Shulou(Shulou.com)11/24 Report--

It got off to a fast start, but it didn't start well.

It has been five years since Xu Shaochun founded Kingdee.

Before that, Wang Wenjing, who had just celebrated his 24th birthday, led his civil servant colleague Su Qiqiang to set up Yuyou Financial Software Service in Zhongguancun. At that time, most enterprises still relied on manual bookkeeping, and Wang Wenjing wanted them to build their own financial system by using software. Just as Bill Gates vowed to earn $1 million by the age of 23, he set himself a plan to earn $30 million in ten years.

Recall that in the early 1990s, Zhang Chaoyang had just gone to study in the United States, and Shi Yuzhu was still selling health products. The wps that asked Bojun for more than 100,000 lines of code attracted Lei Jun. Xu Shaochun borrowed 5000 yuan to open the Epp Software Company, which has not yet changed its name to Kingdee, and the rapidly expanding AsiaInfo has just been listed on Nasdaq in the United States. IBM, Hewlett-Packard and Microsoft have entered China one after another following Oracle. In that golden age, they all set their sights on this hot land.

Later, the names of Neusoft, Kingsoft, Kingdee and Kingdee spread, and upstarts such as Hang Seng, Guanglianda and iFLYTEK also got financing, and local software manufacturers led by USU and Kingdee even claimed to be able to compete with the international giant SAP. As the Fire of Silicon Valley says: history has proved that in the future people will buy software as common as computers themselves. As the operation of software is easier to start and make profits than hardware, selling software is becoming a large-scale business activity.

During the 10-year period from 2005 to 2015, labor costs in China increased fivefold, and the dividend of C-end market decreased sharply. Niu Kuigui, a partner in consumer-grade Internet companies, said in public: "IDG Capital invested in enterprise service companies such as Kingdee and Fidelity a long time ago, and later found that the development of Internet in China is much faster than that of enterprise-level services." All the companies that do enterprise software are not as profitable as Internet companies. "

Now, more than 30 years later, Xu Shaochun smashed laptops, servers, offices, office chairs, as well as the "chimney" of ERP and enterprise digital monolithic architecture, which has been done for more than 20 years. From DOS to Windows, and then transformed into enterprise ERP software, with the success of the American SaaS model, domestic manufacturers began to catch up with imitation, Kingdee's entire product strategy also turned to Kingdee Cloud.

But the problem is that many transformations have not fulfilled Xu Shaochun's proclamation of "becoming one of the top 10 application software in the world in 2010". Kingdee, which once invested RMB 20 million in IDG, has received little new financing since then. "there are basically no capital markets watching us anymore." Wu Ronghai, the general manager at that time, said.

Look at foreign countries, such as AWS, Salesforce, Workday, Figma, Zoom and so on have accounted for half of the enterprise services, as well as Notion, Calendly, Airtable and other new stars. Established software manufacturers have also started a vigorous cloud transformation, such as Microsoft, IBM, Oracle, always maintaining their own unique competitiveness.

In fact, the experience of Kingdee and user friends is also a microcosm of the development of China's enterprise service market. Both old players and new players seem to be in the same dilemma: it is not "easier to make a profit and become a large-scale business activity" as described in Silicon Valley Fire, and even the maturity of the B-end market lags far behind that of Europe and the United States. this gap has gradually become an industry-wide enigma.

01. It was done quickly, but it didn't start many years ago, Wang Jian of Microsoft Research Asia persuaded Jack Ma to do YunOS, mainly relying on the word "platform concept".

He wants to promote Ali's platform strategy in the mobile field, which is consistent with Zeng Ming, the then chief strategy officer. "for a company as big as Ali, don't just want to be Killer App. If you can put third-party applications into the platform, then the platform is Killer App." What he means is that a large application alone cannot support Ali's growth, 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 was able to get Jack Ma's commitment to invest 1 billion yuan a year for 10 years, largely because Wang Jian helped him figure out that Ali needed to achieve sufficient volume and investment in storage.

But the direction of YunOS is not the same. Wang Jian believes that in the future "cloud management" era, the mobile operating system will become an irreplaceable "pipeline", which flows a large amount of user data in geometric multiples. However, YunOS is not as visible a trend as the mobile Internet, so there is not much support. Until 2012, when he broke up with Acer, even though Jack Ma stood up again, the tide was over, and YunOS's story stopped in 2017.

Although YunOS failed, but the "platform concept" has become the main tone of the Internet, this saying continues to this day, has become the so-called "ecological concept".

Unlike most Silicon Valley startups, Facebook was born on campus just to make friends; Slack allows users to send farewell emails and work together through group chats, including Zoom, Notion and databricks, which have become popular in recent years. There are many academic schools and garage companies. At the beginning of their establishment, with a strong purpose, they first find problems, get inspiration, and try to solve them. They have grown into giants from small drooping classes, and they do not advocate ecology.

But at home, the situation is different.

The asymmetric competition in the market has been increasing. Especially for today's Internet, because the marginal cost is close to zero, the potential for large-scale development is taken into account at the beginning. Under the siphon effect of big factories, startups are often faced with mergers and acquisitions or shareholdings, such as byte acquisition of Black Payon in recent years, Alibaba war investor Tang Technology, and Cambrian.

This directly led to, compared with foreign software is to enable users to better complete the work, the entry of large domestic Internet companies is more like to grab the wind hole to occupy the market. The former is technology-driven, while the latter focuses on the restructuring of the industry. Products such as Aliyun and Tencent Cloud, which can be named, often rely on a strong background, and then quickly occupy the market.

In 2015, Alibaba and Yuyou signed a strategic cooperation agreement.

According to the agreement, we will gradually move into Aliyun with a number of Youyou's products to provide SaaS services to enterprises on the cloud. But this is not necessarily a good thing for startups. If your own products are good enough and sell well and are incorporated into the big factory platform, if you can sell them, you should consider making a profit; if you can't sell, the platform has no user flow, so there is no need to join. This is a problem with the sales system. Coupled with the squeeze of large factories, it is very difficult for vertical companies to have a chance to survive, and it is also very difficult to innovate.

In fact, as early as 2013, Microsoft reached a cooperation with Century Interconnection, which will operate Microsoft Azure and Office 365 SAP and Telecom to jointly promote the landing of SAP cloud products in China. In 2016, Oracle and Tencent Cloud signed a cooperation agreement to provide enterprise-level cloud computing services for domestic enterprises. Baidu invested heavily in the Al layout, DuerOS voice open platform and Apollo autopilot system, also belong to the field of to B.

The enterprise service market broke out again in 2016, and the SaaS model is the trend of the whole industry, and the essence of the product is service. In the past, as a traditional software company, Kingdee sold software licenses, and transformed into a cloud service provider, which meant selling software subscription services and making a profit by relying on a complete user experience.

So Xu Shaochun was nervous when he smashed the ERP in 2017.

Internet giants such as Alibaba, Tencent, Huawei, Chaoyang and other cloud service giants have increased their efforts to expand the enterprise cloud service market. On the other hand, established software manufacturers have to re-polish from 0 to 1. Xu Shaochun frankly said that compared with traditional enterprises in the application of Internet, cloud computing, big data and other technologies are not timely and inefficient, Internet companies have more advantages in technology, cash flow, R & D personnel. This virtually aggravates the asymmetry between the market and information.

02, slow transformation, difficult sales "A few days ago, I thoroughly figured it out, and I must. Because the concept, ideas and ideas of ERP have changed greatly, enterprises and people are changing rapidly, and it will certainly not adapt to the needs of the future." Xu Shaochun said later.

From a profit point of view, customers from an one-time payment buyout, to saas mode annual fee, the amount of a single payment is reduced, but as long as there is a continuous lease renewal, then the income will be considerable in the long run. But back to Kingdee, there are still many difficulties in the stage of market education.

For example, most of the western management ideas or models we used in the past have been found to be ineffective. Although there is technology, the management process of the enterprise is still in the last century. Xu Shaochun believes that the management of the company needs to be restructured, so it is not only necessary to gather all kinds of digital technologies, design new business models and meet individual needs, but also how to get these customers to accept it and be willing to spend money to buy it.

So we dug into Kingdee's performance after 2017 and found that apart from the fact that growth was still difficult to meet expectations, costs continued to rise. According to the 2017-2021 results, Kingdee had to increase sales incentives in order to get new customers, and the expenses were mainly focused on sales promotion expenses, that is, employee salaries. The sales expense rates are 54%, 53%, 49%, 42% and 42%, respectively, with an average of 48%. During this period, the sale of traditional products was stopped one after another, but there was no obvious transformation in the new business.

The departure from ROI is telling: the cost of sales erodes profitability, and the more you strengthen the cloud transformation, the more you lose.

From a business point of view, the high cost of small and medium-sized customers and the weak growth of large customers are the main reasons for Kingdee's losses. Although products for the small and medium-sized enterprise market can lead to an increase in revenue, considering that the average life cycle of the latter is too short and their willingness to pay is low, it does not mean an increase in profitability. at the same time, Kingdee also has to continue customer acquisition and maintenance to maintain revenue growth.

If we turn to the big customers with long customer life cycle, strong repurchase ability and high renewal rate, we need a large amount of investment in the early stage. Lin Bo is the CFO of Kingdee. Two years ago, he said frankly at the earnings meeting: "this year, we have signed a lot of influential large customer groups, and there are some enterprises, because of various safety management factors, we even have to rent new office space to serve customers, so the overall delivery cost is much higher."

But even if a large amount of investment is invested, the growth of large customers is also very slow. The reason may be that Kingdee in the south is surrounded by more small and medium-sized private enterprises, large enterprises want highly customized services, and the program replication is limited, so it is very difficult to sustain. In serving big customers, Kingdee is not more experienced than its users in the north, not to mention the leading advantages of established international giants such as sap and Oracle.

They all talk about a history of Kingdee entrepreneurship and half of the history of Chinese software.

However, after calculating and adjusting the deduction of non-net profit, some analysts found that Kingdee has actually lost money for more than ten years, with a cumulative quota of more than 3.188 billion. The results for the first half of this year showed that Kingdee's revenue was 2.197 billion yuan, up 17.32% from the same period last year, with a net loss of 356 million yuan, and the loss increased by 43.66% compared with the same period last year.

Coincidentally, from 2020, the revenue growth of Yuyou has also slowed down, and the net profit has declined instead of rising. In the first half of this year, the net loss is expected to reach 2.43 to 273 million yuan. Revenue rose slightly, profits fell sharply, and the market value of user friends once evaporated more than 70 billion.

When Wang Wenjing, who retreated behind the scenes, came out again and aggressively pushed UFY's capital operation, it had little effect. Jinshan, China's largest software company at that time, had a market capitalization of less than 1% of Microsoft's.

03, can make do with, continue to use domestic software payment consciousness is not strong, for a long time.

Antivirus software, such as Kaspersky and rising in the early days, always earned income by collecting annual fees, but no one expected that 360would quickly enter and occupy the security software market through a free strategy; when Microsoft's Office suite was everywhere, the headquarters allowed this behavior for a long time in order to indirectly improve coverage and cultivate usage habits. When people are used to free and pirated software, they are even more reluctant to pay for software that they can't see or touch.

To some extent, this is indeed a business strategy for manufacturers.

On the other hand, because of higher per capita income and market cultivation, foreign countries can get used to paying for books, music, film and television earlier. In the 1980s, in order to regulate business operations more efficiently and quickly, Sam Walton, the famously stingy Wal-Mart founder, was willing to spend $24 million on a satellite communications system, or even 1max 4 of the annual budget. A private commercial satellite was launched.

Every Saturday morning, he goes into the satellite equipment room to check the printed results and get an accurate picture of this week's sales. "Technology and distribution are important components of Wal-Mart's growth and control," Walton said. "

However, employees of a domestic small and micro enterprise have revealed that in addition to their willingness to pay, considering that it takes more than 100,000 a year to use a Norton genuine copy, it takes three or four thousand years to use Kingsoft, and the annual fee for a single user name of Lotus Notes is more than 5000, and a large enterprise is equipped with a set of software systems that can easily be tens of millions.

That's too expensive.

So for companies, instead of taking the initiative to try to buy a set of software and think about what improvements they can bring to them, most domestic companies prefer to make up for what is missing and continue to use it as soon as they can.

But it also shows that, in fact, some new products can not provide subversive innovation, and its functions and solutions may be in use by companies in the market before the product appears, so there is no need for the latter to pay double fees. Another situation, such as nails, WeCom, Feishu and other products incubated by internal experience, some products are not bad, but are not necessarily suitable for the current market environment, skipping the law from 0 to 1, walking too fast is not necessarily a good thing.

Nowadays, there is a lot of homogenization competition in the domestic market, which may be to occupy the market at first, or to be bigger and more comprehensive, but the core is not to better serve users.

But on the other hand, in the face of a large number of widely distributed enterprises of all kinds, they want more but give less. In this way, the best choice may not be how thin or deep a product is, and only the functions can be covered. As for personalized requirements, they can be handed over to IT integration ecological partners to do. With a national sales network, large-scale implementation, for large and comprehensive giants, may be the best solution.

Once there are more similar vertical software and services in the domestic market, it is inevitable to fight a price war, so the pricing model is very rough, and it is not a long-term solution to lose money for a long time. At this time, if you rely on the rapid mergers and acquisitions of large companies, the market will clear quickly. But is that a good thing?

The answer is obviously no.

04. The sales process needs to be continuous and detailed. What is different from the above is that at SAP, which is also on this track, its product pricing system is the most complex in the industry, especially after the transformation of cloud services. In 2020, for example, the terms of contracts related to SAP pricing were 186 pages long. Without special training, no one can easily learn how to quote through quotation documents, but the complexity of SAPERP pricing does not affect its world leader.

Take SAP's flagship product S4HANACloud as an example, its price is mainly composed of the following aspects: user access authorization, the right to use the interface for data access, infrastructure charges and additional solutions.

Among them, in addition to the annual fee model, SAP also sells permanent authorization. Of course, a certain percentage of the technical support fee must be paid every year; if the annual fee is paid, the renewal of the lease should be guaranteed to be 3.3% annualized 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 floor price requirements. In contrast, most of the domestic similar 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 fee is only for third-party products, but the starting price is 24000 euros, and an extra fee will be charged if the access limit is exceeded. SAP provides super ERP family buckets that cover all aspects of enterprise operation and management and demand differences, so if you need to dock with third-party applications to access large objects, I am afraid that even the largest companies will be distressed.

This is also one of the reasons why family buckets can be cross-sold.

There is a similar practice in China, but generally only a fixed interface fee is charged, and there is little access measurement. Although SAP's pricing has been criticized for being too harsh, it is said that SAP has only offered discount concessions in the past two years and has not cancelled the scheme.

The pricing of Salesforce in 2000 was extremely simple, but now the pricing table may be longer than that of SAP. Oracle and Microsoft's enterprise software product pricing list does not take a few days to understand. SAP is haggling with customers about API access fees, and China often makes "promotions" that buy for three years and get free for three years or even free of charge, and the revenue and profits lost by price competition are difficult to be ignored.

In the final analysis, pricing cannot be that simple with a diversity of products and customers. In the traditional sales function scenario, how much is sold is closely related to performance indicators and income, so we pay more attention to pre-sale and focus on how to sell the product. But the sales of saas products are continuous renewal and renewal model.

To put it simply, you can't stop selling in one day, and the whole process permeates every link of the product and service system, pursuing customer success and achieving win-win results. At this time, for the enterprise itself, you can no longer bet on the sales staff, let alone imagine that a single sales force can support the whole game of chess, even if you have an independent sales team, they are also highly linked to other departments.

The former sales staff who left the company pointed out on the Internet: "if the resistance from all aspects of the sales project is 100, then the customers account for 20%, the competitors account for 20%, and the remaining 60% are all internal competition (resource restraint, backstage containment, distribution direct sales competition, order grabbing and destruction between direct sales)." This is not a good sign.

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 are there no large companies providing services for enterprises, especially those providing software services? 'State-owned enterprises are still largely users of IT technology and haven't really put a lot of effort into developing IT technology, 'Mr. Xiong said.' on the other hand, China's VC has focused its investment on to C.

Today, the difference in GDP between China and the United States has narrowed, and the number of domestic enterprises is much larger than that of the United States, but the size of the American enterprise software market is more than ten times that of the domestic one.

But the reason may not be what Xiong Xiaoge said at that time.

This article comes from the official account of Wechat: new eyes (ID:xinmouls), author: Lu Yao, Editor: Sang Mingqiang

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