Business / CEO roundtable on new normal

SAP aims to nurture a skilled workforce for the IT sector in China

( Updated: 2015-03-13 15:56

Editor's note: With the annual sessions of the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference ending with a call to adapt to "new normal", sat down with global business leaders to get their views on the reform process and lowering of the growth target.

Here are the excerpts of Mark Gibbs,President of SAP Greater China.

SAP aims to nurture a skilled workforce for the IT sector in China

Mark Gibbs

What impressed you the most about the annual Government Work Report released during the ongoing two sessions of China’s top legislative and advisory bodies in Beijing? What do you think was the most important issue raised by the government in this report compared with the previous sessions?

As China’s economy is entering a “new normal”, China is putting more focus on quality growth, emphasizing innovation, efficiency and environmental protection. In the annual Government Work Report, released during the two sessions, what I found impressive were the deepening reform in fiscal and social aspects, highlighting of the “Made in China 2025” strategy and the push for entrepreneurship and innovation.

We believe that these areas will have significant impact and relevance to our China strategy, as we have been the innovation leader in China for more than two decades and we are helping more than 12,000 customers in China innovate their business processes through adopting disruptive technologies including mobile Internet, cloud computing, big data and the Internet of Things.

To promote sustainable economic growth, it is encouraging to see the government will put a lot of focus on stimulating investment, consumption and exports.

The approved 10 trillion yuan ($1.62 trillion) in investment for infrastructure projects announced in late 2014 is going to be a key catalyst for growth in the ecosystem, including information technology.

SAP is well-positioned to support the seven categories of infrastructure projects based on our proven technologies in applications, platform and business network, as well as our global best practices for the energy and resources, transportation, healthcare and communications sectors. Also, increased consumption and exports will promote the use of e-commerce and smart logistics solutions to enhance user experience, improve processes and increase efficiency.

We believe that the two sessions this year will have a significant impact on the nation’s economy and IT market. In addition to maintaining stable growth, promoting reform and structural adjustments were among the highlights at the two sessions.

We expect that technology will continue to play a pivotal role in driving industry transformation and upgrading. Take the manufacturing sector as an example. Both the German and Chinese governments have pledged collaboration in driving Industry 4.0, and SAP is an early participant and active contributor to the Industry 4.0 transformation.

Industry 4.0 is about bringing together intelligent machines, advanced analytics and cloud computing in the next generation of manufacturing. SAP has already started helping customers in China lead this transformation and increase global competitiveness in the value chain.

In the Government Work Report, Premier Li Keqiang said that the nation’s economic growth rate would be adjusted to 7 percent. Do you think your company should adjust its development strategy in China?

In the context of deepening reform in various sectors and internationalization, we expect to see new opportunities for us to support State-owned enterprises and private-sector companies in their transformation and innovation journey.

SAP’s global expertise across 26 industries and our versatile product portfolio make us well-positions to help Chinese companies expand overseas.

The regional strategies of “One Belt, One Road”, the Beijing-Tianjin-Hebei Metropolitan Region, and Yangtze River Economic Belt, and the establishment of Free Trade Zones in Shanghai, Tianjiin, Fujian and Guangdong are going to stimulate the demand for infrastructure and foster the consumption of China’s excess capacity and overseas expansion of Chinese enterprises.

These trends will present enormous opportunities for industries such as construction, industrial machinery and components, energy, transportation and telecommunication. In these areas, SAP has the industry expertise and technology know-how to create best practice solutions for many Chinese enterprises.

A report from the McKinsey Global Institute points out that although China is the world’s largest consumer e-commerce market, companies still lag well behind their counterparts in more developed economies in terms of leveraging networked technologies to run key aspects of their businesses. That is now changing as Chinese companies invest heavily in the building blocks of the Internet economy: cloud computing, wireless communications, new digital platforms, big data analytics, the Internet of Things and so on. These kinds of investment align very well with our business priorities and strengths.

Greater China is a strategic region for SAP globally and is one of the top five markets for the company. Since we announced the China Growth Plan in 2011, we have been on track with our dedicated investment in this fast-growth market. China is SAP’s second home and we will continue co-innovating with our customers and become complementary to China’s IT market.

Amid the global economic slowdown, especially in developed economies, and China’s economic adjustment, what is your greatest concern about your company’s operations in China?

By the end of the year, the government will unveil the details of the next Five-Year plan for the years 2016-2020, which will be very much geared toward the “New Normal”.

We already know that industrial upgrading and innovation, energy conservation and environmental protection, and internationalization are among its major themes and this represents a huge opportunity for us to play to SAP’s strengths.

Our approach is playing a complementary role in China’s IT market and leveraging our strong partner ecosystem, which were established over the past 23 years. We have been exploring various partnership models such as joint ventures, embedded technology via original equipment manufacturing and partner-managed cloud computing to foster knowledge and technology transfer with local IT vendors.

In China, we are working very closely with Lenovo Group Ltd and Huawei Technologies Co Ltd to build an integrated hardware and software solution catering to Chinese customers. In 2014, we announced the availability of human resources cloud services through China Datacom, a joint venture between SAP and China Telecom.

While China is entering a changing mode of economic development, there will inevitably be some disruptive impact on China’s IT market in the short run. However, we believe the long-term sustainable economic growth will offer a stable and favorable business environment for the IT industry and generate demand for advanced technologies such as cloud computer, the mobile Internet and analytics, especially when the government is promoting the optimization of economic structure, the integration of industrialization and informatization and development of urbanization.

China’s talent crisis has been manifesting for some time. The changing nature of the Chinese economy, which is becoming more service oriented and moving upmarket in terms of production, has huge implications for the sort of skills that businesses in China are looking for.

In China, we have been working closely with our partners and universities to narrow the skills gap and nurturing a skilled workforce for the IT sector.

Which aspect of China’s social and economic reforms should be improved in order to enhance the investment environment to attract more foreign companies?

At the World Economic Forum in Davos, Premier Li Keqiang said that the government will loosen regulations and introduce reforms to encourage mass entrepreneurship and innovation. The Chinese leader also reassured everyone that the country will be opened wider to foreign investors through ongoing fiscal and tax reform and liberalization of trade and investment. We are optimistic about the ongoing developments, and continued support of foreign companies in China will have a positive impact on China’s economic development.

We expect that China’s urbanization plan and development of smart cities will create enormous opportunities for various industries including transportation, logistics, healthcare, oil and gas, as well as the use of cloud technology and intelligent systems such as smart energy grids, intelligent transportation systems and the like.

With reforms that will benefit living standards, the government has planned specific projects to cover nine major areas: social security, healthcare, education, retirement and pensions, employment, public security, food and drug safety, community services and family services. These projects are going to represent a major opportunity for the IT market, and foreign IT companies will play a complementary role in sharing their global experience and incorporate best practices in other countries.

Private public partnerships are set to drive infrastructure projects in China. The government has identified several categories including grain and water conservation, transportation, environmental protection, healthcare, communications, oil and gas pipelines, clean energy and mining resource protection.

We expect this effort will bring huge opportunities for foreign companies (including IT companies) to work with State-owned enterprises in the respective sectors.

Do you think your company will develop faster in China than the previous year in terms of growth rate or market penetration?

In greater China, SAP recorded strong growth in the fourth quarter, rounding off the full year of 2014 with double-digit growth for software and software-related service revenue. It marked the second consecutive year of double-digit growth in the greater China region.

Looking ahead, we see solid growth opportunities driven by the new government agenda that will further fuel our growth in China:

• Industry transformation and upgrading: SAP’s global expertise across 26 industries; benchmarking, industry best practice, best-of-breed products and services

• Internationalization: as a world leader among business application providers with industry best practices, SAP has unique advantages to serve the needs of global business operations.

• Urbanization: smart city solutions

• Energy efficiency: smart grid projects and connected cars

• Industry 4.0: The Chinese and German governments have pledged collaboration in driving Industry 4.0. With leading innovation in the Internet of Things, machine-to-machine and cloud computing, SAP is well-positioned to contribute to the Industry 4.0 transformation.


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