Part 5 of “Cloud-Driven Competitive Advantage” series
As the largest and most dynamic segment of China’s business landscape, small and midsize firms have the power to turn the world’s most populous nation into a global cloud powerhouse. Exponential growth in data, technology-focused government programs, and disruptive innovation are feeding firms’ appetite for cloud investment. In fact, the Chinese government estimates a 2.5x expansion in the value of the cloud computing industry – from 150 billion yuan in 2015 to 430 billion yuan by 2019.
For small and midsize businesses across the country, this level of attention on the cloud is setting the stage for digital transformation. The IDC InfoBrief “Using Cloud Capabilities for Competitive Advantage: How Small and Midsize Companies Worldwide Are Adopting Cloud Technology to Meet Key Business Goals,” sponsored by SAP, recently revealed that 56% of surveyed executives from Chinese firms prefer the cloud for future deployments. Meanwhile, 70% of small businesses and 88% of midsize companies in China are using cloud resources as either a single application subscription or a full-scale adoption.
Growing interest in the cloud is great news, but mass adoption and full use of cloud value – from infrastructure as a services (IaaS) to platform as a service (PaaS), software as a service (SaaS), and the emerging artificial intelligence as a service (AIaaS) – still have a long way to go. As discussed during my recent meeting with IDC analysts, on-premise investments in firms across China currently account for 77% of enterprise IT spend. Of the 23% allocated for the public cloud, approximately 63% reside with infrastructure as a service (IaaS) technology. The value of PaaS and line-of-business applications has yet to be understood and captured by small and midsize business owners, especially in non-Internet companies.
Challenges in cloud perception persist, but can be overcome
In China, for SME companies, the founders and CEOs – not only CIOs and IT leaders – are the ultimate decision makers for selecting technology that impacts the entire business. While this approach is optimal for getting executive buy-in and achieving widespread user adoption, not all companies have a boardroom of experts who understand the full value of every form of technology.
As soon as one of the analysts at that IDC meeting told me that 56% of firms in the cloud are Internet businesses, I immediately knew why. These companies, by nature, build their business model on the cloud to operate with agility and innovate continuously without constant intervention from IT. Executives in this industry know what technology like the cloud offers, and have the know-how to extract more value through innovation.
In essence, it is knowledge that separates Internet firms from the rest of China’s community of small and midsize businesses. Once executives learn how to resolve concerns over cost, security, and operational consistency, they can rapidly advance their use of cloud-based services and applications.
Take custom door and window manufacturer ISUNHOME, for example. The company uses small batches of personalized customer information to quickly respond to customer inquiries and orders and to keep production costs low. After learning about a cloud-based ERP solution designed specifically for small and midsize businesses, ISUNHOME decided to implement it to process, share, and analyze every piece of data – from the front-end retailer to the plant floor. The company unified its e-commerce platform, self-owned website, sales order system, lead and customer relationship management capabilities, and supply chain operations with the solution. Soon after the cloud migration was live, the firm reduced its delivery time from 25 working days to 15 working days.
Another excellent example is Aimichey, which competes with tens of thousands of shoe companies that are facing fierce market competition and a backlog of slow-selling inventory. The firm decided to solve this problem by adopting a cloud platform to custom produce shoes. By integrating machine learning with the platform, designers can assess market demand, apply the fashion elements that customers want, start the design process, and deliver the new shoe style within one week. At the same time, customers can design their own shoes online, use virtual reality and 3D scanning technology to “try on” their creation digitally, and purchase the shoes on the e-commerce site.
Made in China: The need to innovate drives cloud adoption
Small and midsize businesses in China are working hard to keep pace with an ever-evolving marketplace while economic development slows down. Thanks to government innovation-led and technology-driven strategies such as “Internet Plus” and “Made in China 2025,” digital transformation is regarded as a critical necessity.
Business leaders must have a clear understanding of the value of the cloud to realize the full potential of their digital strategy. Whether the immediate need is to accelerate Big Data analysis, take advantage of the Internet of Things, or create a new business model, the cloud can help small and midsize firms reshape operations, engage customers better, and build attention-grabbing market leadership.
Find out how cloud technology is helping firms achieve their strategic goals and become a disruptive force in the marketplace. Read the IDC InfoBrief “Using Cloud Capabilities for Competitive Advantage: How Small and Midsize Companies Worldwide Are Adopting Cloud Technology to Meet Key Business Goals,” sponsored by SAP. And don’t forget to check every Tuesday for new installments to our blog series “Cloud-Driven Competitive Advantage” to explore the possibilities for your business.