, and Kingdee spread, and rising stars such as Hang Seng, Glodon, and Xunfei also received financing. Local software manufacturers headed by UF and Kingdee even claimed to be able to compete with the international giant SAP. As said in "Silicon Valley Fire": History has verified that in the future people will buy software as common as buying computers themselves. Selling software is becoming a huge business because it is easier to start and make money in software than hardware.
During the 10-year period from 2005 to 2015, China's labor costs increased by 5 times, the C-end market traffic dividends dropped sharply, and consumer-grade Internet companies began to deploy To B. Niu Kuiguang, a partner of IDG, once mentioned in public: "IDG Capital has long I invested in enterprise service companies such as Kingdee and Fidelity, and later found that the development of the Internet in China is much faster than the development of enterprise-level services, and all the companies that do enterprise software are not as profitable as Internet companies.”
Now, more than 30 years have passed, and Xu Shaochun has smashed laptops, servers, offices, office chairs, and the "chimney" of ERP and enterprise digital single architecture that has been in place for more than 20 years. From DOS to Windows, and then to enterprise ERP software, with the success of the American SaaS model, domestic manufacturers began to catch up and imitate, and Kingdee's entire product strategy also shifted to Kingdee Cloud.
But the problem is that many transformations have not fulfilled Xu Shaochun's rhetoric of "ranking among the top ten application software in the world in 2010". Kingdee, which once invested RMB 20 million from IDG, has rarely received new financing since then. "There is basically no capital market paying attention to us anymore." The then general manager Wu Ronghai said.
Looking at foreign countries, such as AWS, Salesforce, Workday, Figma, Zoom, etc. have already occupied half of the enterprise services, and there are also vertical stars such as Notion, Calendly, and Airtable. Veteran software vendors have also embarked on a vigorous cloud transformation, such as Microsoft, IBM, and Oracle, and have always maintained their unique competitiveness.
In fact, the experience of Kingdee and UFIDA can be regarded as a microcosm of the development of the Chinese enterprise service market. Both old players and new players seem to be in the same predicament: it is not "easier to make money and become a large-scale business activity" as described in "Silicon Valley Fire", and even the maturity of the B-end market is far away. Behind Europe and the United States, such a gap has gradually become a riddle for the entire industry.
01 Do it quickly, but the head is not good
Many years ago, Wang Jian of Microsoft Asia Research Institute persuaded Ma Yun to build YunOS, mainly relying on the four words "platform concept".
He wanted to promote Ali's platform strategy in the mobile field, which was consistent with Zeng Ming's opinion as the chief strategy officer at the time, "For a company as big as Ali, don't just want to make a Killer App. If you can put third-party apps on the platform, then this The platform is the Killer App.” He meant that Ali’s growth cannot be supported by a single large application, and there should be an open platform to access more third-party applications.
But YunOS and cloud computing are not exactly the same thing. For the former, Wang Jian’s cloud computing business can get Ma Yun’s commitment to invest 1 billion a year for 10 years, largely because Wang Jian helped him figure it out. Ali’s arrival is enough. The computing power required by the volume and the investment in storage.
However, the direction of YunOS is different. Wang Jian believes that in the future era of "cloud, pipe and terminal", the mobile operating system will become an irreplaceable "pipe" that will flow a large amount of user data in geometric multiples. However, YunOS is not a visible trend like the mobile Internet, so it doesn't get much support. Until the breakup with Acer in 2012, even if Jack Ma supported it again, the general situation was gone, and the story of YunOS stopped in 2017.
Although YunOS failed, the "platform concept" has become the main tone of the Internet. This saying has continued to this day, and it has become the so-called "ecological concept".
Unlike most Silicon Valley start-up companies, Facebook, which was born on campus, was originally just for the convenience of making friends; Slack allows users to say goodbye to emails and work together through group chats; including Zoom, Notion, databricks, etc. that have become popular in recent years. There are many academic schools and garage companies. They have a strong purpose at the beginning of their establishment. They first discover problems, get inspiration, and try to solve them. They have grown from small verticals to giants. They do not advocate ecology.
But domestically, the situation is different.
Asymmetric competition in the market has been intensifying. Especially for today's Internet, because the marginal cost is close to zero, at the very beginning, the potential for large-scale development in the future is considered. Under the siphon effect of big companies, start-up companies are often faced with being merged or acquired shares, such as the acquisition of Heipayun by Byte in recent years, and Alibaba’s strategic investment in SenseTime and Cambrian.
This directly led to the fact that compared with foreign software that allows users to complete their work better, the entry of large domestic Internet companies is more like grabbing the wind and occupying the market. The former is driven by technology, while the latter is focused on reshaping the industry. Well-known products such as Alibaba Cloud and Tencent Cloud often rely on their strong background to gain a foothold and then quickly occupy the market.
In 2015, Alibaba and UFIDA signed a strategic cooperation agreement.
According to the agreement, various products under UFIDA will gradually migrate to Alibaba Cloud, and provide SaaS-based services to enterprises on the cloud. But this is not necessarily a good thing for startups. If your own product is good enough and the sales are good, if you merge it into the platform of a big manufacturer, if you can sell it, you must consider giving up the profit; if you can’t sell it, the platform has no user traffic, so there is no need to join. This is the sales system. When something goes wrong, coupled with the squeeze from big manufacturers, it is difficult for vertical companies to survive, and it is also difficult to innovate.
In fact, as early as 2013, Microsoft reached a cooperation with 21Vianet. The latter will operate Microsoft Azure and Office 365 on behalf of the latter. SAP and Telecom jointly promoted the implementation of SAP cloud products in China. In 2016, Oracle and Tencent Cloud signed a cooperation agreement to provide Domestic enterprises provide enterprise-level cloud computing services. In the Al layout that Baidu has invested heavily in, the DuerOS voice open platform and the Apollo automatic driving system also belong to the to B field.
The enterprise service market broke out again in 2016, and the SaaS model is the trend of the entire industry. The essence of products lies in services. In the past, as a traditional software company, Kingdee sold software licenses. Transforming into a cloud service provider means selling software subscriptions Services must rely on a complete user experience to make money.
So when the ERP was smashed in 2017, Xu Shaochun was very nervous.
Major Internet companies have blocked positions one after another, and cloud service giants such as Ali, Tencent, Huawei, and Inspur have increased their efforts to expand the enterprise cloud service market. In contrast, established software vendors have to re-polish from 0 to 1. Xu Shaochun said frankly that compared with traditional enterprises that are not timely and inefficient in applying technologies such as the Internet, cloud computing, and big data, Internet giants have more advantages in technology, cash flow, and R&D talents. This has virtually exacerbated market and information asymmetries.
02 Slow transformation and difficult sales
"A few days before the smash, I completely figured it out, and I must smash it. Because the concept, thinking, and philosophy of ERP have changed a lot, and companies and people are changing rapidly, and it will definitely not adapt to future needs." Xu Shaochun said later.
From a profit point of view, the customer has changed from a one-time payment to buyout to an annual fee in the saas model, and the amount of single payment is reduced, but as long as there is continuous lease renewal, the income will be considerable in the long run. But back to Kingdee, there are still many difficulties in the market education stage.
For example, most of the Western management ideas or models we used in the past are now found to be ineffective. Although there are technologies, the management processes of enterprises are still stuck in the last century. Xu Shaochun believes that the company's management needs to be restructured. At this time, it is not only necessary to integrate various digital technologies, design new business models, and meet individual needs, but also how to make these customers accept and be willing to spend money to buy.
So we dug deep into Kingdee's performance after 2017, and found that in addition to the fact that growth is still difficult to meet expectations, costs have also continued to rise. The 2017-2021 financial report shows that in order to acquire new customers, Kingdee has to increase sales incentives, and the expenses are mainly concentrated in sales promotion expenses, that is, employee salaries. Sales expense ratios were 54%, 53%, 49%, 42%, 42%, with an average of 48%. During the period, traditional products were discontinued one after another, but in terms of new business, there was no obvious transformation.
The deviation of ROI can explain the problem very well: sales expenses erode profitability, and the more the cloud transformation is strengthened, the more losses will be.
From a business point of view, the high cost of small and medium-sized customers and the sluggish growth of large customers are the main reasons for Kingdee's losses. Although the products aimed at the small, medium and micro enterprise market can bring about an increase in revenue, considering that the average life cycle of the latter is too short and the willingness to pay is low, it does not mean that the profit increases. Sustain revenue growth.
If you switch to a large customer with a long customer life cycle, strong repurchase ability, and high renewal rate, you will need a large investment in the early stage. Lin Bo is the CFO of Kingdee. He said frankly at the financial report meeting two years ago: "This year we have signed many influential and large customer groups. For some enterprises, we even have to rent new The office space is close to customers to serve, so the overall delivery cost has increased a lot.”
But even with a large investment, the growth of major customers is very slow. The reason may be that Kingdee in the south is surrounded by small and medium-sized private companies, and large companies require highly customized services. The replicability of the plan is limited, so it is difficult to sustain. Kingdee is not as experienced as UF in the north in terms of serving major customers, not to mention the leading edge of established international giants such as SAP and Oracle.
It is said that there is a history of Kingdee's entrepreneurship and half of the history of Chinese software.
However, some analysts found that after calculating the adjusted non-net profit, Kingdee has actually been losing money for more than ten years, with a cumulative amount of more than 3.188 billion. The financial report for the first half of this year shows that Kingdee’s revenue was 2.197 billion yuan, a year-on-year increase of 17.32%, and the net loss attributable to the parent was 356 million yuan, a year-on-year increase of 43.66%.
Coincidentally, starting from 2020, UFIDA's revenue growth has also slowed down, and its net profit has not risen but has fallen. In the first half of this year, the net loss is expected to reach 243 to 273 million yuan. Revenue rose slightly, profits fell sharply, and the market value of UFIDA once evaporated by more than 70 billion.
When Wang Wenjing, who had retreated behind the scenes, came out again to aggressively push UFIDA’s capital operation, the actual effect was minimal. As the largest software company in China at that time, Jinshan’s market value was less than 1% of Microsoft’s.
03 If you can make do with it, keep using it
The problem of weak domestic software payment awareness has a long history.
Anti-virus software such as Kaspersky and Rising in the early days have been earning income by charging annual fees, but no one thought that 360 would quickly enter the security software market through a free strategy and occupy the security software market; when Microsoft Office suite copycats were everywhere , but the headquarters allowed this behavior for a long time, the purpose is to indirectly improve coverage and cultivate usage habits. When people are used to free pirated software, they are even less willing to pay for invisible software.
To some extent, this is indeed a business strategy for manufacturers.
On the other hand, due to higher per capita income and market cultivation, foreign countries can get used to paying for books, music, film and television, etc. earlier. In the 1980s, in order to supervise business operations more efficiently and quickly, Sam Walton, the founder of Wal-Mart known as "stingy", was willing to spend 24 million US dollars to build a satellite communication system, and even took out 1/4 of the annual budget , launched a private commercial satellite.
Every Saturday morning, he goes into the satellite equipment room to check the printouts and get an accurate picture of the week's sales, Walton said: "Technology and distribution are important components of Wal-Mart's ability to grow and maintain control."
However, an employee of a small and micro enterprise in China revealed that, in addition to the willingness to pay, considering that using the genuine version of Norton costs tens of thousands of RMB 100,000 a year, using Kingsoft PowerWord costs 30,000 to 40,000 a year, and there is also an annual fee for a single user name of Lotus Notes Just over 5,000, and a software system for a large enterprise may even cost tens of millions.
too expensive.
Therefore, for companies, instead of actively trying to buy a set of software and thinking about what improvements they can bring to themselves, most domestic companies are more inclined to make up for what is missing, and continue to use it if they can.
But it also shows that in fact, some new products can not provide subversive innovation. Its functions and solutions may be used by companies in the market before the product appears, and there is no need for the latter to pay repeatedly. In another situation, for example, some products hatched from internal experience such as DingTalk, Enterprise WeChat, and Feishu are not bad products, but not necessarily suitable for the current market environment. Skip the rule from 0 to 1 and go Going too fast is not necessarily a good thing.
Nowadays, there is a lot of homogeneous competition in the domestic market. It may be to occupy the market at the beginning, or it may be to expand and expand, but the core is not to better serve users.
But conversely, in the face of a large number of various companies with a wide distribution, they want more but give less. In this way, the best choice may not be as detailed or deep as a product, but only to cover all the functions. As for individual needs, it can be handed over to the IT integration company's ecological partners. Having a national sales network and carrying out large-scale implementation may be the best solution for large and comprehensive giants.
Once there are more vertical software and services of the same kind in the domestic market, price wars will inevitably occur, so the pricing model will be very rough, and it will continue to lose money for a long time, which is not a long-term solution. Cleared, but is that a good thing?
The answer is obviously no.
04 The sales process needs to be continuous and detailed
Different from the above cognition, SAP, which is also on this track, has the most complicated product pricing system in the industry, especially after the transition to cloud services, the pricing is more complicated. For example, in 2020, SAP pricing-related contract clauses are as long as 186 pages. Without special training, no one can easily learn how to quote through quotation documents, but the complexity of SAPERP pricing has not affected its world leadership.
Taking SAP's flagship product S4HANACloud as an example, its price is mainly composed of the following aspects: user access authorization, data access interface usage rights, infrastructure charges and additional solutions.
Among them, in addition to the annual fee model for access authorization, SAP also sells permanent authorization. Of course, a certain percentage of technical support fees must be paid every year; if the annual fee is paid, the lease renewal must be guaranteed at an annual rate of 3.3% or not lower than the local CPI increase. Although the authorization fee is directly related to the number of users and has great flexibility, SAP still has certain base price requirements. In contrast, most similar domestic products only charge this part of the fee, while SAP relies on bargaining power, and there are three levels of superimposed fees.
In addition, SAP's data interface payment is only for third-party products, but the starting price of this fee is 24,000 euros. After the access limit is exceeded, additional fees are required. SAP provides a super ERP family bucket covering all aspects of enterprise operation and management and different needs. Therefore, if you need to connect to third-party applications to access huge objects, I am afraid that no matter how big the company is, it will feel distressed.
This is also one of the reasons why the family bucket can be cross-sold.
There are similar practices in China, but generally only fixed interface fees are charged, and there is rarely access metering. Although SAP's pricing has been criticized for being too harsh, it is said that SAP has only offered discounts and concessions in the past two years, and has not canceled this plan.
In 2000, Salesforce pricing was extremely simple, but now the pricing table may be longer than SAP. The pricing tables of Oracle and Microsoft's enterprise software products can't be understood without spending a few days. SAP is haggling over API access fees with customers, and China often offers "promotions" that buy for three years and get three years free or even free. The revenue and profits lost by price competition are hard to ignore.
In the final analysis, when products and customers are diversified, pricing cannot be so simple and straightforward. In the traditional sales function scenario, how much is sold is closely related to performance indicators and income, so more attention is paid to pre-sales and how to sell products. But the sale of saas products is a continuous renewal and renewal model.
To put it simply, it takes one day to keep selling, and the whole process permeates every link of the product and service system, pursuing customer success and achieving a win-win situation. At this time, for the enterprise itself, you can no longer bet your business on the sales staff, let alone imagine that an iron sales force can support the whole game. Even if you have an independent sales team, they are highly connected with other departments.
A sales employee who resigned from Youyou pointed out on the Internet: "If sales are a project, if the resistance from all aspects is 100, then customers account for 20, friends and merchants account for 20, and the remaining 60% are all internal competition (resource containment, background containment, distribution). Competition in direct selling, grabbing orders and sabotage between direct selling).” This is not a good phenomenon.
At a dinner party many years ago, Duan Xiaoying, CEO of GE, asked Xiong Xiaoge: There are many great companies and giant state-owned enterprises in China, why there are no large companies that provide services for enterprises, especially large companies that provide software services? Xiong Xiaoge said , State-owned enterprises are still IT technology users to a large extent, and have not really invested a lot of energy in developing IT technology; on the other hand, Chinese VCs focus their investment on to C.
Today, the GDP gap between China and the United States has narrowed, and the number of domestic companies is much larger than that of the United States. However, the size of the US enterprise software market is more than ten times that of the domestic market.
But the reason may not be what Xiong Xiaoge said back then.