The market environment and policy environment are changing, and the business model, technology model, policy and regulation model, and self-positioning of cloud companies need to be reconstructed
Cover Design /Li Li
Wen | Reporter Wu Junyu of Caijing
Edited | Sherry
In 2021, at the node where it should be soaring, Chinese cloud manufacturers have collectively slowed down.
Global economic growth is increasingly dependent on the power of digitalization, especially after the COVID-19 epidemic in 2020, the process of international and domestic digital transformation has accelerated, which is conducive to the business growth of cloud vendors, especially cloud giants.
Global clouds, look at The United States; the Central American Clouds, look at the six clouds. At the beginning of this year, the three major TECHNOLOGY companies in the United States (Amazon, Google and Microsoft) have successively released the 2021 cloud business financial report data. From the financial report data, Amazon AWS, Microsoft cloud to maintain a high growth, high profit development trend; Google cloud is still in the investment period, but the loss narrowed sharply, the United States cloud giant in the global position is becoming more and more important. According to the latest report data from third-party international data agency Statista, Amazon AWS continues to lead with a market share of 32%, and Microsoft Azure ranks second with a market share of 21%. Google Cloud will replace Alibaba Cloud as the world's third-largest cloud vendor in 2021, with an 8% share.
In 2020, China's three major cloud giants also experienced a round of high growth dividends, but there was a headwind in 2021.
Alibaba's performance report for the third quarter of fiscal 2022 (that is, the fourth quarter of 2021) shows that Alibaba Cloud's revenue growth rate in the third quarter of fiscal 2022 dropped to 20%, which is also the lowest growth rate since Alibaba Cloud announced its performance data. Tencent Cloud's revenue is consolidated in the fintech and enterprise services business, which grew by 47% in the first quarter of 2021 but slid to 25% in the fourth quarter. HUAWEI CLOUD did not announce quarterly revenue growth, but its annual revenue growth rate has slipped from 168% in 2020 to 30% in 2021.
The gap between Chinese cloud vendors and overseas cloud vendors has widened: market share, revenue growth, and profit scale all reflect this. The gap in market share, revenue growth, and profit scale is only a symptom, and the deeper problem comes from the maturity of the industry. The development stage of China's cloud and digital market is still in the early stages, and the market scale and industrial maturity still need to be further improved.
"Chinese cloud vendors and American cloud vendors have reached a fork in the road." A number of domestic digital enterprise executives told the "Finance" reporter.
A cloud vendor executive even believes that the divergence began two years ago when Internet cloud vendors entered the government and enterprise market on a large scale. This is determined by the difference in market demand. There are differences in the customer demand models of the two sides, and in the process of meeting the demand, the technical model is also bifurcated, plus the policy and legal model changes, and the valuation model of Chinese cloud vendors will also change. Next you may need to reposition yourself.
China's cloud giants replicated the first half of China's rapid growth of consumer Internet in the cloud market, but the logic of The To B (enterprise), To G (government) market and consumer Internet market is completely different, requiring stronger strategic determination, deeper organizational ability and more flexible ability to respond to market rules. In the face of this new big market, China's cloud giants are slightly naïve, and this shortcoming has been magnified when the macroeconomic and regulatory environment changes.
Cloud giants are like this, in the complex multi-ring cloud industry chain, similar problems are also plaguing everyone.
Young Chinese cloud, is experiencing growing pain.
In the field of medicine, growth pain has its own specific reference: eight or nine-year-old children entering the rapid growth period due to relatively large amount of activity, rapid bone growth, local muscle and tendon growth and development uncoordinated growth and development caused by physiological pain. It does not require medication and symbolizes the pain of rapid growth.
Under the adverse trend, complex emotions began to spread, which was mixed with anxiety about slowing growth, reflection on past development models, and uneasiness about policy supervision and macro environment. However, the market for China's digital economy is huge and there are many opportunities, and more people are beginning to explore new paths.
An executive of a Chinese cloud manufacturer analyzed the "Finance" reporter that the situation of collective growth pain of China's cloud is difficult to reverse in the short term, and the conversion period may be as long as two years.
Collective deceleration
Is growth in 2021 the norm?
Observing the growth of cloud giants in China and the United States, we can analyze it from the two dimensions of financial indicators and market share.
In terms of financial indicators, the 2021 financial report data shows that Alibaba Cloud's revenue was US$11.2 billion (about 72.35 billion yuan), an increase of 30% year-on-year. Amazon AWS revenue of $62.2 billion, up 37% year-over-year. Microsoft Smart Cloud revenue was $67.8 billion, up 27% year-over-year. Google Cloud revenue was $19.2 billion, up 47% year-over-year.
According to the financial report data, Alibaba Cloud's adjusted operating profit (EBITA, EBITDA) in 2021 was 1.175 billion yuan, with a profit margin of 1.3%. Other domestic cloud vendors are still in the strategic loss stage. In contrast, Amazon AWS operating profit in 2021 was $18.5 billion, with an operating profit margin of 29.8%; Microsoft Smart Cloud operating profit was $30 billion, with an operating margin of 44.2%; Google Cloud was still in the investment period, with an operating loss of $3.1 billion and an operating profit margin of -16.5%, but narrowed by 45% year-on-year.
Chinese cloud vendors typically have gross margins of only 30% and operating margins below 5%. In contrast, the gross profit margin of Amazon AWS and Microsoft Cloud is as high as 60%-70%, and the operating profit margin is as high as 30%-40%.
In terms of market share, the most critical indicator market in the cloud market is the public cloud IaaS market, which can be understood as an infrastructure similar to a hydropower network. In this market, in 2021, the share of Chinese cloud vendors is declining, and the share of overseas cloud vendors is rising faster. A new report from third-party international data agency Statista shows that Amazon AWS continues to lead the global market with a market share of 32%. Microsoft Azure came in second with a market share of 21%. Google Cloud will replace Alibaba Cloud as the world's third largest cloud vendor in 2021, with a share of 8%. Alibaba Cloud currently has less than 6% share.
IaaS is the basic resource, and PaaS and SaaS are the services that host the application, representing the depth and maturity of the cloud. China's PaaS, SaaS market and related companies are still in their infancy. Gartner data shows that in the global market "IaaS + PaaS + SaaS" overall spending, IaaS spending accounted for 27.9%, PaaS + SaaS accounted for 72.1%. But in the Chinese market, IaaS accounted for 70.1%, and PaaS+SaaS accounted for only 29.9%. Domestic SaaS companies were generally born around 2014, and no one has a revenue of more than 10 billion yuan so far. In contrast, Salesforce revenue in the U.S. market has already exceeded $25 billion, and a number of platforms and vertical SaaS companies have built a mature SaaS ecosystem.
The slowdown in growth has caused industry vigilance in the second half of 2021. At the end of 2021, Alibaba Cloud and Tencent Cloud began to adjust their strategies from pursuing scale to focusing on healthy and quality growth. "Caijing" reporter comprehensive interview with a number of industry veterans after reviewing the judgment, the beginning of the rapid growth is more or less beyond expectations, the growth rate in 2021, for Chinese cloud manufacturers, may be a more reasonable and normal growth rate.
A domestic leading cloud vendor strategic planner analyzed to the "Finance" reporter that the revenue of China's cloud vendors includes three parts. Among them, there are two core self-operated revenues, one is the four major pieces of public cloud (computing, storage, network, database), accounting for 35%-40% of the total revenue of cloud vendors; the other is PaaS and SaaS revenue, which is usually lower than 15% of public cloud revenue. The third part is resale revenue, when cloud vendors serve government and enterprise customers, they must not only provide self-operated products and services, but also purchase products and services from deployment partners. This typically accounts for 40%-50% of total cloud vendor revenue.
He explained that in 2020, the revenue growth rate of the four major pieces of public cloud of some domestic cloud manufacturers has been lower than 25%. Resale revenue from the government and enterprise markets has been a driver of the high growth of the broader market. This deviates from the ideal plan to rely on the public cloud to leverage the digital economic growth market.
Government and enterprise customers take into account policy compliance, governance processes, risk control and other factors, and adopt a more conservative strategy. The acceptance of public clouds is lower, and private, hybrid, and private clouds are more accepted. But one thing is the same – customer needs come first.
In order to meet the needs of customers in the government and enterprise markets and get this market, domestic cloud manufacturers have taken the initiative to change their thinking in recent years, changed the self-service strategy of "water and electricity" based on the public cloud concept, and customized the digital transformation strategy for government and enterprise customers, provided in-depth services, and played the role of integrators.
The three growth curves are very different
The different rules of the game in the government and enterprise markets have deformed the actions of cloud giants
Before 2020, Chinese cloud vendors such as Alibaba Cloud, Tencent Cloud, and HUAWEI CLOUD and overseas cloud vendors will have basically the same vision for the future. At the beginning of the birth of domestic cloud computing, it was to learn the model of Amazon AWS. The first batch of practitioners almost all came from Amazon, Microsoft, IBM, Oracle and other foreign companies. According to the vision of Chinese cloud vendors for the future, the cloud computing market has three growth curves.
First, expand in the IaaS layer. Cloud vendors sell computing power and storage resources like selling hydropower, and do large-scale dilution of cloud costs. The expansion of cloud vendors in the IaaS layer mainly relies on small and medium-sized enterprises and Internet companies, including e-commerce, video, live broadcasting, gaming, online education, etc. The gross profit margin of the IaaS layer of Chinese cloud vendors is about 30%, and the amazon AWS and Microsoft cloud are about 60%.
Second, sell self-operated databases and data intelligence products at the PaaS layer, and rely on PaaS and SaaS partners to stimulate the application ecosystem. PaaS has operated its own database and data intelligence products, and the gross profit margin is about 60%-80%, which is a high value-added part. Supply-side PaaS and SaaS partners can provide customers with application tools on the cloud. Enterprise customers on the demand side can use tools to increase efficiency and reduce costs. Ecological prosperity can not only allow cloud vendors to distribute SaaS applications to obtain a 10%-20% discount, but also make the explosion of upper-level applications further drive cloud usage. The digital "flywheel effect" will thus be formed.
Third, take orders in the government and enterprise (government, telecommunications, finance, energy, manufacturing and all other industries that need digital capabilities). Government and enterprise customers usually need to set up projects for bidding, and there are multiple phases of subsequent expansion projects. Due to the focus on policy compliance and data security, hybrid cloud, dedicated cloud, and private cloud services are generally preferred. Such orders are typically in the tens of millions to hundreds of millions of dollars. Cloud vendors need to adopt an "integration model" to work with ecosystem partners to integrate internal and external PaaS and SaaS services to build a cooperative ecosystem that includes pre-consulting and planning, mid-term implementation, and late-stage operation and maintenance.
Taking the above three paths means that cloud vendors have stable revenue at the IaaS layer, higher profits at the PaaS and SaaS layers, super orders in the government and enterprise markets, and a large number of partners to help cloud vendors sell products and be responsible for the whole process of service.
The one that goes the smoothest way down this road is Microsoft. In 2014, Satya Nadella, the former head of Microsoft's enterprise and cloud computing department, became CEO, and since then he has led Microsoft's "cloud transformation" that was strategically confused at the time. Microsoft's market capitalization was less than $300 billion in 2014 and is now more than $2 trillion today.
Microsoft's IaaS layer is the intelligent cloud (Azure, servers, enterprise consulting and services, GitHub open source community), which will generate $67.8 billion in revenue in 2021. The SaaS and PaaS tiers are productivity and business process businesses with annual revenue of $12.2 billion. These include teams office platform, Power Platform development platform, Dynamic development platform, Office and Windows enterprise edition, Linkedin talent solution.
Microsoft has long been rooted in government and the big business market. Government customers include federal government departments such as the U.S. Department of Defense and military units such as the U.S. Army. Large enterprise customers include U.S. carriers AT&T, Verizon, and others. In 2021, Microsoft Cloud launched six industry clouds for six industries (retail, healthcare, manufacturing, finance, government and nonprofits, and sustainability).
A domestic digital enterprise executive told the "Finance" reporter that Microsoft's products, business, and strategic layout seem to be almost no short board, which is the most complete of all cloud manufacturers. Microsoft's strategy has been recognized by the capital market, which is also an important reason for the continuous rise in market value. The domestic Alibaba Cloud",000",000",000,000,000,000,000 alibaba cloud-in-one strategy is very close to Microsoft's SaaS and PaaS ideas.
Amazon AWS and Google Cloud have a simpler business structure. In addition to the cloud at the IaaS layer, Amazon AWS has database and data intelligence products in the PaaS layer. These services are highly standardized and have a gross profit of about 80%. Google Cloud PaaS layer has Google Cloud Platform (Google Cloud Platform), SaaS layer has Workspace (collaborative office platform), and the revenue growth rate of both products exceeds that of IaaS layer services.
Chinese cloud vendors face challenges on all three curves.
The first is the decline in growth of the IaaS layer due to the slowdown in the Internet market. The so-called Internet market refers to the market supported by Internet companies using public clouds. China's Internet industry is developed, and the demand and consumption of public cloud is huge, which is also the biggest advantage of China's public cloud companies. Over the years, the Internet market is still the largest proportion of cloud vendors' revenue. At present, Alibaba Cloud Internet customers account for 48% of the total revenue. Before 2019, the Internet revenue of Alibaba Cloud and Tencent Cloud accounted for about 70% of the total revenue.
After 2020, Internet growth peaked and the growth rate of enterprise cloud use slowed down. In the past, Alibaba Cloud's typical Internet customers included ByteDance's Douyin and Watermelon Video, while Tencent Cloud included Meituan and Pinduoduo. An Alibaba Cloud person said that the market will no longer emerge high-growth enterprises such as Douyin, Kuaishou, and Pinduoduo, and such enterprises are all cloud users.
In the second half of 2020, the U.S. government asked ByteDance to withdraw overseas data, including TikTok, from Alibaba Cloud's servers. In 2021, multiple rounds of supervision in the fields of online education and games have also disappointed growth expectations. A leading cloud manufacturer product planner said that before the "double reduction" education policy, it was expected that the revenue of his company's education market would be 2 billion to 3 billion yuan, accounting for about 10% of its pure cloud revenue. With the contraction of enterprises such as Good Future, Ape Tutoring, and Homework Help, expectations have been disappointed. In addition, the revenue of the game and live broadcast markets has also been affected to varying degrees due to policy supervision.
At the SaaS and PaaS layers, the domestic market is not yet mature and is still in its infancy. Domestic cloud vendors are generally still in the investment stage. In the first fiscal quarter of Alibaba's 2022 fiscal year (that is, the second quarter of 2021), DingTalk's performance was merged into Alibaba Cloud for the first time, but Alibaba Cloud's revenue in the quarter declined sequentially. DingTalk has not directly pulled Alibaba Cloud's revenue for the time being. In March 2022, DingTalk began to clarify the PaaS strategy and formulated three commercialization paths of customized DingTalk, paid subscriptions, and commission extraction.
In addition to the Internet market, China Cloud also has a super market to be tapped into dividends - the government and enterprise market. After the epidemic in 2020, policies such as "new infrastructure" have prompted local governments at all levels and large enterprises in China to accelerate their digital transformation efforts, and cloud manufacturers have accelerated the pace of government and enterprise market expansion. Alibaba Cloud's non-Internet industry customer revenue in the third quarter of fiscal 2022 (that is, the fourth quarter of 2021) has increased to 52%, and the telecommunications and financial industries are the main drivers of revenue growth in the quarter. A domestic cloud vendor government and enterprise business person told the "Finance" reporter that the government and enterprise income of Internet cloud vendors will even exceed internet revenue in the future.
However, the rules of the game in China's government and enterprise markets are completely different from those in the Internet market. Here, the service rules formed by traditional IT companies for many years have been solidified, which is completely different from the rules of the game adapted to by The Chinese cloud giants that started as Internet technology companies.
This also means that cloud giants cannot replicate the solutions of the Internet market at low cost in China's government and enterprise markets. Because the actual situation of large-scale government and enterprise customers is not the same, the needs are not the same, the need for one-to-one personalized customization strategies and services, which means a huge investment in resources and time financial costs, in theory, the growth of China's government and enterprise market is lower than the Internet market, and the difficulty of operation is much higher than the Internet market.
After Chinese cloud vendors enter the government and enterprise markets, they often assume the role of general integrators. The integrator needs to break down the project, subcontract the order, and hand over the consulting, hardware, implementation, and service to the partner.
It is reasonable for Chinese cloud giants to undertake the task of aggregates. On the one hand, government and enterprise customers hope that the project has a big enterprise bottom and the Internet company is trusted. On the other hand, being a general integrator is also an effective way to understand the to B and To G market rules, expand the partner ecosystem, accumulate industry experience and establish industry reputation.
However, Internet cloud vendors have relatively little experience in the government and enterprise markets. The National Information Technology Service Standards Working Group is an association organization under the guidance of the Ministry of Industry and Information Technology and the National Standardization Commission. A senior IT expert in charge of the development of smart city construction standards in the working group told Caijing that the technical solutions proposed by the cloud factories with internet background are sometimes too advanced and lack understanding of the actual situation. In the face of a number of traditional enterprises in urban information construction, some of the whimsical solutions of cloud manufacturers seem to be "not understandable".
Taking the data governance of smart cities as an example, as early as 2019, Internet cloud vendors hoped to open up the data of the various commissions and offices of the city, and there was a departmental wall between the commissions and offices, and this barrier was difficult to break. It is not until 2021 that principles such as "data is available and invisible" are truly established. However, he acknowledged that Internet cloud vendors understand technology trends and data innovation, which is what traditional enterprises have to learn.
A cloud vendor executive who understands the traditional IT market told Caijing that it is not easy to deal with government and enterprise customers, and cloud vendors have paid a lot of tuition in the government and enterprise market in the past two years. Some projects seem to be high in amount and tempting, and cloud vendors often abandon the principle of undertaking projects. This allows cloud vendors to continuously make up lessons in contract terms, customer demand management, payment collection management, partnerships, organizational management, and so on.
In addition, regulatory factors have further raised the threshold. Since the end of 2020, domestic regulators have taken a number of measures to regulate the Internet economy. Regulators expect to promote the healthy and sustainable development of the platform economy on the basis of sound platform governance. After the regulatory measures of Ant, Tencent, Didi and other companies landed, the government and large state-owned enterprises wavered towards Internet cloud manufacturers. An Aliyun person told the "Finance" reporter bluntly that in 2021, Aliyun lost orders in the government and financial markets due to the Ant Financial incident, and the policy threshold for entering the government and enterprise markets is getting higher.
The national team is on the rise
Keywords of government and enterprise market: independent and controllable
With the introduction of more policies, laws and regulations in the field of digital economy, a new group of competitors are emerging.
Among them, the national team players with state-owned backgrounds have attracted the most attention. Such as Inspur (Inspur Cloud), Shuguang (Shuguang Cloud), Tsinghua Unigroup (Xinhuasan, Tsinghua Cloud), China System (China Electronic Cloud), as well as China Telecom (Tianyi Cloud), China Mobile (Mobile Cloud), China Unicom (Woyun). These enterprises are playing a more important role in the infrastructure market and the government and enterprise market.
In April 2020, the State Council issued the Opinions on Building a More Perfect Factor Market-based Allocation System and Mechanism, and an important signal in the Opinions is that data assets are listed as production factors alongside land, labor, capital, and technology. Among the key industries of the digital economy in the 14th Five-Year Plan in 2021, cloud computing and big data are listed as the top two industries. The National Security Law, the Cybersecurity Law, the Data Security Law, and the Personal Privacy Protection Law further regulate the behavior of participants in the digital economy.
In February this year, the National Development and Reform Commission, the Ministry of Industry and Information Technology and other departments jointly issued a document agreeing to start the construction of national computing power hub nodes in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area and six western provinces, and planned ten national data center clusters. At this point, the national integrated big data center system has completed the layout, and the "East Number West Calculation" project has started.
A government procurement person told Caijing that data is becoming the basic resource, strategic resource and important productivity of the digital economy. Cloud computing, as an infrastructure for carrying and processing data, is also becoming part of a national strategy. According to the concept of cloud-network integration and computing-network integration, the future computing power, storage, and network, like electricity, will be uniformly dispatched and transmitted.
At the infrastructure level, a number of enterprises with a "national team" background have previously built large-scale data centers in the above areas and become the main providers of computing power. In the IDC infrastructure market, China Telecom, China Mobile, and China Unicom own more than 60% of the country's IDC computer rooms, and Alibaba Cloud, Tencent Cloud, and HUAWEI CLOUD rent a large number of operators' data centers.
The "national team" players assume the responsibility of building and operating computing power infrastructure due to policies, which corresponds to larger-scale investment in infrastructure construction such as data centers, as well as cheaper services. High investment and cheap service are not something that cloud vendors can do.
"Finance" reporters checked China Mobile's financial report and learned that in order to implement the policy of "counting east and counting in the west", China Mobile's network expenditure on pre-computing power in 2022 will be as high as 46 billion yuan. These include direct investments in business networks (cloud services, business platform clouds), IT clouds, data centers, and partially shared investments in transmission networks. In the future, the investment in the construction of computing power networks will further rise.
China Telecom relevant people told the "Caijing" reporter that at present, China Telecom has 400,000 data center racks in the six hubs of Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing, Inner Mongolia and Guizhou, and the next step will accelerate the construction of land acquisition for eight major hub nodes, and it is expected that the proportion of eight hub racks at the end of the "14th Five-Year Plan" will reach 85%. At the same time, the ratio of east to west will be optimized, from the current 7:3 to 6:4 at the end of the "14th Five-Year Plan".
Huawei is trying to become a player in computing power infrastructure. After the epidemic in 2020, Huawei strengthened cooperation with local governments and built AI computing centers in Beijing, Shenzhen, Wuhan, Chengdu and other places. Xu Yingtong, president of Huawei's Ascend Computing Business, told Caijing and other media in December 2021 that the Artificial Intelligence Computing Center will provide computing resources for local governments, enterprises, and universities. The cooperation model is that the local government is responsible for construction and operation, and Huawei provides computing power and AI capabilities. The operating company will sell Huawei products and solutions and provide follow-up services.
Huawei Cloud data center (Phase I) located in Gui'an New District, Guizhou. Photo/Visual China
Computing power infrastructure is even merging with network infrastructure. In October 2021, Wu Hequan, an academician of the Chinese Academy of Engineering and director of the Expert Committee for Promoting IPv6 Scale Deployment, mentioned to Caijing and other media that the computing power of Eastern And Western Computing needs to be supported by network capabilities. China is promoting a new generation of infrastructure for cloud-network integration and computer-network integration.
In December 2021, an executive of the BG network business department of Huawei operator told Caijing that in some pilot areas in Shanghai, enterprises can purchase cloud network resources including Tianyi Cloud and third-party cloud through China Telecom at the same time. The idea of "unified scheduling of cloud network resources" will gradually land in the future.
Compared with Internet cloud vendors such as Alibaba Cloud and Tencent Cloud, HUAWEI CLOUD among China's cloud giants is relatively between them and the "national team". Huawei has been rooted in the government and enterprise markets for many years, and its customer relationships and partnerships are solid. This is very similar to the national team players. Inspur, Sugon, Tsinghua Unigroup mainly sell servers, storage, networks and other hardware, and Chinese systems are mainly in markets such as system integration and smart cities. China Telecom, China Mobile, and China Unicom mainly sell IDC infrastructure and cloud services, and are also the general contractors of a large number of smart city projects.
Huawei's enterprise business revenue will be 102.4 billion yuan in 2021, and Huawei's enterprise business revenue in China will exceed 62 billion yuan in 2020. The cloud and IT service-related revenue of China Telecom, China Mobile, China Unicom, Inspur Information and Tsinghua Tsinghua Is between 40 billion and 70 billion yuan.
This makes Huawei relatively more relaxed in the new changes. The "national team" is also gaining a larger market share and undertaking aggregate tasks in more government and enterprise projects. Taking the government cloud as an example, Huawei, Inspur, China Telecom, Tsinghua Unigroup, and Sugon occupy the main market share. Alibaba Cloud and Tencent Cloud are marginalized.
In the digital market of government and enterprises, the route proposed by Internet cloud vendors in the past was "data intelligence", but the route proposed by Huawei and the "national team" was "credit creation, independent and controllable". Xinchuang refers to the information technology application innovation industry, which is intended to achieve domestic substitution in the fields of chips, basic hardware, operating systems, middleware, and data servers. Under the background of sino-US strategic game and "technology decoupling", the route of "information creation, independent control" has been recognized. Xinchuang has become a rigid expenditure on the digitization of governments and financial institutions.
A Huawei enterprise BG business person mentioned to the "Caijing" reporter that in 2021, Huawei has sold the x86 server business due to the power outage of Intel x86 server chips. Huawei's government and enterprise China region has therefore failed to achieve the target growth rate of 40%-50% in 2021. However, Huawei's self-designed 28nm Kunpeng server chip based on ARM architecture is accelerating the replacement of x86 server chips. A number of domestic server manufacturers are joining the Kunpeng industry chain.
China Electronics is also a key enterprise in the field of "xinchuang, independent and controllable". China Systems is a secondary company under China Electronics, and its business scope includes China Electronics Cloud, data governance operations, digital consulting, IT integration, etc. China e-Cloud is mainly secure and trustworthy, and only provides cloud services to government agencies and state-owned enterprises and central enterprises, which is a product of China System.
A Chinese electronics person once told caijing reporter that China's electronic positioning is "the core force and organizational platform of the national network information industry", and it needs to play a leader in "xinchuang" and also serve as an industry leader in the cutting-edge digital construction such as smart cities. Ma Jin, senior vice president of China Systems and executive president of China E-Cloud, told Caijing in January this year that China E-Cloud currently uses an exclusive cloud hosting model to serve the government and central state-owned enterprises. In 2021, benchmarks have been formed in 17 market segments, and in 2022, it will be expanded on a large scale, and the current main assessment of revenue growth.
"Xinchuang" advocates that with the support of policies, it has a subtle impact on the demand side. A local city government person in Zhejiang Province told caijing that the city's digital needs are usually put forward by the business department first, and the digital special class and the big data bureau are docked, and experts are invited to evaluate the plan and quotation. The feasibility assessment of the plan is implemented after passing, and there is also a progress assessment in the meantime. Domestic alternatives will occupy a higher weight in the expert evaluation and scoring, and digital special classes will also favor xinchuang solutions because of policy factors.
In addition to the government, enterprises in the field of financial securities are also turning to "xinchuang". In December 2021, a leading domestic securities company CIO revealed to the Caijing reporter that the company's revenue in 2020 was 20.15 billion yuan, net profit was 9.5 billion yuan, and the overall ICT investment was 824 million yuan. As a pilot unit of financial innovation of the CSRC, a large part of the existing IT expenditure should meet the rigid demand of "Xinchuang".
The brokerage company will start a comprehensive digital transformation in 2020, and for this purpose, it has selected a digital enterprise with a non-Internet background to fully cooperate in the network transmission, storage server, hybrid cloud and other sectors.
From "fast" to "healthy"
Alibaba Cloud and Tencent Cloud began to examine the health of their businesses, which represented industry trends
The main position of China's cloud giants is still in China, and most of the reasons for the growth pain are based on market characteristics. The progress of cloud and digital transformation in the Chinese market is still in the early stage, the habits and needs of traditional IT still have a strong foundation, and the overseas mature markets represented by the United States and Europe have reached the middle and late stages.
The Indian Software Industry Association (NASSCOM), which has a significant impact on India's IT industry policy, released a report in 2019 that counted the proportion of IT spending in the gross domestic product (GDP) of major countries around the world. Among them, India accounted for 1.6%, China accounted for 1.4%, and the United States accounted for 4.7%. If the US GDP is calculated at 1.5 times that of China, the US IT expenditure is about 5 times that of China. In addition, U.S. digital enterprises face the global market, and the main customers of Chinese digital enterprises are in China. According to Gartner data, China's IT spending in 2021 will be 12% of global spending.
From the perspective of the IT expenditure industry, China's IT expenditure is unevenly distributed. With the exception of the Internet industry, almost all other industries in China are in the early stages of digital transformation. In contrast, Deloitte's CIO Insider released in 2021 shows that in the US digital market, banking and securities, technology and telecommunications, business and professional services, insurance, and medical services are the top five industries for IT spending and technology investment, and IT spending and technology investment are relatively balanced across industries.
Differences in IT spending industry and market maturity further affect the structure of IT consumption. In China's IT spending structure, hardware is much larger than software and services. In software and services, IaaS is much larger than PaaS and SaaS. But in the global IT spending structure, software and services are much larger than hardware; in software and services, PaaS and SaaS, which represent the depth of cloud computing use, are much larger than IaaS.
Different industrial bases have spawned different market demands. On this basis, different service models have been created. This began in the traditional IT phase with hardware as the core and continued to the digital phase with the cloud as the core.
In the 1980s, governments and enterprises in mature overseas markets began to build informatization, digitalization sprouted in 2000, and cloud transformation began after 2012. It started early and took a long time, which makes the industrial standardization and maturity of its IT market higher than that of China. In contrast, the informatization of the Chinese market has not yet been completed, and after 2016, the government, enterprises, and upstream and downstream enterprises in the industrial chain have been pushed to the digital transformation with the cloud as the core.
Under different industrial bases, market demand is not the same. After the four major industries of the Internet, government, telecommunications, and finance, IT spending in other industries is almost incomparable with the former.
Server bearer computing power and storage are the core infrastructure of digital transformation. Since x86 chips occupy more than 90% of the global and Chinese server markets, the industry sales distribution of x86 servers can simultaneously reflect the IT investment of various industries. According to IDC data from international data firm, the top five industries in China in terms of x86 server sales in 2020 are the Internet, telecommunications, government, finance and service industries. Caijing reporters learned from Alibaba Cloud and Huawei's enterprise business related people that the above five industries are almost equal to the areas with the largest IT expenditure in China.
Different IT expenditure structures have also been formed under different industrial bases. The consumption expenditure on software and services in the IT market in overseas mature markets is far greater than that of hardware. But in China's IT market, on the contrary, hardware consumption spending is much greater than software and services. The reason for this pattern is that the speed of cloud transformation in the Chinese market is relatively slow, and the majority of IT spending, such as government, telecommunications, and financial industries, are accustomed to deploying hybrid clouds and private clouds.
According to gartner data from international research institute in 2022, hardware accounted for 31%, services accounted for 15%, and software accounted for 4% of China's IT spending structure in 2021. In the global IT expenditure structure, hardware accounts for 19%, services account for 28%, and software accounts for 14%.
The difference in IT consumption structure further affects the income structure of upstream and downstream enterprises in the digital industry chain. The mature and huge overseas IT market has given birth to highly mature upstream and downstream enterprises in the industrial chain. Cloud revenue from cloud vendors, software vendors, and consulting and integrators is generally above 70%. The cloud revenue of cloud vendors, software vendors and integrators in the upstream and downstream of China's digital industry chain is generally below 40%.
At the hardware level, overseas mature IT enterprises rank at the top of the industrial chain and have mastered the part with the highest added value in the IT hardware industry chain. The most typical is the Intel x86 server chip, which has a market share of more than 90% in the server chip and a gross profit margin of 60%. Downstream Chinese x86 server producers typically have less than 10% gross margins.
At the software layer, the maturity and scale of the European and American industries exceeded that of China in the same period. In the traditional IT period, SAP, Salesforce, Workday and other enterprise software are deeply integrated with the industry, and customer stickiness is very high. As public clouds replace traditional IT, the above software vendors are gradually transforming to PaaS and SaaS. Whether it is platform SaaS, industry SaaS, and traditional software vendors, its market value and revenue are not lost to hardware manufacturers such as HP and Dell.
In the platform-based SaaS market, representative enterprises include Salesforce, Workday, etc., forming a layout of SaaS products as the core, expanding new products horizontally, and building PaaS platform vertically. The market value of the above-mentioned enterprises has approached or reached 100 billion US dollars, and the operating profit margin is about 10%. In the industry vertical SaaS market, a group of enterprises represented by Shopify and Zoom are distributed in the fields of e-commerce and video conferencing. The strategy is to meet the needs of customers in vertical areas. The market capitalization is typically in the tens of billions of dollars, and the operating margin is around 20%.
Established consulting and integration service providers are also accelerating the cloud transformation. Accenture, Capgemini, Atos and other world-renowned companies have cloud revenue of more than 50%. Even established digital companies such as SAP and IBM, which are seen as slow to transform, still account for more than 30% of cloud revenue.
In the Chinese market, as a whole, in the early stage of cloud transformation, the market value and revenue of hardware manufacturers are generally higher than those of software manufacturers. In addition to the relatively fast pace of cloud vendors, the transformation of domestic software vendors has not kept up quickly. The mainstream service model is still software customization and project integration, and the cloud-based and SaaS-based business model is not yet mature. Therefore, the market value and revenue of traditional software vendors and project integrators are generally higher than that of SaaS vendors.
The disadvantage of software customization and project integration is that its business model is labor-intensive, and the marginal benefits decrease with the increase of personnel. With the increase of projects, manpower investment becomes larger, and the cost of enterprise management is also increasing, which is easy to fall into the trap of increasing revenue and not increasing profits.
The ideal goal of IaaS, PaaS and SaaS based on public cloud is to achieve the goal of increasing revenue and profit through a relatively standardized way, so that platform enterprises, partners and customers can achieve a win-win situation for all three parties. But at present, in China, this logic has not yet worked out.
Platform SaaS companies in the Chinese market, such as Kingdee, are still in the process of transforming SaaS, with a market value of about 100 billion yuan. In 2021, Kingdee cloud software revenue accounted for more than 60%. Kingdee management told investors on an earnings call that Kingdee has stepped into the deep waters of cloud transformation. Although the loss is 248 million yuan, it is expected that the cash flow will improve in the future. Enterprises such as easy sales and diversified sales customers are in the stage of entrepreneurial financing.
In the industry software market, Companies such as Shiji Information, Weining Health, Hang Seng Electronics, and Guanglianda started in the traditional IT stage and are still in the early stage of cloud transformation, with a market value of 10 billion yuan. Among them, the cloud revenue of Shiji Information is less than 10%, the cloud revenue of Hang Seng Electronics is 17%, and the cloud revenue of Guanglianda is 54%, and the above-mentioned software enterprises are still a long way from achieving SaaS.
In the integrator market, the pace of cloud transformation for Major Integrators in China is even slower. For example, Shenzhou Information, Changshan Beiming and Donghua Software currently account for no more than 50% of their software business. These three well-known integrators in the Chinese market mainly serve customers in government, finance, power, medical and other industries. Software revenue is mainly based on customized software.
Generally speaking, enterprises with a fast pace of cloud transformation also have a high proportion of cloud revenue. One of the most critical indicators of comparison is the proportion of cloud revenue and the profit margin in the process of enterprise cloud transformation. In the early stage of cloud transformation, enterprises will enter a painful period, such as the reduction of software customization orders, revenue fluctuations, and declining profit margins. However, due to the software SaaS, product subscription system, standardization, profits will be much higher than labor-intensive traditional software customization development, so the scale of enterprise revenue will grow rapidly, profit margins will gradually repair. The above path has been verified by a large number of enterprises in overseas mature markets.
A senior expert from an overseas cloud vendor told the Caijing reporter bluntly that there is still a 3-5 year gap between the cloud transformation process of Chinese software manufacturers and overseas mature enterprises.
Under different industrial bases and market demands, the technical models and service models of enterprises have further diverged. This is especially evident in the government and enterprise markets.
Deloitte China Cloud Services Managing Partner Liu Junlong told Caijing that european and American governments and enterprise customers have formed IT hosting services based on THEIL standard (Information Technology Infrastructure Library, a set of international standards widely recognized and used for IT service management) before accepting cloud computing.
Based on ITIL standards, government and enterprise IT systems can be hosted in data centers provided by IBM, HP and other service providers. When cloud vendors such as Amazon AWS and Microsoft Azure popularized the public cloud, the government and enterprises migrated and hosted IT systems to the cloud because of their cost advantages. Hosting means that data from different customers can be stored in the same data center, physically isolated only with hardware. However, there are unified procurement, delivery and management standards. In this way, the greatest marginal benefit can be obtained.
According to senior experts from overseas cloud vendors, Amazon AWS has established regional data centers in the eastern and western parts of the United States according to government cloud standards, which are specially used for government and public sector hosting services. Another principle is to provide customers with only public cloud consulting, absolutely do not touch the customized business, and set a strict profit margin assessment indicator. The bottom line is usually no less than 25%.
He explained that hosting is a low-cost approach. Contrary to hosting, most of the domestic government and enterprise customers are internal IT departments to manage the operation and maintenance system, and adopt the project system, and set up projects and bid for projects in multiple phases. This means that the cost, technology, and service aspects are more complex and costly.
The government set up the project, the service provider won the bid, the procurement of servers and storage hardware are scattered, the early stage of warehousing, logistics, the later implementation of the construction, each link must pay the corresponding cost. Hybrid cloud and private cloud deployments mean that cloud vendors design technical architectures for each customer's peak estimate. Cloud infrastructure cannot achieve the scale effects envisaged in the past across enterprises and departments. To do personalized customization of personal services, but also to be a total integrator, time-consuming and manpower-consuming, the reuse of solutions is poor.
Huawei, as well as Inspur, Shuguang, Tsinghua Unigroup, China System and other enterprises in the past in the government and enterprise market for many years to do this kind of business, a large number of servers, storage, network and other hardware equipment. After companies such as Ali, Tencent and Baidu enter the government and enterprise market, they must also assume the role of general integrators.
However, the disadvantage of doing too many aggregate projects is that it is similar to customized software, and it is easy to fall into the trap of "diminishing marginal benefits, increasing revenue without increasing profits". In addition, the low value-added parts of the revenue structure such as traditional hardware and resale are too large. Products with high added value and representing the direction of industrial development, such as databases and data intelligence products, are relatively insufficient. The result of the total integrator's big package is that the gross profit of the project is too low. The income of partners is also divided, and ecological trust is easily destroyed.
A leading cloud vendor executive said, "In order to do large-scale, a lot of resale revenue is actively included in revenue. "This creates a regurgitation. Cloud manufacturers often have to advance funds for projects, which occupies a large amount of liquidity, and sometimes the payment collection cycle is long, and even it is difficult to collect money. A cloud vendor politician mentioned that in addition to the main business, cloud vendors even have to undertake engineering construction work. He believes that this should not be what tech companies should do.
In his view, Chinese cloud vendors are still young and have relied on the explosive development of the Internet for revenue growth for many years. The body has grown, but the mind is immature, still relying on the inertia of To C growth, and lacks a deep understanding of the To B market. In the face of the mature and huge government and enterprise market, it lacks both the ability to formulate rules and the strategic determination to maintain restraint.
This has a counterproductive effect on the R&D team. The above-mentioned executives of the head cloud manufacturers said bluntly that government and enterprise customers are not sensitive to technology, "when customer needs are not technology-oriented, the R & D team will also follow the customer." His cloud vendor R&D team will keep an eye on every product innovation of Amazon AWS before 2019 and follow up within a month or two. But today, the R & D team personnel, energy to serve a lot of customer needs. Non-standard products developed based on personalized needs cannot be replicated at scale like AWS and Azure.
He believes that the technology gap between domestic cloud vendors and overseas cloud vendors is widening. "It's not a single technology gap, it's a comprehensive one. It's hard to be sure which step of the review didn't keep up. He worries that in the future, it is necessary to further fight with competitors in terms of market prices and business relations, and intensify low-level competition.
From October to November 2021, Zhang Jianfeng, president of Alibaba Cloud Intelligence, and Tang Daosheng, CEO of Tencent Cloud and Smart Industry Business Group, stressed in an interview with Caijing that it is necessary to moderately retreat in government and enterprise projects, turn the "total integration role" to "the integrator", and only provide their own products and solutions that they should and can provide.
On November 19, 2021, people learned about Alibaba Cloud intelligent manufacturing technology at the 2021 World Manufacturing Conference. Figure/New
When serving government and enterprise customers, the strategic focus of each manufacturer has gradually changed from "benchmarking regardless of investment" to "starting from advantages and assessing profits". In November 2021, Wang Jingtian, head of Tencent Cloud's government cloud business, told Caijing that Tencent Cloud will focus on two key points in the government and enterprise market: one is the key benchmarking projects related to the national economy and people's livelihood such as health codes; the other is the projects that Tencent is good at, such as social security, finance and taxation, which can lose money in the early stage, but can see the prospects for profitability. Projects that are not good at and do not see profit prospects will reduce the number of orders.
On July 7, 2021, at the World Artificial Intelligence Conference held in Shanghai, Tencent booth showcased "Tencent Cloud AI" technology to serve the future city.
Photo/Visual China
This means that Alibaba Cloud and Tencent Cloud have begun to examine the health of their businesses, and the internal performance appraisal is gradually excluding the resale part of the revenue that is not related to the core business.
This is not just the action of Alibaba Cloud and Tencent Cloud. A senior sales person from a cloud manufacturer told The Finance reporter that after entering 2022, domestic cloud manufacturers are generally emphasizing two principles. The first is to clarify the proportion of self-operated products in the sales of general contracting, and some cloud vendors have raised the proportion to 50%; the second is to clarify the proportion of managed products, such as databases, middleware, data intelligence and other PaaS products in the self-operated business. Some of Tencent Cloud's business lines even raised the proportion to 70%. The added value of the technology in this part of the business is relatively high, and the gross profit margin is usually as high as 60%-80%.
Repositioning
Copying overseas experience in defiance of market realities is short-sighted
Just as electricity drives social and economic development in the electric age, in the era of digital economy, the cloud carries computing power, and computing power drives the development of digital economy. The cloud vendor's initial vision was to become the computing infrastructure of the whole society, which is similar to the "national power company".
Amazon AWS, Microsoft Cloud, and Google Cloud are currently on this path. The three cloud vendors split the majority of the global digital market for U.S. government departments, military units, and even intelligence. Build cloud infrastructure in the global market to serve large customers in the global market of government, finance, telecommunications, manufacturing and other fields.
However, in the Chinese market, it is difficult for Internet cloud manufacturers to replicate the success of Amazon AWS, Microsoft Cloud, and Google Cloud in the short term.
China's digital market is considered immature by those who believe in "cloud native". However, a group of rational localists believe that the difference with overseas mature markets does not equal the gap. Every IT system has its own suitable scenario, and it is a short-sightedness to copy overseas experience regardless of the reality of the market. Cloud vendors need to reflect on the mistakes made in the previous stage and how to re-occupy the position in the next stage.
Ning Yu has worked in China Mobile's business support department and Huawei's business software department, and has led the construction of multiple IT projects. In his view, both the cloud and traditional IT are just service tools and business strategies. Cloud vendors have previously promised low-cost, high-efficiency services that have missed their contracts. In many areas, traditional IT means are cheaper and more flexible. Cloud vendors can't just let customers buy the cloud, but don't help customers increase efficiency and reduce costs.
Senior experts from the above-mentioned overseas cloud vendors pointed out that domestic cloud vendors sometimes pay too much attention to results-oriented, just selling clouds regardless of transformation. Digital transformation requires a scientific and rigorous methodology, according to Amazon AWS's approach, selling the cloud while helping enterprises successfully transform. Only in this way can it be possible to make the business real, thorough and bigger.
Under the many challenges, the management of Chinese cloud vendors began to reflect on adjusting their business, thinking about new growth paths, and repositioning themselves.
From the perspective of new market cultivation, cloud vendors are not without a way but the Internet and government and enterprises. As computing power grows, so does the cloud. Looking for a high-computing industry is a way of thinking. Industries such as games, meta-universes, autonomous driving, new energy vehicles, and medical and health care are seen as having strong demand for computing power and data. In 2021, the key customer in the Internet field of Alibaba Cloud is Mihayou, and Mihayou's game "Original God" is known for its high data and high computing power consumption. HUAWEI CLOUD regards new energy vehicles as a key industry.
Following the policy to serve key industries is also a way of thinking. In 2021, the Ministry of Industry and Information Technology and other departments have formulated a number of documents on industrial digitalization and "carbon neutrality". Zhai Yongping, senior adviser of Tencent's strategic development department, told Caijing that Tencent is trying to invest its digital capabilities in areas such as carbon neutrality. The opportunity points include two parts, one is to provide digital measurement services for related enterprises, and the other is to develop emission reduction algorithms and applications. Tencent Cloud Industrial Service Line is negotiating cooperation with large enterprises in the energy and manufacturing fields.
Cultivating overseas markets is seen as another important growth curve. Due to international geopolitical influences, Chinese cloud vendors are encountering more uncertainties in overseas markets. Chinese cloud vendors have originally laid out in the United States, but are now retreating. Even so, the idea of "local to local seriously cultivating overseas" is growing stronger.
"Local to local" refers to the use of overseas teams to serve overseas enterprises in overseas markets, rather than using Chinese teams to serve Chinese overseas enterprises.
A senior PingCAP professional told Caijing that Chinese companies need to understand the global market, rather than falling into internal competition in the local market. PingCAP is a world-renowned open source database startup founded by a domestic team. The market covers China, the United States, Japan, and the overseas market size is larger than that in China, and amazon AWS, Microsoft Azure and Alibaba Cloud have cooperative relations.
"There are some pseudo-demand in the domestic market, which is easy to bring cloud manufacturers into the wrong area." In the past two years, cloud vendors have done too many integration projects with traditional IT ideas, and the technology gap with overseas cloud vendors is widening. If not adjusted, the gap will continue to widen. The PingCAP person said that Chinese companies such as Alibaba Cloud can still fight with Amazon AWS and Microsoft Azure in Japan, South Korea and Southeast Asia. Going to sea is not only for revenue growth, but also for understanding technology trends in the competition and building a technology architecture for the global market.
"Caijing" reporter learned that in 2021, Alibaba Cloud has made some progress in the Japanese and Southeast Asian markets. For example, in Malaysia, Indonesia, the Philippines and other countries, it provides technical support for local retail, finance, aviation and other industries. Part of the revenue comes from serving Chinese companies to go overseas, and the other part comes from local income. Alibaba Cloud's overseas market revenue is about 2 billion yuan.
But overseas markets are not the core of the current strategy, and the real difficulty lies in repositioning themselves.
An analogy was made by a cloud vendor executive who in the past wanted to become the "national power company" of the digital age – the provider of upstream computing infrastructure. However, as policies and regulations become clearer, this vision may need to be adjusted. In the future, computing infrastructure, like a communication network, may be operated by "national teams" such as China Telecom, China Mobile, China Unicom or China Electronics.
Cloud vendors are positioned more like downstream vendors, renting telecom operators' data centers and paying for network transmission costs. A Chinese digital enterprise executive told Caijing that domestic cloud vendors need to pay telecom operators about 30% of their revenue data transmission fees. Amazon and Microsoft can build their own fiber optic networks and charge for data transmission from the company being served. In theory, self-networking can optimize the network according to its own needs, and it will gradually dilute with the cost of use. According to media reports, Amazon's AWS data transmission service gross margin is more than 80%. However, this data has not been confirmed by Amazon.
But the above-mentioned cloud vendor executives stressed that the imagination space is only for the capital market, not the real world. As a private economy, cloud manufacturers are still the most innovative and indispensable link in the industrial chain. In the future business structure of cloud vendors, integration, consulting, and software will account for a large proportion. Continue to strengthen R&D investment in software and hardware, and continue to dig deeper in vertical industries.
In practice, it is probably the most realistic solution to go out of your own way. Liu Junlong mentioned that the practice in some areas of the Chinese market is even more advanced than that of overseas markets. The digital strategy and management reform of enterprises have entered the deep water area, and the technology application and business strategy need to be adjusted in a timely manner in response to market changes.
"Even if PaaS and SaaS are not mature for the time being, China may still be the world's largest BaaS (Business as a Service) market. As a platform, cloud vendors can provide customers with back-end technical services and business services to maintain more lasting and close relationships. The above-mentioned cloud vendor executives are still optimistic about the prospects of China's digital market, and believe that the reference of overseas mature enterprises is limited, and the future road should be explored by themselves.
The practice of Internet cloud manufacturers in the financial digital market in recent years is realistically representative. It is not only in line with supervision, but also has a certain competitiveness in the market due to technical advantages, product advantages and innovation awareness.
In the past, the core systems of domestic financial institutions were almost all composed of IOEs (IBM mainframes, minicomputers, Oracle databases, EMC storage devices). Around 2011, Alibaba Cloud proposed to "go to IOE" and made progress.
Gartner predicts that in 2025, overseas manufacturers will only have 30% of the analytical database market share in China and only 50% in the transactional database market.
IBM mainframe market share is still higher than 90%, and domestic financial institutions are almost unable to avoid purchasing IBM mainframes. Liu Weiguang, general manager of Alibaba Cloud's Intelligent New Finance and Internet Business Unit, mentioned in an exclusive interview with Caijing in March this year that in the past two years, Alibaba Cloud has helped several domestic banks replace IBM mainframes with distributed cloud platforms. On the one hand, this is the demand for "localization", on the other hand, the business of Chinese financial institutions is flexible and diverse, which needs to be completed on the distributed cloud platform.
Liu Junlong believes that although the Chinese market is temporarily in the early stage of cloud transformation, the development path and profit model are indeed different from overseas counterparts, but the commonality cannot be ignored, whether it is an overseas mature market or the Chinese market, the trend of "cloud transformation" is certain.
With the improvement of the maturity of the domestic industry, the two sides will eventually "go to the same destination".
In this process, problems and challenges are normal phenomena. Whether it is the national team, or the private technology giant, or the ecological enterprises of various gene types in the digital market, they are all powerful teams that contribute to China's digital process.
Their problem-solving ability and efficiency, and the future direction of evolution, will directly affect the breadth, depth and speed of the digital ecology, and will eventually bring China's digitalization into a benign development track.