Revenues from software services on the rise
By Zhu Boru (China Business Weekly)
Updated: 2004-04-27 16:47

Software services have begun contributing to most Chinese management software vendors' sales revenues, indicates a report released recently by a leading domestic market research firm.

However, the report suggests domestic vendors must improve the quality of their services if they hope to meet customers' growing demands.

The report, by CCW Research, indicated 94.8 per cent of China-based management software vendors collected fees last year from their software services.

For most of the companies, revenues generated from services accounted for between 5 per cent and 20 per cent of sales revenues.

Moreover, 4.5 per cent of China's management software vendors -- including leading players such as UFSoft and Kingdee -- earned profits from software services.

Firms are spending more -- up to 30 per cent in some cases -- on IT (information technology).

Domestic software vendors are not able to meet demand, even though management software users are becoming increasingly aware of the importance of software services, and are willing to pay for such services, the report indicates.

Most management software vendors lack a sufficient number of competent employees to provide consulting and implementation services.

Between 10 per cent to 20 per cent of a software vendor's employees are responsible for software services.

Although 87.1 per cent of the software vendors provide training, 74.2 per cent of them do not give certificates to their employees.

Meanwhile, software vendors are under tremendous financial pressure, as it costs a great deal of money to provide software services. Many of the services, however, do not generate revenues.

Services provided by management software vendors usually include pre-sales consulting, software deployment, training, system maintenance and re-development.

Customers currently pay for system maintenance and re-development, while pre-sales consulting and software deployment are free.

Sales revenues in China's management software sector reached 7.73 billion yuan (US$931.3 million) last year, up 24.4 per cent year-on-year.

In 2002, the sector generated 6.214 billion yuan (US$748.67 million) in sales revenues.

Sales revenues of ordered software -- mostly for finance, telecoms and government organs -- were approximately 6.33 billion yuan (US$762.6 million) last year, accounting for 81.9 per cent of the total market, CCW Research said.

China's management software market is expected to grow more than 30 per cent annually in the next three years.

The market will be worth 12.56 billion yuan (US$1.51 billion) by 2005.

The general management software market will grow even faster: It will be worth 2.65 billion yuan (US$319.2 million) by 2005.

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