First thing first, MBS is short for Microsoft Business Solutions and is synonymous with Microsoft Dynamics. Microsoft Dynamics is Microsoft’s offerings on ERP and CRM systems.
On a recent trip to China, I delivered a training course – Business Action World Tour – in Mandarin, in Beijing and Shanghai, China, and here is the blog post I promised on MBS in China.
While I was there, I had a chance to work with folks from MBS China, MCS Shanghai, a local MBS partner on a 4000 seats CRM implementation for a local bank. In this post I write about what I have seen / learnt / realized some of the unique characteristics of the Chinese market in the business solutions arena and Microsoft Business Solutions in particular from working with these folks.
The business solutions market in China is pretty fairly partitioned
Tier 1 companies, ones that employ tens or hundreds of thousands of people like large telcos, banks, insurance companies, power companies, big manufacturing plants and some foreign invested global corporations. They are floating in all major stock exchange markets and are chopped up between SAP, Oracle, Siebel, IBM etc, a few global competitors. This is a global phenomena and this is no exception in China. So in terms of business solutions in this market tier, the level of maturity on both demand and supply sides is comparable to it in most developed countries. Microsoft is positioning its Dynamics Suite of ERP and CRM systems at tier 2 and 3, and there is no *good* ERP and CRM, local or foreign, for the small to medium market (Tier 2 & 3) in China apart from the Microsoft Dynamics Suite, this is great for Microsoft in the long run. But, this market tier is nowhere as mature as tier one. MBS isn’t doing particularly well comparing to other parts of the world – MBS GCR only has an annual sales target of 9 millions US and 3 millions for CRM, this is shockingly low for a 1.4 billion population economy.
In general, businesses in China, don’t fully understand the function of IT in a business
This is a true reflection of a developing economy. Business solutions in China for tier 2 and 3 market is still at its very early days, they don’t really have well defined business processes to drive their business operations, things happen and decisions are made on a very ad hoc basis, unorganized verbal communications is the main channel of driving business operations. They typically see IT systems as commodities that they can live without or a one off purchase and then shelved away for the rest of its life, there is no drive for adoption or satisfaction. They don’t see IT systems as an ongoing investment for the business to adapt changes in the business. In general, business owners and managers in China have a very primitive view on IT, they haven’t understood the value propositions of IT solutions in a business. They haven’t realized how IT solutions can drive productivity at individual workers level as well as organization level. They are yet to see the role of IT in driving company wise business operations’ efficiency, transparency, predictability and consistency. Concepts like Business Intelligence, Line of Business Solutions, Workflow driven business operations and organization collaborations are only just starting to emerge in this market tier. Then again, this is China we are talking about here, one of the main characteristics of the Chinese economy is cheap labour – if businesses can achieve the same tasks with 100 men running around manufacturing plants at 10 dollars a day, why would they choose to spend 3 million dollars on an ERP system that does roughly about the same thing?
There are, however, businesses in this tier are leading the way in adopting Line of Business solutions. They are riding at the forefront of this MBS wave and taking full advantage of being an early technology adopter. They wish to achieve two main goals from adopting a LOB solution. One, through implementing a LOB solution, they wish to define and formalize their business processes that drive their business operations. Two, they wish to benchmark these business processes against them of worldwide best practices in their specific industry verticals. This is more than just a couple of Business Analysts joggling along and formalize what’s already there. This is having specialized business consultants with relevant industry knowledge come in, look at their businesses and define their processes. This is distinctly different from what we have here in New Zealand and most developed countries where businesses already have a well defined set of business processes and business operations are driven by these processes. What they need is a *tool* to realize/automate these processes. In other words, businesses in the western world know what they do the best, IT systems implementers like Intergen, are literally “implementers” and working with the business to *refine* their business processes at the most.
So, what businesses in China need are end to end business solutions in their respective industry vertical, can MBS meet these needs?
MBS ecosystem in China lack business knowledge
In China, the MBS ecosystem is made up of MBS in China, MCS China and local MBS partners in China.
Microsoft Business Solutions (MBS) China, is a marketing and sales team that’s geared around license sales on the suite of Microsoft Dynamics products. (At the time of this blog post, MBS China only officially supports Microsoft Dynamics CRM and AX). They have technical pre-sales support, but that’s as far as it goes. They are not involved in post sales implementation.
Microsoft Consulting Services (MCS) China is a team of technology specialists and is very light on Dynamics but nevertheless they still are involved in implementations with their very limited Dynamics capability. There was only one person in MCS Shanghai that has had MSCRM implementation experience.
Local MBS partners, these folks are the main task forces for implementing MBS solutions in China. They are either foreign invested or home grown. What you’ll find amongst these partners is, they have good technical capabilities just like any other Microsoft dev shops, however they lack knowledge on industry vertical business solutions.
When I was helping out on this 4000 seat CRM implementation for a local bank, one of the senior managers asked for “Business solution for Customer Relationship Management in the banking sector”. No one could answer to that request, not MBS China, not MCS China, not the partner.
So here we have; businesses asking for best practices, benchmark business processes and solutions for running a paper mill factory on one hand, and 10 C# coders dressed up in suits and ties sitting across the table looking blindly at each other on the other hand. I’m not sure how well this deal is going down for.
There is a distinct mismatch between what the market *wants* and what MBS ecosystem in China can “provide”. This sets MBS apart from SAP and Oracle. No wonder MBS China has shockingly low sales targets…
IT service is cheap and very competitive in China
”Cheap labour” doesn’t just apply to brick shifters, it applies across the economy and also to IT Services. On average local MBS partners charge at RMB￥2000 (NZD $600 – $350, USD$300-$175 depending on forex rate) per person per day. So for the foreign companies that want to explore the Chinese market, you simply can’t compete on price with the local partners, unless you are to set up an offshore office that hire locals and pay local wages as well.
Political and social pressure
This is another unique characteristic of the Chinese economy – a social and political one. There is a fair bit of pressure from central government and communities on keeping people employed, so businesses sometimes have to consider striking a very fine balance between employment rates and company efficiency. So businesses do have to think twice before implementing a system and make a whole lot of people redundant…
Where to from here???
The demand for business solutions in China in tier 2 and 3 is already picking up, with the Chinese economy and this market matures over time, the demand will grow exponentially.
Microsoft and partners need to take a long and hard look at this market, look at the needs and wants of this market.
1. To the Chinese market, MSFT needs to position the Dynamics suite not just as products but more importantly as end to end business solutions offerings in variously different industry verticals, put solutions ahead of products.
2. MSFT actually needs to *BUILD* these business solutions offerings on top of the Dynamics products and ship them with the products, put business back into the solutions. Keep your eyes on SAP and Oracle and no else where.
3. MSFT and partners need to look at building up their capabilities around providing business solutions offerings to their customers. There needs to be business processes people, there needs to be business consultants that specialize in different industry verticals not just technical people. Again, look at how SAP and Oracle build their implementation partners.
There is a long way ahead of us all my friends, and it only gets more exciting! :)