The outbreak of the SaaS industry is coming, how will KINGDEE INT'L (00268) secure its position in the billion-dollar market?

Chairman and CEO of KINGDEE INT'L (00268), Xu Shaochun, expressed at a semi-annual performance meeting, "For our software industry, it is not the 'most dangerous moment' that has arrived, but rather the golden decade of Chinese enterprise software SaaS services has arrived, and of course, this is also the golden decade of our Kingdee's development." Currently, based on the needs of major enterprises to reduce costs, increase efficiency, and implement refined management, the SaaS industry is experiencing a surge in demand. According to a report released by the Cloud Computing and Big Data Research Institute of the China Academy of Information and Communications Technology titled "Research Report on the Development of China's Enterprise SaaS Industry (2024)," the size of China's SaaS market reached 58.1 billion yuan in 2023, with a growth rate of approximately 23.1%. With the continuous development of AI technology, the SaaS industry is experiencing a new round of innovation. The report also points out that China's SaaS industry started relatively late and is currently in a stage of growth and transformation. Currently, various sectors including industry, academia, research, and application are beginning to explore new models, new formats, and new impetus, exploring the integration of SaaS with technologies in cross-cutting fields such as artificial intelligence, big data, and the Internet of Things, promoting industry growth. The rapid development of AI technology combined with exploration in overseas markets is bringing new growth opportunities to the SaaS industry. The report shows that AI large model technology is redefining SaaS products, creating new opportunities for enterprises. Industry experts believe that AI innovation focused on customer needs can help companies solve practical problems and enhance the competitiveness of applications. For example, internal research by BlueFocus Intelligent Communications Group indicates that its AI technology application has significantly improved employee efficiency, resulting in a 55% increase in overall production efficiency. Additionally, Hisense Group's Employee Huo Platform, combined with Kingdee CloudCangqiong GPT's large model platform capabilities and Kingdee CloudStar Han Human Resource Cloud functions, has achieved precise identification of candidates based on positions, significantly increasing the proportion of internal talent supply, reducing the loss of outstanding employees, and improving human resource allocation efficiency. The growth of SaaS business in various well-known software companies also confirms that the market is releasing tremendous business opportunities. In the first half of 2024, including Kingdee, several SaaS manufacturers invested by Kingdee achieved cloud revenue growth of more than 20%. Kingdee Cloud's annual recurring revenue (ARR) from subscription services in the first half of this year increased by 24.2%; Fshare Sales Customer (CRM SaaS) saw a 23% increase in SaaS revenue in the first half of this year; DuoDian (retail industry SaaS) experienced a 24% growth in the first half of this year; and Xiren Xingshi (HR SaaS) had a 24% increase in SaaS revenue in the first half of this year. Industry analysts believe that the growth of well-known software companies' SaaS businesses is being driven by multiple factors: the transformation of the digital economy is generating hard demand, the SaaS subscription model is reducing the burden on enterprise IT, the maturity and security improvement of mainstream SaaS products are meeting enterprise needs, and AI is becoming a new growth engine in China's economic transformation. AI is expected to disrupt the SaaS industry, bringing challenges and opportunities, and enterprises that integrate AI innovation with a customer-centric approach will achieve greater growth. GMTEight understands that Kingdee (00268)'s various cloud service products have been favored by benchmark enterprises, including Kingdee CloudCangqiong (Next-generation enterprise AI platform), Kingdee CloudStar Han (Large enterprise SaaS management cloud), Kingdee CloudStar Sky (High-growth enterprise SaaS management cloud), Kingdee CloudStar Chen (Small and micro enterprise SaaS management cloud), which have provided enterprise management cloud products and services to over 7.4 million companies, governments, and other organizations worldwide. Value innovation and collaborative development are the core strategies for the future development of KINGDEE INT'L (00268). SaaS companies in China have always been "rolling prices," with some vendors even choosing irrational super-low prices to win market competition, which although wins customers, leads to continuous losses and huge financial risks. Investigations and analysis indicate that SaaS requires software suppliers to invest more resources in product development, and customer migration costs are low. If customer needs are not met, customers will quickly leave. Therefore, what SaaS companies really need to focus on is not just pricing, but value. Products that truly provide value to customers, bring new value increments, and naturally have room for price increases. For example, last August, Salesforce raised the average prices of Sales Cloud, Service Cloud, Marketing Cloud, Industries, and Tableau by an average of 9%. The price increase was attributed to the value created for customers, as through Salesforce, customers could deploy innovative technologies with a company in sales, service, marketing, and business areas, reducing complexity and quickly realizing value. Similarly, in a survey of voting on the pricing of SaaS products, data shows that a distribution of sales method is the most valued, but the premise is that SaaS companies can prove that sales growth is directly related to the product. It can be seen that for SaaS companies, it is important to focus on the value of the product continuously. In addition to value management, for SaaS companies and KINGDEE INT'L, to open the door to this golden decade, embrace massive market opportunities, only through cooperation, partnership, and win-win situations can they achieve long-term stability. The industry points out that the core of the SaaS model lies in standardized products, and SaaS companies cannot meet all the needs of different enterprises. Therefore, the most suitable approach is for SaaS companies to focus on their core strengths in research and development, polish their products to perfection, and allow partners to implement other aspects; marketers should treat channel partners well, providing necessary help and support in delivery and market development, and achieve win-win situations with partners.