China's SaaS: An 'Open Ocean' Up Ahead

Kingdee (00268:HK)

Holding 6.8% of China's cloud market, per EqualOcean data, Kingdee has maintained the largest share in enterprise SaaS cloud services for two consecutive years, while its enterprise-grade SaaS ERM (cloud ERP) and 'Financial Cloud' services have taken this position for 4 consecutive years. Kingdee is also one of the largest ERP software providers in China.

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In 2020, Kingdee continued to redirect resources to the SaaS business, leveraging its large corporate customer pool, in an attempt to gradually alienate itself from the ERP software business by focusing on the development and promotion of subscription-based cloud products. As a result, the SaaS business reached 57% of the total revenue in the 2020 fiscal year, surpassing the ERP business (43%) for the first time. After cultivating a solid customer base in its ERP segment, Kingdee would be able to convert many of them into buyers of the other services.

Kingsoft Cloud Holdings (KC:Nasdaq)

Kingsoft Cloud is the largest independent cloud service provider in China. Unlike many others in the space who tend to be narrowly segmented, it has extended from its original infrastructure-as-a-service (IaaS) model to platform-as-a-service (PaaS) to SaaS, forming a complete closed-loop that covers the entire cloud computing market to achieve cross-functional expansion as the scale grows. Kingsoft Cloud has built a comprehensive cloud platform consisting of extensive Cloud infrastructure, diverse products and industry-specific solutions across public cloud, enterprise cloud and AIoT cloud services. Powered by Kingsoft Group's enterprise service capabilities, Kingsoft Cloud is widely trusted in China and has inherited a huge customer base.

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In the midst of fierce competition in the cloud service market, Kingsoft Cloud raised a total of USD 720 million in six rounds of funding in 2017-2018 and went public in May 2020. With sufficient cash reserves and the support from consumer electronics giant Xiaomi, Kingsoft has been able to survive and thrive. Its customer are, however, so concentrated now that the three largest of them account for 53% of its revenue.

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