On May 18, Tencent released its performance report for the first quarter of 2022. Among them, the single-quarter revenue of “financial technology and enterprise services” was 42.8 billion yuan, accounting for 32% of total revenue.
The financial report pointed out that Tencent’s To B business actively adjusted its revenue structure and gave up some loss-making orders. At the same time, increase resource investment in PaaS fields such as video cloud and network security.
At this time last year, Tencent Cloud and Smart Business Industry Group (CSIG) just completed a new round of strategic adjustment, and determined the three directions of deepening the industry, deepening the area, and improving efficiency. In terms of personnel appointments, Tang Daosheng changed from president of cloud and smart industry business group to CEO, and Qiu Yuepeng, president of Tencent Cloud, served as COO, responsible for sales, quality, and operations of Tencent Cloud and the business group, reporting directly to Tang Daosheng.
Previously, Leifeng.com has analyzed this personnel adjustment, which is timely and ingenious: the addition of COO is equivalent to having a manager assume the role of the middle and the office, and make the management and collaboration between departments become More transparent and smooth.
Less than half a year after this adjustment, in the fourth quarter of 2021, Tencent further put forward the goal of “healthy and sustainable” To B business growth, and adopted measures including improving the competitiveness of self-developed products, encouraging product integration, and enriching partner ecosystems. a series of measures.
Entering 2022, China’s cloud computing market is constantly changing. Under the appearance of anxiety outbreaks and personnel turmoil, it is cloud manufacturers who are actively “saving themselves” and adjusting their mentality and pace.
And Tencent Cloud has also started to face the “congenital defects” of the To B business earlier than the outside world knows. It does not ask for every step to be big, but only wants to tread deeply and steadily. Therefore, whether it is organizational structure adjustment or product and sales model upgrade, it will take about 6-12 months earlier than other leading companies.
The strategy is firm and the execution is decisive.
Why are cloud manufacturers deeply cultivating regions and industries?
Let’s go back to the CSIG strategic adjustment in May 2021. At that time, there are several details worth noting:
At the industry level, emphasis is placed on providing industry solutions that are more in line with actual needs. At the same time, Li Qiang, former global senior vice president of SAP and general manager of China, was introduced to be responsible for the smart industry and service industry. On the whole, strengthen industry coverage and refine industry division of labor.
At the regional level, a new regional business department was established to explore business models that meet the needs of regional customers. At the same time, cooperate with ecological partners to build regional sinking channels.
Starting from the two dimensions of industry and region is not a move of Tencent Cloud. In July last year, Alibaba Cloud also implemented a similar strategy internally, setting up 18 new industry departments + 16 general managers of local branches.
The major Internet cloud manufacturers have their own industries that they are good at and have been working on for a long time. Under the circumstance that the external environment is full of uncertainties, the refinement of industry lines and the expansion of industry coverage are all aimed at ensuring the basic revenue of cloud.
The emphasis on regional deep cultivation is to establish a connection with local government and enterprise customers, establish a localized ecology, appropriately delegate power to the region, and let those who hear the artillery fire participate in command battles, which is more conducive to improving decision-making efficiency and organizational agility.
You must know that To B is different from some To C services that focus solely on online traffic. The geographical separation means a lot of difference.
First of all, the formation of an industrial cluster is closely related to its geographical location and resource distribution. If you want to deeply cultivate the industry, you must take root in the local area and gain insight into the internal needs of the cluster. Secondly, there are also certain gaps between the north and the south and the east and the west in terms of corporate culture and corporate governance.
A relevant person of Tencent Cloud also revealed to Leifeng.com that this move is also aimed at a large number of small and medium-sized customers based in the regional sinking market.
It is true that government and enterprises located in first-tier cities or larger scales were ideal customers for cloud vendors in the past. Large customers not only have high customer unit prices, but also add luster to the revenue figures of cloud manufacturers. Their cases and needs are more representative of the industry, and they also accumulate rich service experience for cloud manufacturers. It is also one of the common practices of cloud vendors to cooperate with major customers to create benchmark cases.
However, the market potential of domestic government and enterprise head customers has also been fully tapped, and the growth space is limited. In addition, such customers are more inclined to private clouds or hybrid clouds, and they want “personal services” and “tailor-made services”, and the service process has its own uncertainties.
In contrast, when serving small and medium-sized customers, it is easier for cloud vendors to promote public cloud solutions and standardized self-developed products. If we can “two-pronged approach” and at the same time exercise our service capabilities for sinking markets and small and medium-sized customers, and tap waist or long-tail customers, we will make up for the shortcomings of only serving large customers. This is not only a social responsibility that cloud manufacturers need to shoulder under the guidance of national policies, but also a “hard bone” that they must gnaw in the process of strengthening themselves.
“It’s a bit idealistic to say this, but serving small and medium-sized enterprises well may allow them to go further and live longer. For cloud service providers, the number of small and medium-sized customers is higher, The products are easier to replicate on a large scale, and the marginal cost can be reduced. Isn’t it the value of a win-win situation together? Head cloud organizations must have a sense of responsibility and belief, advance and retreat with small and medium-sized enterprises, and hand over half-life to customers.” One cloud manufacturer executives told Leifeng.com.
The only way: adapt to To B, face to be integrated…
In addition to the above adjustments, Tencent CSIG also added departments such as the Business Operation Management Department and the To B Product Committee a year ago. Industry insiders pointed out that this is to adapt the front-end sales and back-end products, research and development, and service systems to the requirements of the To B market.
The data shows that for more than three years after the “930 Revolution”, Tencent’s To B revenue ratio has increased from 25.5% in Q1 in 2019 to 32% in Q1 in 2022.
Four years ago, when 930 changed, Tencent proposed a strategy of driving B by C, such as using the advantages of traffic to grow and acquire customers for customers. The C2B2C development strategy is still its core advantage: reaching billions of users with WeChat and QQ, allowing enterprises to use the public account, applet, payment, enterprise WeChat and other connectors to open up the bridge between enterprise users B and C .
The industry insiders contacted by Leifeng also pointed out that in the low-key and meticulous several adjustments, if Tencent can do a good job of cross-organizational cooperation and find the point of balancing the interests of all parties – of course, there will be many difficulties in this process. , but Tencent must do it. After all, once it succeeds, this is a dimensionality reduction blow.
At present, Tencent is continuing to try to expand the technology and product capabilities of C-end manufacturing explosive models to the To B field according to local conditions. For example, the star SaaS product Tencent Conference is based on its accumulated experience in audio and video technology and products for many years. And its recently launched Tencent e-signature, also starting from C-end users, realizes “WeChat signing contract” and lowers the threshold for use.
From the data point of view, Tencent is also continuing to increase investment in core technology R&D. As of 2022Q1, the cumulative R&D investment has reached 15.4 billion yuan, a year-on-year increase of 36%.
Generally speaking, the cost structure of cloud vendors usually includes two parts: basic hardware and software R&D. Correspondingly, the main methods for cloud manufacturers to improve profit margins are: by expanding the number of user services, expanding the scale of infrastructure, and diluting hardware costs through economies of scale; controlling the scale of customized projects and integration projects; Standardized products such as parts.
In the past few years, it is very common for domestic cloud giants to adopt total integration and subcontracting projects in pursuit of rapid development, revenue scale and number of customers.
This kind of play is immediate, but problems also follow: large-scale customization, integration difficulties, advance capital, long account period… In this case, either the big cloud factory itself has invested a lot of labor costs, or through external ISV landed. However, the management of ISV is quite difficult, and it is necessary to have an internal team to control the quality of the project.
Under the total integration model, cloud manufacturers can harvest beautiful revenue figures, which are also beneficial to customers and experience accumulation in the early stage, but the actual profits are often discounted a lot, and it is more likely to be thankless. Tencent Cloud also admitted that this model is “not healthy and not sustainable enough”.
And choosing to be integrated, although the data in terms of total revenue is not so beautiful, it will bring higher gross profit margins and avoid wasting a lot of time and labor costs on high customization or ISV management.
We have also written many times in “Cloud Inner Volume Five Questions” that cloud manufacturers are gradually saying goodbye to the stage of focusing on revenue scale and development and growth, and focusing more on high-margin and standardized products. Some big manufacturers even consider only calculating self-developed revenue, excluding resale revenue, and sacrificing total revenue to increase the business proportion of self-developed products – no matter what means and form, actively adjust revenue. The structure will be the only way for cloud vendors to go.
“In the past three years, our industrial Internet strategy has gone through the start-up stage from 0 to 1, and the scale has grown to a considerable level. This year, based on the new internal and external environment, we will consider the To B business strategy. The focus has shifted from pure revenue growth to more healthy and sustainable growth.” Tencent Cloud said.
Breaking out of the habitual “comfort zone” and facing problems head-on is not an easy task for enterprises, and sometimes they are embarrassed to open their mouths. A necessary step for long-term survival.
Focus on SaaS+PaaS and solve the problem of involution
Starting from 2015-2016, China’s cloud computing market has developed so far. One of the industry’s consensuses is that IaaS has fallen into the quagmire of price wars, and the “involution” of cloud is often related to it.
In Leifeng.com’s previous research and visits, strengthening the output of SaaS+PaaS and not fighting on IaaS is also the most mentioned point by practitioners in the field of cloud computing.
However, at the SaaS level, China not only started at least ten years later than the United States, but also due to the weak foundation of informatization, the insufficient development of market players, and the lack of genuine and paid awareness. ” status quo.
Doing SaaS is a commonplace, but it is often new. How to make and defend the country in SaaS should be a proposition that will not be outdated in the domestic market in the next ten years. Tencent’s layout in the SaaS field is very early. As early as the QQ era, Tencent incubated CRM SaaS enterprises. After years of development, Qidian has a certain competitive advantage in the market. According to the Gartner report, Qidian’s market share in the CRM field ranks first among local manufacturers and has the fastest growth rate among the Top 5 manufacturers.
The rapidly growing office collaboration applications during the epidemic have also begun a new integration. At the beginning of this year, Tencent Conference, WeChat and Tencent Documents announced that the three major products will be integrated. The integration of Tencent’s industrial Internet efficiency tools will help Tencent gain more market share, and at the same time, it means that the group is breaking down the departmental wall and achieving full collaboration.
Self-developed SaaS is constantly emerging, and the ecological level is not relaxed. Tencent launched the Qianfan plan as early as October 2019, aiming to unite SaaS manufacturers to expand the market. Up to now, Tencent Qianfan has more than 500 SaaS partners, covering more than 70 tracks. Through account connectors, data connectors and other products, Qianfan helps SaaS manufacturers solve problems such as account interoperability and mutual integration. In Qianfan Ecology, nearly 100 SaaS vendors have GMV of more than one million.
In terms of PaaS, under the polishing of massive C-end business, audio and video and security have become Tencent’s advantageous areas. According to the Gartner report, Tencent Cloud ranks first in China’s CPaaS market. Tencent also has a comprehensive layout at the PaaS level such as containers, microservices, databases, AI, big data, and low-code.
It is understood that Tencent is also actively implementing the strategy of self-developed cloud migration internally, so that more Tencent self-developed businesses can embrace cloud native. The practice of this ultra-large-scale business also helps Tencent Cloud to further polish PaaS products such as microservices and containers.
In the field of PaaS and SaaS, Chinese cloud vendors are almost on the same starting line. Whoever can grab more market share will test their determination to transform and execute wisdom.
Judging from the range of actions and the scope of adjustment, Tencent Cloud does not look magnificent. However, judging from the specific adjustment actions, the cloud giant has solidly dissected every crux of the development path and prescribed the right medicine.
Each of these cruxes is found and dissected. The process is not easy, but it must be done. But as Ma Huateng himself said, “To do these difficult and correct things is what the country and society expect from us, and it is also a way for us to stand in the world better.”
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