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November 2009

November 2009. CRISIS in Chinese…. Wei : Danger. Ji: Opportunity. Country profile. Formal name: People’s Republic of China (PRC) Capital: Beijing President: Hu Jintao Language: Mandarin Currency: Renminbi (RMB/Yuan) Land size: 9.600,000 km2, the third-largest

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November 2009

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  1. November 2009

  2. CRISIS in Chinese… Wei : Danger Ji: Opportunity

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

  4. 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 % of population living on < $1.25 a day • 1981 • 1990 • 2005 Source: World Bank

  5. Internet population Source: World Bank

  6. GDP forecast (in b. US$) Source: IMF

  7. ie: Shanghai • Shanghai’ population = 18,88 M people (including 5.2 M migrants and 152,100 foreigners) • Shanghai’ GDP = Brazil’ GDP

  8. Consumption « In this current financial crisis, IDC expects to see governments coming up with various stimulus packages » Source: Moody's Economy.com

  9. Where money is invested

  10. ICT Import (in b.US$) #2 China255.195 #4 Germany105.502 #1 USA273.360 # 3 China HK154.416 #5 Singapore80.674 source: OECD

  11. 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)

  12. 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

  13. Chinese prospects • Fortune 500 list includes 37 Chinese companies (11 in 2003) • Chinese companies are going international July 2009

  14. in Telecom • 7 Principal Telcos in China • Hundreds subsidiaries all over China

  15. in Banks • 31 Nation wide Retail banks + Thousands Regional banks • 90 Foreign banks

  16. in Insurances • 86 Chinese insurance companies • 40 foreign insurance companies & JVs in China

  17. in Airlines • 27 airline companies • 16 state owned 8 privates 3 JVs

  18. 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

  19. 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 • …

  20. in Utilities: Water • Shanghai Water • Beijing Water • Shenzhen Water • Chongqing Water • Exist in all the cities • … one per large city !

  21. in eCommerce Purchase value of 325 billion €

  22. 2008 software sales revenue in Mainland China

  23. Piracy? Large accounts • Punishment • CCPC Medium SME SOHO Consumer

  24. 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

  25. 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)

  26. Guan Xi (关系) • 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 Tip: To succeed in business it is not what you know, but who you know

  27. Mian Zi (面子) • What is Mianzi? • Literal: Face • The dignity of the person • “Men live for face as trees grow for bark.” Tip: You only suggest ideas and let your interlocutor to take the leadership

  28. 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 »

  29. 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)

  30. German ISV specialised in Document Management • Actions: • Four Distributors • One Pre-sales Consultant (Virtual office) K… (BJ) M…. (BJ) Q… (SH) E… (SZ)

  31. 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

  32. Tough competition, ie: BEA • Chinese CEO, Mr. Alfred Chuang • 30 Distributors • 3000 Partners • 2000 customers in China • 200 employees • December event « limited » to 4200 attendees

  33. 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

  34. French ISV specialised in ERP for Fashion 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

  35. German ISV specialised in CAD for The harness automotive industry (narrow market) • Discovery of the Chinese market • One strong local Support Engineer (Virtual Office)

  36. US ISV specialised in application & IT monitoring for large accounts • Actions: • Three Distributors • One Pre-sales Consultant (Virtual office) Kun… (BJ), large Governments Imo… (SH) large Enterprises Newd… (FZ, BJ) Telecom

  37. 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 Tal… & Vis… …. (Beijing) Eas… (Shanghai) Chin… (Shenzhen)

  38. UK ISV specialised in EAM/CMMS mainly for the manufacturing market • Four Distributors • One Sales and One Support Yoy T… . Beijing (Telecom) High-C… . Beijing (Manufacturing) Ewa…. Shanghai. Xiamen.Guangzhou (Manufacturing)

  39. 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

  40. 200 satisfied customers

  41. 谢谢 (Thank you) www.softdatabase.com.cn gpardon@softdatabase.com.cn ljfan@softdatabase.com.cn

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