Until now, Chinese industries have largely been playing catch-up in their use of IT. After all, who needs IT-driven efficiency drives while labour is cheap and plentiful?
But rising labour costs and the challenges of globalisation are now obliging Chinese companies to copy their western counterparts and use IT in a much more strategic fashion.
While the revenues that western enterprise software companies get from China is today relatively modest, analysts believe that the tipping point is close. So vendors are redoubling their efforts to woo Chinese businesses, which have historically winced at paying high prices for software like enterprise resource planning (ERP) suites.
Oracle, the world's second largest ERP vendor, has made a raft of China' announcements in the past couple of days to coincide with its Oracle OpenWorld Asia Pacific user conference, which this year was held in Shanghai.
Oracle claims business is booming in China, which is now its sixth largest market. Roger Li, regional managing director for Oracle Greater China said: “Customer growth in China has been very strong this year. Across key industries, we are winning more deals as customers increasingly prefer a single vendor who can meet all their needs.”
One of the themes jof the event was the rise of China as a hi-tech manufacturing base both for foreign companies and, increasingly, for home-grown players. So the Shangai event features a Hi-Tech Industry Strategy Council, at which Oracle's hi-tech customers heard about the challenges facing the high-tech industry in Asia. Topics covered included product lifecycle management, global trade management, price management and IPR manangement.
Always keen to score points over arch-rival SAP, Oracle claims it is now the leading enterprise software vendor in a number of key industries across Asia Pacific and in China, such as banking, financial markets, education, communications & media and process manufacturing. A few of Oracle's customers were on hand to lend support to Oracle's sales pitch.
EngagingChina is always suspicious of the quotes that customers contribute to vendors' press releases. That's because the quotes are often prepared by the vendor's PR people. In China, there is the additional problem of the language barrier, so its unlikely the following quotes came direct from the horse's mouth.
Nevertheless, it is interesting to see how Chinese businesses have apparently fallen for the IT industry's marketing messages.
“Our Oracle-based ERP system has helped us streamline processes and establish sound management and cost control systems. We now have complete control over every aspect of our business,” said Zhong Tonglin, executive vice general manager of Huadian Power International.
“The fierce competition in China's insurance industry has called for Aviva-Cofco to adopt the latest business management applications to improve efficiency and lower costs,” said Zhang Wenwei, president of Aviva-Cofco Life Insurance.
Aviva-Cofco claims it is the first company in China to set up a shared services centre, a concept that is much in vogue with western multinationals.
Perhaps the most interesting quote is from Guang Zhengkuang, IT director at Midea Group, one of the top electronic home appliances manufacturers in China.
We have established an order-driven business model with Oracle supply chain management. This not only helps us to optimise internal business processes, improve collaboration with our vendors and expand to other markets overseas, it also supports our long term business growth plans.”
Chinese hi-tech companies may be leaders in their domestic market but they realise that if they are to compete in overseas markets then they need to use the same IT weapons as western multinationals.
To help meet the increased customer demand Oracle is seeing in China, the US software house has expanded its presence and operations across the country. To date, Oracle has established eight new branch offices in Shenyang, Dalian, Nanjing, Jinan, Xi'an, Chongqing, Hangzhou and Fuzhou.
At the user event, Oracle announced a new R&D centre is Shanghai, its seventh in the AsiaPac region and its third in China. The Shanghai centre will focus on ubiquitious computing and Web 2.0 technologies. More on the R&D centre in this release.
Earlier this year, Oracle Consulting launched a China Solutions Services Centre in Chengdu to provide consulting services for customer projects in north Asia. A similar centre is being planned in Shenyang in northeast China to take advantage of the availability of Korean and Japanese speaking software developers.
Last year, Oracle established an Oracle Global Support Centre in Dalian to provide technical assistance primarily to Oracle customers in China. It also serves as a multi-lingual service desk to provide local-language assistance to Oracle customers in Taiwan, Korea and Japan.
Oracle is hardly the first western software industry to “talk up” China. But its interesting to see how, in the last 18 months or so, these intentions have translated into a raft of specific initiatives and investments that suggest that as far as Oracle is concerned, China is both a fast-growing new market opportunity and also a source of innovation and talent.