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SCMP Reporter

Industry watchers say the mainland firm should adopt a more flexible corporate culture

Two months after announcing an ambitious overseas expansion plan, the mainland's Kingdee International Software Group may find the strategy has as many weaknesses as strengths.

Recent technology and process upgrades are expected to boost the company's efforts to expand internationally from its Asia-Pacific headquarters in Hong Kong.

But industry experts say those developments are not enough to push the Shenzhen-based firm into the league of industry giants such as SAP and Oracle.

Robert Xu Shaochun,  chairman and chief executive at Kingdee, said the company was on track to meet its key expansion targets.

These goals include becoming the Asia-Pacific region's top supplier of business-automation software by 2006 and making the world's top 10 enterprise application companies.

Kingdee, which is listed on the Growth Enterprise Market, hopes to cultivate new markets in Australia, Malaysia, Singapore, Vietnam and Thailand, and is pursuing software  outsourcing contracts in the United States.

'We are striving to create a global company,' said Mr Xu.

He said the number of Hong Kong users was also expected to increase because of initiatives under the Closer Economic Partnership Arrangement.

SAP Greater China president Klaus Zimmer  said Kingdee might be strong in Chinese government and small- and medium-sized business projects but it was behind in large corporate contracts.

'We have not seen Kingdee participate in any of the major enterprise projects in the mainland,' Mr Zimmer said.

He noted, however, that Kingdee was expanding faster than its larger mainland rival UFSoft.

Gartner Asia-Pacific research director Dion Wiggins said Kingdee might not have the international management structure and resources to compete against larger western business software vendors.

'It needs to change its corporate structure and get more resources to support its international operation,' he said.

Kingdee  employs more than 2,000 staff in 46 locations and has three research and development centres in the mainland. The company saw net profit surge 45.3 per cent to 59.13 million yuan last year.

Mr Wiggins said Kingdee should adopt a more flexible attitude in its expansion plans - for example, granting autonomy to overseas branches in their sales and business development programmes.

Despite the perceived lack of a sophisticated international management structure, Kingdee has moved to improve its technology to catch up with more established foreign competitors and scale to the requirements of large companies.

Mr Xu said the company last month obtained  Level 4 Capability Maturity Model (CMM) accreditation,  from the Software Engineering Institute of the United States. Kingdee is one of five mainland software firms to receive CMM Level 4 certification, a global standard for assessing and improving software engineering processes.

'This certification marks a significant step for Kingdee's software applications outsourcing business,' said Mr Xu, who projected the company's outsourcing operations would comprise about 15 per cent of total revenues by 2006.

There are fewer than a hundred companies worldwide with CMM Level 4 certification. But top Indian outsourcing firms such as Wipro Technologies already have  CMM Level 5.

Last week, a subsidiary of Kingdee licensed the use of Sun Microsystems' latest Java application development platform in a move to extend use of the company's enterprise software product portfolio.

Shenzhen Kingdee Middleware, formed in July 2000 after the mainland's Central Research Institute was integrated into Kingdee, agreed to license version 1.4 of Sun's Java 2 Platform Enterprise Edition - a technology used for Web-based services development across disparate  systems.

'To take a position in the world [market], China's software products must be equipped with world-leading technology,' Mr Xu said.

He noted that J2EE would enable Kingdee Middleware to develop new products suited to international customers.

Middleware covers any programming that serves to bind together disparate software programs. Having such a competitive software infrastructure platform would allow Kingdee's business applications to work well within many large organisations, which often run a variety of  software products.



Kingdee faces obstacles on path to global expansion