Salesforce and Alibaba team up to take on China

China is a problematic market for most non-Chinese technology vendors to penetrate.  In the 20 years that I have been an analyst covering China, the amount of money that I have seen lost, particularly by US-based firms in China is staggering. Politically, things have become more difficult in the past two years. The Trump administration has engaged in a series of trade sanctions, tariffs and other economic measures to put pressure on the Chinese government over trade. The omnipresent and rarely helpful Trump tweets increase the economic and political stakes and uncertainty in equal doses.

In the background of this, Salesforce recently announced a partnership with Alibaba to help provide Salesforce capabilities direct to the Chinese market. It is focused on the PRC, Macau, Hong Kong and Taiwan markets, and will enable Salesforce to have a capacity in the market that is effectively quarantined from the rest of the Salesforce market. Alibaba is the obvious Chinese partner for Salesforce for market reach, capability and cultural reasons. capioIT expects that Alibaba will be the primary go-to-market vehicle. In briefings from Salesforce, it is clear that this is a long term and well-considered investment. Both Alibaba and Salesforce have rightly taken an approach that minimises impacts from both administrations and is focused on customer outcomes. At the same time, the importance of data privacy, and Chinese hosting laws cannot be understated, hence the expectations of quarantining.  

The other important aspect of the deal is that both parties can join together to provide confidence for clients in the market. capioIT believes that the initial target will be MNC’s looking to enter or expand into the Chinese markets. This will be particularly true for industries such as retail and luxury goods. Salesforce is rightly planning to have one consistent UI of Salesforce, aside from clear localisations, customers will know it is Salesforce, and for customers who are also clients outside of China, it will have the same look, feel and capability. This is critical for both markets.

From a partnering perspective, the Chinese market is a modest but growing Services opportunity. Unlike some markets such as Hybrid Cloud and Strategy Consulting, the challenges of China has meant that it lags in terms of opportunity size, but not growth behind Australia and Japan. In 2019 the market is forecast by capioIT to be worth US$146.4M, rising to US$496.3M in 2023. As with the customer base, there will be two distinct markets,  larger MNC’s investing inwards to China, and the domestic organisations that invest with Salesforce and Alibaba.

Capture Point
China is a difficult market. It is not going to become more accessible or straightforward in the foreseeable future for both political and economic reasons. Cloud providers such as Salesforce have to be conservative and pragmatic on their entry to China. The opportunity is there, but it is not as easy as other markets. As a result, the well-considered approach of Salesforce in teaming up with Alibaba to provide capability across China, Hong Kong, Macau and Taiwan markets makes business and geopolitical sense. Trusted parties on both sides can ensure that the opportunity is there for Salesforce to match the growth and scale it enjoys in other markets in the Chinese marketplace.

About capioIT - Phil Hassey

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world. +61422231793
This entry was posted in Uncategorized and tagged , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s