Digital transformation, ERP accelerated decline, or rush forward?

21.1% of enterprise users are dissatisfied with ERP system, and only 44.8% are satisfied with ERP system.

Many people think that ERP will be replaced by more new technologies, such as digital operation platform DOP, business innovation platform BiP of enterprise information management, and overall enterprise business capability platform EBC, so as to bring more platform innovation.

Correspondingly, in the future planning of enterprises, whether to choose ERP or digital transformation, the survey found that 47% of enterprises still choose ERP and 53% choose digital transformation.

The 2021 ERP report released by panorama consulting, a market consulting company, gives us a group of new data, which is very impressive.

As the saying goes, “if you succeed, you will lose.”. But no matter how, as the core application of enterprises, ERP occupies an irreplaceable position, and it is also the key field of Xinchuang in the application layer.

01. Increase of domestic ERP market share

Since the birth of ERP, because of the wide range of software products, long consultation and implementation service cycle, high cost and other aspects, the success rate of ERP has become the focus of the industry. However, this does not prevent the global top 500 enterprises from actively adopting ERP, nor does it prevent ERP from gradually extending from large enterprise users to small and medium-sized enterprises, or even small and micro enterprises. ERP’s contribution to standardizing enterprise processes and improving efficiency has always been praised by users.

Looking at the ERP market which is becoming more and more popular in recent years, we find that the progress of domestic ERP enterprises is obvious to all, and its development presents distinct characteristics.

The localization process of ERP is accelerated, and the market share of national ERP enterprises is further improved. Compared with the market share rankings of China’s ERP in 2008 and 2018, the relevant research institutions can see that UFIDA, Inspur, Kingdee and other local ERP manufacturers have achieved anti surpassing compared with foreign traditional ERP brands such as SAP and Oracle.

Another distinctive feature is that the pattern of high-end ERP market monopolized by international enterprises began to crack. At present, the domestic state-owned enterprises that have entered the global top 500 have basically adopted the domestic products such as Inspur and UFIDA. Because they adapt to the management ideas and large-scale development trend of Chinese enterprises, the domestic ERP products have excellent performance with Chinese enterprises going overseas.

All kinds of signs show that the high-end ERP market originally controlled by overseas giants is constantly penetrated by local ERP manufacturers, but the comprehensive replacement is a long process.

Similarly, the growth rate of traditional ERP decreases, but the market concentration increases. According to the data compiled by the foresight Industry Research Institute, the growth rate of China’s ERP market scale has declined from 29% in 2012 to 11% in 2018. The growth rate of global ERP market dropped from 4.4% in 2010 to 2.3% in 2017. In the past few years, the growth rate of both the global ERP market and the Chinese ERP market has been gradually declining, which means that the penetration rate of ERP is approaching the ceiling, especially for the overseas market with the leading industrialization process. After nearly 30 years of rapid development, China’s ERP market is basically close to this level.

The market concentration of ERP industry will be further improved in the next ten years. The main performance is that the market share of UFIDA, Inspur, Kingdee and Dingjie, which are the leading ERP enterprises in China, is constantly increasing, while the international companies sap and Oracle will lose part of the market. Therefore, there is still room for leading companies to increase their income and profits, and small and medium-sized ERP enterprises are facing the pressure of transformation.

The participants of China’s ERP software industry are mainly divided into several camps: first, multinational ERP giants, including SAP, Oracle, IBM, infor, and oodo, which later entered the Chinese market; second, national ERP software leadership, UFIDA, Inspur, Kingdee, etc; Third, ERP enterprises for specific industries, such as Yum software for clothing industry, QAD for manufacturing enterprises, etc.

In terms of products, the first matrix of ERP is aimed at large enterprise users, including products such as SAP s / 4hana, Oracle ERP cloud, the infor cloudsuites, etc. The Xinchuang camp includes UFIDA NC cloud, Kingdee cloud · sky, Inspur cloud GS cloud, etc.

The second square array is mainly aimed at medium-sized enterprises. Foreign products such as Microsoft Dynamics 365 finance, netsuite, sage enterprise management, etc., while Xinchuang enterprises include yonsuite / U8 and other products of UFIDA, Kingdee cloud · star, insuite of Inspur, etc.

The third camp is ERP manufacturers that meet the needs of specific industries, as well as a large number of enterprises’ products that meet the needs of small and micro enterprises, such as Oracle’s netsuite, SAP business one, etc., while Xinchuang’s products include a large number of domestic enterprises’ products, such as digital China’s ERP products Yizhu, Qiankun ERP, etc.

02. The high-end ERP market will be broken, and the ERP of large enterprises will thrive

Wang Xingshan, CEO of Inspur Group, believes that the current enterprise digital transformation presents five major directions in the new stage: first, digital transformation is not only a technical problem, but also a dual wheel drive of “digital technology + management innovation”; second, digital transformation should adhere to the problem orientation and make valuable transformation; third, group enterprise digital transformation, sharing services first; third, group enterprise digital transformation, sharing services first; Fourth, the environment is unstable and uncertain, which requires more prediction and intelligent decision-making; fifth, the digital transformation of large enterprises from application to platform.

Therefore, the introduction of digital platform for large enterprises, providing powerful PAAS and rich SaaS, and based on their rich service experience in large enterprises, has become the “huge engine” for the digital transformation of the main ERP enterprises in China.

In terms of transferring to the cloud, ERP for large enterprises has made rapid progress. The public cloud deployment and private deployment of cloud ERP have always been a hot topic in the market. The core of ERP for large enterprises is private cloud deployment and hybrid cloud deployment.

Private cloud deployment has not completely changed the business model of ERP. Private cloud deployment is the deployment of ERP software on the customer’s own server, which is still a one-time payment or annual payment, and does not reflect the advantages of SaaS pay per use.

In China, local deployment, private cloud deployment and customization will still exist for a long time, especially for large enterprise customers. ERP is highly related to business process, so privatization and customization are inevitable. For example, less than 10% of Huawei’s ERP system adopts commercial ERP products, and the rest are customized and developed. Google abandoned Oracle’s ERP products, adopted low code and developed its own ERP system.

There is no problem in the adaptation of China’s ERP Based on Xinchuang technology stack. Domestic ERP are steadily promoting the adaptation work from the server to the client, it can be said that it has been in the stage of being available to easy to use. For example, UFIDA NC cloud large enterprise digital platform has completed the full stack adaptation of six chip technology stacks, as well as the adaptation of database, middleware, operating system, browser, streaming office software, Xinchuang printer terminal and other peripherals. At the same time, it has obtained PK compatibility certification of CEC safe and reliable software and hardware joint research base, Huawei stack technology certification, etc.

In terms of products, UFIDA builds and operates yonbip, the world’s leading business innovation platform. NC cloud, as a digital platform for large enterprises in yonbip service group, focuses on digital management, digital operation and digital commerce, and helps large enterprises realize the comprehensive digitization of people, finance, materials and customers. It can support the mixed cloud deployment scheme of large, medium and super large group enterprises, and provide 18 major solutions such as digital marketing, intelligent manufacturing, financial sharing and digital procurement for 14 major categories and 68 sub sectors of manufacturing, consumer goods, construction, real estate, finance and insurance, so as to help enterprises fully implement digital intelligence and reshape their core competitiveness.

Technically, NC Cloud is based on cloud native architecture, and integrates AI, multi terminal technology, enterprise level low code development and other capabilities. It has the characteristics of high availability, high reliability, high performance, high security, advanced technology, stable performance, independent security and controllability. It supports n-tier multi site hybrid cloud deployment solutions for large, medium and super large group enterprises, supports enterprise business agile delivery, and enables managers to innovate and innovate Management reform helps enterprises realize digital transformation.

Inspur cloud ERP launched a new generation of large enterprise digital platform GS cloud3.0, which adopts a new generation of computing architecture such as cloud native and container, adhering to the principle of “experience sharing intelligence” The new concept of “open” helps enterprises to create four digital capabilities of “comprehensive experience capability, intensive sharing capability, digital intelligence driving capability, and open integration capability” with five major technical features, such as low code, high control dual engine platform, new interactive experience, and safe opening, so as to reconstruct business agility response capability, accelerate the construction of smart enterprises, and create a symbiotic, CO creating, and win-win environment New ecology.

Inspur cloud ERP has served enterprise informatization for more than 30 years, and has rich practical experience. It has served 67% of central enterprises, 38% of state-owned enterprises, 31% of China’s top 500 enterprises, and 13% of the world’s top 500 enterprises. It has provided digital transformation services for many large enterprises such as Dongfang Electric, China Consulting Corporation, China Tower, Weichai Power, and helped the construction of smart enterprises.

As the first cloud native architecture platform in China with the core goal of building the five capabilities of EBC, Kingdee cloud sky has won the favor of many large enterprises. Kingdee cloud · firmament officially released V3.0 at the end of 2020, continued to accelerate application research and development, strengthened technical advantages, and significantly upgraded the platform architecture. At the same time, it also focused on optimizing the opening capacity.

Kingdee launched Kingdee cloud · sky PAAS platform, which supports cloud native, micro service, distributed computing and storage, container service and multi tenant capability, and provides SaaS services covering the whole process of enterprise management, including employee service cloud, financial cloud, human resource cloud, procurement cloud, manufacturing cloud, sales cloud, logistics cloud and channel cloud.

It is understood that it teams and business teams of large enterprises can quickly realize business innovation and system replacement based on the low code platform of sky, which also makes Kingdee win orders with the advantages of standardized configuration and rapid deployment in the POC (proof of concept) stage. According to the financial report of Kingdee International in 2020, the signing amount of Kingdee cloud sky, a SaaS + PAAS platform based on cloud native architecture, has doubled to 470 million yuan, making a huge breakthrough in the market of large and super large enterprises.

03. Cloud ERP dominates the SME market

In 2015, Gartner, a market research organization, was acutely aware of the acceleration of traditional ERP cloud. The managed ERP software market (including core financial system, financial analysis and reporting, project financial management, non productive material procurement management system) is rapidly changing from the traditional deployment mode to the cloud.

In recent years, with the acceleration of cloud services, cloud ERP Based on public cloud has brought new development opportunities for traditional ERP and won the ERP market of small and medium-sized enterprises.

According to the data of panorama consulting, at present, 61% of the enterprises in the world have adopted ERP deployed in the cloud. However, alliedmarket research estimates that the current cloud ERP market size accounts for 43% of the global ERP market size. Therefore, it can be estimated that the global cloud ERP market share is expected to further increase.

Compared with traditional ERP, cloud ERP Based on public cloud deployment has the advantages of more comprehensive product functions, more cost-effective use, more secure data and information, more efficient improvement and upgrade, and faster service response. Comparatively speaking, the cloud ERP has less investment in the early stage, higher system stability, corresponding technical maintenance provided by service providers, and is also easier to be accessed. Therefore, large enterprises with high customization and security requirements often choose local deployment or private cloud deployment, while small and medium-sized enterprises with weak technology and funds and flexible access are more suitable for SaaS deployment.

Foreign ERP giants have lost the opportunity in the wave of ERP cloud in China. The domestic manufacturers actively layout, take the lead to complete the ERP cloud upgrade, take advantage of the system replacement opportunities brought by cloud computing, in order to achieve overtaking in the middle and high-end ERP market. UFIDA, Kingdee and Inspur’s cloud businesses account for more than 50% of their respective revenue year by year, and the overall progress is relatively rapid.

In 2013, Kingdee took the lead in starting cloud transformation when major domestic software manufacturers were still watching carefully. Since then, Kingdee has publicly proposed that more than half of the group’s revenue will come from cloud business by 2020. After this goal was achieved, Xu Shaochun, CEO of Kingdee International, once again made a bold statement: “Kingdee will continue to strengthen the transformation strategy of cloud subscription mode, and build a new Kingdee with subscription mode in the next three years.”

Cloud ERP model reduces the fixed cost of deploying ERP, and shortens the amount and period of delivery. In fact, it reduces the user’s stickiness to ERP products, and reduces the barriers for domestic manufacturers to replace foreign manufacturers. From the development of China’s cloud ERP market, foreign ERP giants have lost the opportunity in the wave of China’s ERP cloud.

As an ERP SaaS service, cloud ERP will enter the second stage of cloud transformation, aiming at the high-quality development of cloud subscription mode, and the core business indicators will also shift from cloud share to arr (annual recycling revenue).

Arr (annual recurring revenue) is one of the most critical financial indicators of SaaS subscription business, which is the annual recurrent revenue. The recurrent revenue of SaaS business comes from the subscription of customers, which is the sustainable revenue in the future, with the characteristics of stability, predictability and high certainty. Generally, for SaaS subscription service contracts signed annually, arr is usually used to measure the recurrent revenue; if subscription service contracts are mainly signed monthly, MRR (monthly recurring revenue) is used to measure the monthly recurrent revenue.

According to the survey conducted by kbcm technology group, an American investment bank, on 325 SaaS enterprises with an arr greater than 5 million, the median growth rate of these enterprises’ arr in 2020 is 20.5%.

In terms of products, independent and controllable cloud ERP products are leading the development of the industry in technology and other aspects.

Kingdee Cloud Star deepens the industry’s digital intelligence empowerment and becomes a star product of medium-sized enterprises. Kingdee Cloud Star provides Omni channel marketing cloud, intelligent financial cloud, intelligent manufacturing cloud, intelligent supply chain cloud and PLM R & D cloud to realize the dead cycle of enterprise’s whole value chain business, innovate the non-contact marketing mode, upgrade the cloud delivery platform, realize the fast launch of subscription products, help enterprises reconstruct digital combat power, and speed up the transformation and upgrading of enterprises with digital intelligence.

Insuite is a new generation of open source cloud ERP for growing enterprises. The product adopts cloud native architecture. It not only provides online SaaS services in key fields such as finance, supply chain, intelligent manufacturing, cost and collaboration, but also provides low code designer and high availability cloud development platform. It can quickly respond to the personalized needs of individual enterprises and small multi organization groups, covering the whole life cycle To lead the enterprise from internal refinement to the comprehensive digital road of internationalization, intelligence and ecology.

At the same time, with the product concept of “connection, empowerment and innovation”, it focuses on data-driven business capabilities and key applications of industry and finance integration, aiming to create an internal and external connected, interactive and self evolving “cloud community” for growth enterprises.

For the construction of cloud community, Inspur in suite continuously aggregates various kinds of partners such as sales, consulting, delivery, integration, development and service through innovative application cloud, solution cloud, implementation cloud, interface cloud, development cloud and service cloud, and provides online diversified services such as product and industry solutions, system delivery, interface integration and customized development to customers of growing enterprises Build a “platform + ecology” partner system to jointly provide full life cycle services for growing enterprises and support enterprise digital transformation and business innovation.

From this point of view, customer satisfaction is the key factor to determine the renewal rate of Enterprise Cloud ERP in the future. To make user satisfaction become the direction of small and medium-sized cloud ERP service, and also the starting point of Xinchuang ERP.

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