A GLANCE AT THE CHINESE HOSTED MARKET. Asia Pacific Market Insights. By Marcus Wei, Industry Analyst. We accelerate growth

Transcription

1 2010 A GLANCE AT THE CHINESE HOSTED MARKET By Marcus Wei, Industry Analyst Asia Pacific s Frost & Sullivan s commentary on the Asia Pacific ICT industry, addressing opportunities, best practices, and major events We accelerate growth

2 The financial crisis and credit crunch that originated in the U. S. imposed a prolonging negative effect on the world economies. Enterprises faced problems such as decreased export output, narrow profit margins and tight cash flows, observed especially in the Small and Medium Business (SMB) sector. SMBs find IT investment of lower priority and are cautious about any capital expenditure. As a result, hosted IT services have gained its popularity in 2009, primarily due to its pay-as-you-go pricing model and the professional IT services rendered by IT services vendors at affordable costs. One of the typical services is the enterprise service which is imperative and pivotal to today s business communication. Hosted enterprise is a model whereby the service provider licenses an enterprise-grade application and offers it to customers as a service on-demand via its data centers. Features of hosted services include: Network access and management of the enterprise software Centralized administration of boxes/seats instead of being at the customer s site One-to-many, single-instance, multi-tenant architecture Centralized software upgrades, including version and patch administration Frequent integration with other communication and collaboration software, either as a service mash-up or as a plug-in to a platform as a service This market insight aims to give you a walk-through of the Hosted market in China and gives the reader a glimpse of the key vendors and the functionalities of the solutions they offer. Vertical opportunities and future development in the market are also discussed. Overview of the Hosted Market in China Although the usage amongst corporations in China is still relatively limited compared to developed countries and the level of functionality used is rather basic, the enterprise market still grows at an exponential rate year on year on account of the fast-increasing Chinese economy and the progress towards informationization in most organizations. However, small companies with less business needs prefer to continue using free services offered by Mass Portal Websites such as Sohu.com, Sina.com.cn and TOM.com. This alludes to a huge market potential for paid hosted services. Hosted services in China have seen positive tractions over the past 2-3 years, witnessing good mid double digit growth in 2009 as a result of the cost cutting exercises across corporations due to the financial crisis. It is expected to grow to US $28 million by the end of Expected exponential growth in the number of SMBs, cash flow management convenience of pay-as-you-go financing model and cost savings concerns are the top drivers that make up the rapid expansion of the market. BFSI, Government, Professional Services and IT services verticals contribute the most Hosted market revenue in Apart from the positive aforementioned driving factors, there are also some hindering restraints that need to be addressed with care. Firstly, many companies in China strongly believe that should be a core function hosted on-premise to overcome concerns on confidential information leakage. This psychological barrier is anticipated to persist within the short 2010 Frost & Sullivan Page 2

3 term and makes many enterprises especially large conglomerates hesitant in adopting Hosted solutions. Secondly, some MNCs have their own on-premise legacy systems in place before setting up offices in China, thus, their MIS policies often require them to tap on servers overseas. Moreover, many have multiple databases and applications running on or integrated with the in-house servers. Seamless migration remains problematic for many. Lastly, many small hosted vendors in China run on different platforms and even illegal websites, which leads to unsatisfying user experience. Industrial standardization and common protocols need to be established to squeeze vendors providing inferior services out of the market. Functionalities of the Hosted services provided are imperative to end users choices of vendors. The table below summarizes the common key functionalities of the current Hosted services in the market. Key Vendors in the Chinese Hosted Market There are primarily three types of market players in the market: Telco service providers, in-house developed solution vendors and key vendors authorized hosted/managed partners. Unbeatably, in-house developed solution vendors take up the majority of the market share and most of their systems are proprietary and built based on Unix/Linux platform. These vendors are mostly domestic and include vendors such as 263.NET, CORP EASE, 35.COM, NET.CN, XIN.NET, 21CN and China Telecom. 263.NET, CORP EASE and 35.COM are leading the Chinese Hosted market and their geographical presence focuses are on East and South China especially along the coastlines. Direct and channel sales are both critical to their businesses, except 35.COM who only emphasizes on direct sales team building. Different editions or bundles of Hosted services are provided to cater for the various business needs of enterprises across horizontals. Good tractions from the large enterprises are seen compared to those for other vendors, as by 2009, about one third of their business comes from large enterprises. In spite of the domestic vendors dominant performance in the Hosted market, they have some intrinsic selfdeficiencies which make them less competent on an international platform. For instance, most of their hosted solutions are not able to be integrated with key Collaboration vendors applications, such as IP Telephony, Conferencing and Instant Messaging. As enterprise communication emerges towards a collaborative and integrated system, domestic Chinese Hosted vendors will be placed at a disadvantageous position. In addition, most solutions don t have English or other languages support which will restrict their solution s prevalence in overseas countries. Limited geographical presence abroad is also a major hindrance, since most vendors have yet penetrated into overseas market and set up local branches or offices Frost & Sullivan Page 3

4 Nevertheless, these vendors have had a long presence in the market and have already built up good rapport with the local government and have strong presence at regions near their headquarters. Although the Chinese vendors have a long way to go to compete on a global basis, their domestic performance is still considered remarkable and a force to reckon with in the near future. Looking Forward Total Hosted market revenue in China is small but with lucrative market potential. A double digit CAGR in the high teens from 2009 to 2014 is expected along with the strong global economic recovery. Integration, Customization and Mobility depict the future technological development of the Hosted in China. Integration: As enterprises have increasing demand for information surveillance, storage and sharing, a Hosted platform integrable with applications like Instant Messaging and business processes like CRM and OA will be preferred. This is also an area domestic Chinese vendors lack the most. Customization: Personalized interfaces, login pages with company logos, mailboxes bundled with multiple of domain names, such flexibility in customization fascinates organizations in China. Mobility: Businesses in the 21st century require employees to communicate efficiently and effectively, thus, the traditional PC/Internet way of accessing s cannot meet business demand. With the prevalence of 3G services and smart phones in China, mobility applications of Hosted for mobile portals would come under the limelight Frost & Sullivan Page 4

5 Contact Tel: (65) Website: www. frost. com Trademarks Frost & Sullivan is a registered trademark of Frost & Sullivan. All other trademarks referenced in this document are the property of their respective owners. These references are for informational purposes only and are not intended to imply any endorsement by or affiliation with any of them. Disclaimer These pages contain general information only and do not address any particular circumstances or requirements. Frost & Sullivan does not give any warranties, representations or undertakings (expressed or implied) about the content of this website; including, without limitation any as to quality or fitness for a particular purpose or any that the information provided is accurate, complete or correct. In these respects, you must not place any reliance on any information provided by this document for research, analysis, marketing or any other purposes. This document may contain certain links that lead to websites operated by third parties over which Frost & Sullivan has no control. Such links are provided for your convenience only and do not imply any endorsement of the material on such websites or any association with their operators. Frost & Sullivan is not responsible or liable for their contents. Copyright Notice The contents of these pages are copyright Frost & Sullivan Limited. All rights reserved. Except with the prior written permission of Frost & Sullivan, you may not (whether directly or indirectly) create a database in an electronic or other form by downloading and storing all or any part of the content of this document. No part of this document may be copied or otherwise incorporated into, transmitted to, or stored in any other website, electronic retrieval system, publication or other work in any form (whether hard copy, electronic or otherwise) without the prior written permission of Frost & Sullivan. About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting and Growth Team Membership empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. For more information about Frost & Sullivan s Growth Partnerships, visit Frost & Sullivan Page 5