In the past, many companies relied on domestic business to deploy overseas, and were dubbed “going overseas”. Nowadays, more companies are choosing to explore new territories overseas, happy to be seen as a “globalized” enterprises. This indicates that in the minds of many entrepreneurs, venturing overseas has become more than just doing business; it has become a phase where Chinese companies are demonstrating their abilities beyond their domestic borders.

At this moment, 36Kr has launched a series of observations on “software globalization”. The series will report on software start-ups, representative companies, and investment professionals that possess Chinese elements that are expanding globally. The aim is to cover various angles of software globalization and provide insights that can help paint a more accurate picture of this trend.

Increasing number of Chinese software companies are venturing into the global market.

The reasons are multifaceted: overseas markets offer a wider range of opportunities, with mature SaaS markets in Europe and United States, customers boasting a stronger willingness to pay. While Southeast Asia’s higher growth potential has become the preferred destination for an increasing number of Chinese software companies venturing overseas.

However, what does the overseas market look like? What kind of competitors will they face? Is achieving globalization goals an easy feat?

Perhaps only the “seniors” who have gone through the process would have the answers to these questions.

Yonyou is known as a “traditional” ERP vendor serving mainly state-owned enterprises in China, and many people may not associate it with globalization or going abroad. However, in fact, the seemingly “traditional” company began preparing for overseas business after its IPO in 2001 and officially established its overseas business unit in 2003. Data shows that Yonyou’s compound annual growth rate in overseas markets from 2005 to the present is 20%. Currently, Yonyou has expanded to seven offices outside mainland China, including Yonyou Hong Kong, which has an annual revenue of nearly HKD 200 million. As one of the most noteworthy companies in the enterprise service sector, how did Yonyou achieve globalization? What efforts did Yonyou make behind its growth? And what experience and lessons can it share in the above-mentioned questions?

In this interview, 36Kr spoke with Bowen Guo, the General Manager of Yonyou’s Overseas Business Unit. Bowen Guo has previously held leadership positions in Yonyou’s Macau, Europe, Singapore, and Southeast Asia offices, making him a core member of Yonyou’s global strategy team.

Bowen Guo believes that “cross-river dragon” enterprises are difficult to compete with local enterprises in the low-end overseas market. Therefore, in order to achieve globalization, the first priority is to identify the company’s advantageous products, define the target customer group, and follow the principle of ” first survive then thrive” in choosing target markets and promoting them. The company should start by settling down in the easiest places and then gradually move to more challenging regions.

However, starting is easy, but finding a foothold is difficult. In overseas markets, high-end markets have long been dominated by European and United States companies, while mid-range market has to face competition from vendors in other Asia-Pacific countries.

In Bowen Guo’s view, regardless of where the competitors come from, strong product capabilities and high cost-effectiveness are the core advantages of domestic software in overseas markets. China’s vast market, high-productive labour force, and constantly mature and improving production industry chain have not only created the high cost-effective of domestic software but also unlimited possibilities for internationalization.

The following is the interview section (edited by 36 Kr):

| 36Kr: When did Yonyou start preparing for global expansion? Why was that particular timing chosen?

Bowen Guo: In 2001, Yonyou was listed on the Shanghai Stock Exchange. With the improvement of the company’s risk resistance and sufficient funds, Yonyou began to prepare for expansion during the same period.

From an internal perspective, Yonyou has covered most of the domestic provinces and cities. As Chinese companies in various industries began to globalize, Yonyou’s customers also started to globalize, thus demanding Yonyou to expand globally. Therefore, in 2003, Yonyou began to expand overseas together with its clients. Additionally, the unlimited production capacity and transportation costs in the software industry also accelerated Yonyou’s globalization process.

From the perspective of external factors, at that time, some of Yonyou’s competitors had established branch offices in Hong Kong to undertake overseas business. Therefore, expanding globally was a natural choice for Yonyou who with a larger scale business.

| 36Kr: How does Yonyou position itself in overseas markets?

Bowen Guo: As a “cross-river dragon” enterprise in the Asia-Pacific region, Yonyou also encounter the problems of international competitors struggling to defeat local vendors in the low-end market when entering new markets. However, U8, as Yonyou’s mid-range product, was very mature in 2003, with higher product strength and cost-effectiveness than overseas local vendors, making it more competitive. Meanwhile, the high-end product NC Cloud had just been launched and was still in the trial phase. Therefore, in terms of strategy, Yonyou chose to take the lead with U8, and gradually commercialize NC Cloud starting from 2008 as it became more complete and mature. With international vendors gradually entering the Asia-Pacific region, NC Cloud’s cost-effectiveness advantage gradually emerged.

| 36Kr: What is Yonyou’s strategy for choosing target markets and advancing in order?

Bowen Guo: In a nutshell, the strategy of Yonyou in selecting target markets and pushing forward is to follow the principle of “survival first, then thrive”. Specifically, it gradually expands outward in the order of “easy first, difficult later”, and emphasizes the strategy of “prioritizing developed areas” in the process. The sequence was to focus on China’s Hong Kong, Macao, and Taiwan regions, where the language and culture are most similar to mainland China, followed by the Southeast Asian countries where the time difference is relatively small and the proportion of ethnic Chinese is high, and radiates outwards from this central point to the other ten ASEAN countries. Finally, the Asia-Pacific countries with a similar time zone such as Australia and New Zealand.

Yonyou’s overseas business unit headquarters is located in Hong Kong, with branch offices in Macau, Taiwan, Singapore, Malaysia, and Thailand. Among them, Singapore’s business scope radiates to Indonesia and the Philippines, but Indonesia has just established a separate office. Malaysia’s business scope includes Brunei, and Thailand’s business scope covers Vietnam, Cambodia, Laos, and Myanmar.

| 36Kr: What is the competitive landscape of the overseas ERP market?

Bowen Guo: In the high-end L1 customer segment market in the Asia-Pacific region, only international vendors have corresponding products, which gives them a clear advantage. In the high-end L2 customer segment market, the competition for Yonyou is still the same as when it was in China, with international vendors being its main competitors. Japan used to be in the number one position in many industries in the Asia-Pacific region, but now many industries in China have surpassed Japan, especially in the ERP field, where Yonyou’s product strength is far superior to Japan’s. Although India is relatively strong in the computer software industry, its two largest ERP vendors only focus on the HCM (human capital management) field, which is different from the comprehensive development direction of YonBIP and YonSuite product lines in Yonyou. In addition, Russia does not have high-end products. Therefore, in the high-end L2 customer segment market, Yonyou’s competitors are only international vendors, without any competitors from other Asia-Pacific countries. In the mid-range M1 and M2 customer segment markets, Yonyou’s most common competitor is cloud ERP NetSuite, which acquired by Oracle in 2016.

| 36Kr: What are the differences between domestic and international vendors in your opinion?

Bowen Guo: In terms of products, the difference between Yonyou and international vendors is that Yonyou does not simply imitate or apply everything, but based on the localization needs and scenario applications of domestic enterprises, it has developed its own unique aesthetic and technical path that is exclusive to domestic vendors.

| 36Kr: What do you think is the advantage region of Yonyou?

Bowen Guo: Yonyou specializes in digital management, we adopted a digital group management adopt a decentralization management mode in business, delegating authority as much as possible.

The major challenge of group management is that it either leads to rigidity or chaos when delegation is given. Yonyou has over 200 subsidiaries in China and seven offices abroad. To address this challenge, we have established a systematic normative system and digital management methods at our headquarters, such as personnel establishment, budgeting, and financial planning etc., Within this framework, we delegate power to the business as much as possible, allowing front line play the role of a battle fortress and subsidiaries to make bold breakthroughs.

| 36Kr: Where are Yonyou’s product development, sales, delivery, and after-sales centers located, and what factors were considered when deciding their locations?

Bowen Guo: Chanjet Info Tech is a subsidiary of Yonyou Group listed in Hong Kong. Its R&D center is located in Silicon Valley, United States, and is mainly positioned to synchronize with the latest technology in Silicon Valley in real time, especially industrial technology architecture. To do well, you need to either run earlier or run faster than others. If a large enterprise does not keep pace with developed countries in underlying technology, it may fall behind in next-generation products and technologies.

In terms of sales, delivery, and after-sales service, the situation varies for different product lines, but generally they are located locally. At the headquarters, Yonyou focuses on product development, while in overseas markets we focus on localization and customization development. Each overseas salesperson is supported by 4-5 delivery and operation consultants.

Last year, Yonyou established a R&D center and a public cloud data center in Singapore. As our new generation of products are all cloud-based, customer data from Southeast Asia and other overseas regions are centrally stored in the Singapore data center. In the future, as more customers come on board, Yonyou will store data in local data centers.

Originally published in https://36kr.com/p/2046505952529417 (作者：吳思瑾)