麦肯锡-微软云中国市场进入战略-云市场机会扫描-20120201

1n.月饼

ChinesebakeryproducttraditionallyeatenduringtheMid-AutumnFestival 1.Mooncakefestival(orMid-AutumnFestival)isakeyfamilygatheringevent 2.MooncakewasusedinrevolutionoftheMingdynasty–oneofthelongestandwellrandynasty

inChinesehistoryProjectMooncake1–Phase2:BusinessPlanSupportChinaAzureopportunityidentificationCONFIDENTIALANDPROPRIETARYAnyuseofthismaterialwithoutspecificpermissionofMcKinsey&CompanyisstrictlyprohibitedJan,2012Studywrapup(A)TableofcontentRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina1StudyscopedefinedinLOPSOURCE:McKinseyMarketsize/opportunityCompetitorlandscapeProduct&customervaluepropRisks&constraintsImplement-ationplanGovernmentrelationsplanGotomarketmodelIncomestatement(P&L)QuestionstobeansweredinthebusinessplanWhatistheoverallmarketsizeandwhichareasaregrowing?WhatarethelargestareasofopportunityforMicrosoft?Whoarethecurrentandfuturecompetitors?WhatisMicrosoft’spositioningrelativetothecompetitors?WhatserviceswillMicrosoftofferandatwhatprices?WhichpartsofthevaluechainwillMicrosoftfocuson?WhichcustomersegmentswillMicrosofttarget?Whatisthevaluepropositiontodifferentcustomersegments?WhataretherisksinvolvedinlaunchingcloudinChina?WhatarethelegalandlicensingconstraintsthatmustbenavigatedtodelivercloudservicesinChina?Whatarethekeymilestonesinbuildingthebusiness?Whataretheshorttermactionsthatneedtobedoneinthenext6months(e.g.multiplierdiscussions)WhattypeofgovernmentsupportwillMicrosoftneedtolaunchcloudservicesinChina?Whatarethekeygovernmentagenciesthatneedtobeapproached?WherewillMicrosoftbuild/buy/partneralongthevaluechain?Whataretherevenuesharingmodels?Whatorganizationandresourcesareneeded?Whattypeofproductmarketingwillberequired?Whatarethekeyinvestmentsrequired(hardware,sales&marketing,headcount,partnersupport)?WhataretheestimatedCOGSandSG&A?Whataretheexpectedrevenues?CurrentstatusDraftfromPhase1DraftbyMicrosoftDraftbyMicrosoftTobecompletedbyMicrosoftDraftbyMicrosoftNeedstobecoordinatedwithChinasubforanoverallplanTBDTobecompletedbyMicrosoftMSFinancetobuildP&L,McKtovalidateassumptionsIncludeinscope?Deepdiveonrevenuesharingmodels123456782KeyassumptionsgoingforwardCorefabricDatacenterfaciliti-esITinfra.HWITinfra.SWCont-entanddataApp.dev.Platf-orm,toolsApps.andwebservic-esEnd-userdevic-es

LastmileconnectivityOnli-nemark-etsKeyassumptionalongwithCloudvaluechainCloudinfrastructureMicrosoftiscurrentlyinRFIstagetoselectinfrastructurepartnersinChina.NofurtherdeepdiverequiredSaaSPartnersNeedtofurtherexploreindirectGTMoptionsinprioritizedverticalswhereMicrosoftpartnerswithISVstodevelopsolutionsontheAzureplatformMultipliersNeedtoidentifyrapidlyscalingnewbusinessopportunitiesthatcouldleverageAzureastheircoreplatformNeedtoalsoexplorethepossibilitytobuildOnlinemarketfromscratchinChina(likewhatAmazondidinUS.)AzurePublicCloudserviceServer&storageConnectiondeviceandcorefabricMicrosoftAzure(OS,DB,ServiceBus,Dev.Platform,Accesscontrol,etc)AzureDataCenterfacilityAppsAppsAppsAppsAppsAppsTechnologyarchitectofAzureofferingAzurecoverageMicrosoftwillimportAzureout-of-boxfromUS.,andwillnotlookforPaaSpartnersinChinatodoheavycustomizationNeedtoexploredirectGTMoptionsbyofferingPaaSinChina(e.g.,touniversityorotherdevelopers)ABCDImplicitstrategy:UseSaaSopportunitytopullsales/usageofcoreAzureplatformservice3CriticalquestionstoanswerinthisstudyWhichexistingSaaSverticalsaremostattractivetoacceleratelaunchofAzureinChina?Withinpriorityverticals,whoaretheleadingplayerstoday?Whatarethecurrentandemergingbusinessmodels?Andwhatismakingcurrentplayerssuccessful?WhereshouldMicrosoftplayineachverticalsandhowcantheymaximizevalueinnext18-24monthsCriticalquestions(RecapofPhase1study)Whichmarketsegmentsarethemostattractive?Whoareleadingplayersandwhataretheirbusinessmodelineachprioritysegment?EarlyhypothesisonGTMmodelMicrosoftcouldconsiderineachofsegmentsWheretocoverintoday’sagenda?

4TableofcontentRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina5SoftwarespendInfra.softwarePlatformsoftwarePackageapplicationCustomapplication18–2417–5010–2025–47CloudMarketSizeOverview(2013-2017)PAASIAASSAASCloudopportunities(USD,Billion)FocusareasGovernmentinitiativesandnewgrowthareasMultipliers34HardwarespendServerStorageNetworkDesktop2N/A~4DeepdiverequiredtoexploretruepotentialTotal12–2821–5439–71SOURCE:TeamanalysisPotentialactionssuggestedtocapturewiderangeofopportunitiesStandard-Aggressive6SecurityTelecomFinancialservicesERMManufacturingGovernment&Education2Information&datamanagementsoftwareSystemnetworkmanagementsoftwareCustomapplicationsPackageapplicationsPrioritizedsegmentsfromphaseI-marketsizingstudyPotentialsizeforprioritizedsegments2013-2017,

USDbillionsPreliminarythoughts

MicrosoftmaygetsharesfromSaaSmarketbyEitheradoptrevenuesharingmodelwithSaaSplayersOracquire/JVverticallytomakefootprintinSaaSmarketPaaSmarketispartiallyaddressablebyAzureplatformUseSaaSopportunitytodrivesales/usageofcoreAzureserviceMicrosoftneedtocatchthenextwaveofrapidgrowthofMultiplierinChinaMultipliersStandardAggressive7~134~79~225~134~115~94~84~81SincemostsoftwareplayersofERMandmanufacturingindustryareoverlapped,these2segmentswillbecombinedinfollowingdiscussion2 GovernmentSmartCityprograminitiativeswillbecombinedintothissegmentforfollowingdiscussionCombinedsize:8-151Infra.andplatformsoftware7SOURCE:litsearch;teamanalysisDifferentprioritysegmentshavedifferenttypesofClouddemandMajorindustrycharactersrelevanttoCloudserviceImplicationonClouddemandFinancialservicesAccordingtoCBRC1and

and

CIRC2

,banksandinsurerscannotuse3rdpartyvendorshosteddatacenterservicesduetodatasecurityreasonsChinesesecuritiescompanieshavelowrequirementforhighcomputingrelatedtoresearchandmodelingHardtoconvertbankstobemajorusersofPublicCloudserviceHowever,buildingPrivateCloudinsidebanks’datacenterscouldbeaninterestingoffering1CBRCisChinabankingregulationcommittee2ChinaInsuranceRegulatoryCommissionGov.&Edu.GovernmentdataislesslikelytobestoredonPublicCloudduetosecurityconsiderationIn12thfiveyearplan,governmentannouncedsmartcityinitiatives,whichmainlyfocusonbuildingCloud

datacentersinpilotcitiesasthefirststepE-GovernmentapplicationsarehardtorideonPublicCloud

Gov.mayneedhelptobuildsmartcityClouddatacenterbyadditionalinvestmentandadvancedtechnologyplatformTelecomChinahas3dominateoperators,whoserevenueisover30B

USD.ItislesslikelyforthemtousepubliccloudsolutionAnotherinterestingfindingisChinatelecomoperatorsalsohavelargeapplicationhostingservice

businessforenterprisecustomers(mainlySMBcustomers)TelecomoperatorswillmainlyconsiderprivatecloudsolutionfortheircorebusinessTelecomoperatorsareconductingPublicCloudexperimentsintheirapplicationoutsourcingserviceManufacturing+ERMLargenumberofSMBmanufacturingcompanies(over10M)existinChina.Theyarelookingforlowcost,flexible,andstabletechnicalplatformandapplicationsolutionstoruntheirbusinessSMB

manufacturingcompaniesarethecoremarketofSaaSinChina,althoughtheyarepricesensitiveandnotquitecapabletoidentifyCloudplayersvs.traditionalplayersMultiplierSomesegmentsof

MultiplieralreadyhavedominatedplayersinChina,e.g.,e-commerce,SNS,onlinestream.TheyarelookingforpotentialnewgrowthopportunitiesofCloudspaceSomesegmentsof

Multiplierarestillintheearlystage,e.g.,onlinestorage,Cloudenduserdevice.Themarketwinnerwillemergeinnext18-24monthsFore-commerceandSNSplayers,CloudisthewaytocreatenewbusinessandnewtrafficsForemergingonlinestorageandCloudenduserdeviceplayers,theyneedtoexpandCloudcomputingcapacityandSaaSappsvarietyquicklytosecuretheleadingposition8TableofcontentRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina9StructureofanalysisforeachprioritizedsegmentOverviewofleadingplayersReviewoftheirbusinessmodelKeysuccessfulfactors/MajorchallengesImplicationonMicrosoftAzurelandingForeachprioritizedsegment,theanalysiswouldspreadasfollowing10TableofcontentFinancialServiceverticalGovernmentverticalManufacturingverticalandERMmarketTelecomverticalMultiplierRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina11SOURCE:LitsearchOverviewofSaaSprovidersinChinafocusingonManufacturingandERMCorefabricDatacenterfacilitiesITinfra.HWITinfra.SWContentanddataApp.dev.platform,toolsApps.andwebservicesEnd-userdevicesLastmileconnect-ivityOnlinemarkets12345678910NameRevenue,2010USDMn

SaaSOfferingManufacturingSolutionprovider71ImplementCloudsolutionsbutnotprovideCloudserviceERM

Solutionprovider286providingSaaSservicesuchasonlineaccountingsystem~11BusinessbyDesign,theonlineERPsystem228istheplatformtoprovideSaaSservicesuchasonlineaccountingsystemtobothenterpriseandpersonalusers~2istheplatformprovidingSaaSsuchasonlineCRMandPaastoenterprisecustomers~6istheplatformprovidingSaaSsuchaseERP,eTools,ePortaletcNAOnlineSCMandonlineretailsalesmanagementsystem~18OnlineSFA(salesforceautomation)system1.Estimatedby20~30companycustomers,500endusers,$149/usermonth,estimatedrevenueis~1MPureSaaSrevenueinChina12SaaSprovidersinChinachargecustomersbynumberofusers,serviceandapproachcustomersbydifferentchannelsBusinessmodelTelesalesSalesforceInternetsalesResellerGTMmodelPriceby#ofusersByusersperyearorpermonthPricebyserviceImplementationserviceIntegrationservicePricebyusageStorageComputingpowerBidforlargeCloud

program(e.g.,Pangoo1)1PangooisIBM’sPaaSprojectinWuxiSoftwarepark13ThreemainchallengeshavepreventedexistingSaaSplayersfrombeingprofitableinChinaChallengesLowmarginduetofiercecompetitionSaaSplayersneedkeepalowpricetocompeteagainsttraditionallow-pricepackagesolutionprovidersMostSaaSplayersfocusonCRMareaandprovidesimilarfunctionalitiesorservicesSaaSplayerscompetewitheachotherbylowpricetoattractmorecustomerstomaximizetheirinvestmentoninfrastructureandbuildDescriptionNegativeshorttermROIbecauseofhighcapitalexpenditureNeedssubstantialinitialinvestmentandmanagementskillstogaingoodearningsfromlong-terminvestments.Investmentonserversandinfrastructuredepreciatesveryquickly,puttingpressureonSaaSproviderstomonetizetheirinvestmentsquicklyLackofSaaSdemandbecauseofpoorcustomeracceptanceSaaSisstillinveryearlystageinChina,mostcustomersarefirst-timeITusers,notfamiliarwiththeconceptandbenefitsManycustomersinChinaconcernaboutstoringcriticaltransactiondatainSaaSCustomersinChinajustbegantogetusedtopayingforsoftwareorservice14ImplicationstoMSSetupaclearvaluepropositiontodifferentiatefromotherPaaSorSaaSprovidersLowerdevelopmentcostandfasterdevelopmentcyclesbyleveragingexistingapplicationsbasedonMSdevelopmentplatformsuchas.NETcollaboratewithIaaSpartnerstohelpSaastolowercostandcutinvestmentoninfrastructureShorttermROIcouldbenegativeifinvestbeforethedemandbootsOptimizecoststructurebysharinginitialinvestmentwithinfrastructureprovidersorGTMpartnersCostalongtheentirevaluechainsuchasassets,operationsandmarketingshouldbekeptlowtocompeteandbenchmarkwithtraditionalpackagesolutionvendorsSelectGTMpartnerswhocanquicklyattractlargescalecustomersMigrationfeasibilityandcost WhetheritispossibleoreasytomigratetheircurrentSaaSsolutionsorPackagesolutiontoAzureSizeofcurrentuserbaseIndicatepotentialuserpoolandpartner’schannelcoverageRichnessofsolutionportfolioAgoodsolutionportfoliocanattractmorecustomersanddrivethenumberofusersorusageofcustomers15TableofcontentFinancialServiceverticalGovernmentverticalManufacturingverticalandERMmarketTelecomverticalMultiplierRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina16CorefabricDatacenterfacilitiesITinfra.HWITinfra.SWContentanddataApp.dev.platform,toolsApps.andwebservicesEnd-userdevicesLastmileconnect-ivityOnlinemarkets12345678910ReviewoffinancialserviceleadingvendorsandtheircurrentbusinessmodelFinancialservicecontext93304925295420171512Revenue$MNameLeadingplayersBusinessmodelPresalesteamSalesteamImplementationteamSOEBanksJoint-StockBanks1LeadingcityBanksGTMteamoftheseplayersByaccountcoveragemodelLeadingcustomapplicationplayersinFSIusetheirownsalesteamtodoaccountbasedcoverageforlargebanksinChina1.Jointownedbygovernmentandenterprises2SmallerbankslikeruralcooperativebanksarenottargetcustomersforleadingFSIITplayers

Targetlargebankcustomersonly24LargestbanksinChinaNationalwidecommercialbanksSmallcitybasedbanksSOURCE:Litsearch,expertinterview,teamanalysis17KeychallengesoflaunchingpubliccloudforfinancialservicesolutionvendorsandimplicationonMicrosoftAzurelandingSOURCE:Litsearch,expertinterview,teamanalysisChallengesoflaunchingpubliccloudinChinainFinancialServiceIndustryLackofPublicClouddemandfromlargebankcustomersRegulationlimitation:CBRCpreventsbanksfromusing3rdpartyvendorshosteddatacenterservicesandrequiresthemnot

tostorecustomerandtransactiondataandothersensitivedataoutsidebanksLackoffocusonCloudstrategyMostofsolutionprovidersinFinancialServiceIndustryarecustomapplicationdevelopers,insteadofCloud,theyarefocusingmoreonSoftwareProductize,andacquiresmallplayerstoexpandtheirsolutionportfolioImplicationonMicrosoftAzurelandingDifficulttofindmatureSaaSplayersinFinancialServiceindustryandconvertthemdirectlytoAzureplatformNeedtolobbyregulatortoadjustpolicytoallownoncriticalbusinessprocessanddatatorunonPublicCloudNeedtoimplantCloudvisionintoleadingcustomdeveloperplayers,andencouragethemtobuildsolutionsonCloud18TableofcontentFinancialServiceverticalGovernmentverticalManufacturingverticalandERMmarketTelecomverticalMultiplierRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina19SOURCE:IDC,

Litsearch,expertinterview,BloombergCorefabricDatacenterfacilitiesITinfra.HWITinfra.SWContentanddataApp.dev.platform,toolsApps.andwebservicesEnd-userdevicesLastmileconnect-ivityOnlinemarkets12345678910SmartCityProgramsSolutionvendors9,261579123Revenue($M)27,36210,38266276LeadingplayersinGovernmentsectorLeadingGovernment

Solutionvendors496414248Revenue1

($M)662579372207SmartprogramcityBeijingShenzhenWuxiShanghaiShanghaiShanghaiShanghai1651241.Revenueinthisindustry496BeijingLeadinggovernmentsolutionvendorsareinvolvedingovernmentsmartcityprograms20ReviewofbusinessmodelofgovernmentsolutionvendorsandtheircurrentcloudchallengesChallengesoflaunchingcloudTheircustomershaveconcernsoninformationsharingTheonlycustomersoftheseleadingGovernmentSolutionvendorsaredifferentdepartmentsinsidedifferentlevelsofgovernment,itisbynaturethattheircustomersdon’twanttoshareanyinformationacrossdifferentdepartmentsifnotmandatoryBusinessmodelSOURCE:Litsearch,expertinterview,teamanalysisPresalesteamSalesteamImplementationteamProvincegovernmentProvincegovernmentProvincegovernmentGTMteamoftheseplayersByaccountcoveragemodelSolutionsincludee-government,Taxation,HR,QA,etc21ReviewofbusinessmodelofsmartcityandprogramprogressinChinaEntitiesBuildUseGovern-mentSMBsPubliccloudInvestorCloudsolutionvendorSaaSApp.vendor112KeystepsofsmartcityprogramGovernmentistakingleadinclouddatacenterbuildingprogramSolutionvendortogetherwithtelecombuildthedatacenterinfrastructure,e.g.HuaweiInvestorsbringsincapital,e.g.,MunicipalgovernmentPlantoencouragedemandofclouddatacenterbyAttractingmorelocalSMBuserstomigratetoClouddatacenterCooperatingwithapplicationvendorstoprovideSaaSsolutiontoenrichthepubliccloudcontentMigratingE-governmentsolutionsfromde-centralizedmodetocentralizedclouddatacenterBusinessmodel12Allsmartcityprogramsareinearlyplanningorbuildingstage,impactneedstobefurtherobservedSOURCE:Litsearch,expertinterview,teamanalysis22ImplicationforMSHowtoapproachsolutionvendorsTalktosolutionvendorsonlywouldbeinvain,becausetheywillnotactuntiltheircustomers(departmentsindifferentlevelsofgovernment)wantPublicCloudTherightthingtodohereistolobbyprovinciallevelgovernmentbyconvincingthemcentralizingdifferente-governmentapplicationstoPublicCloudcouldenhancethegovernanceandtransparencyatprovinciallevel,meanwhile,toincreasethedemandforClouddatacenterstheyarebuildingHowtoapproachsmartcityprogramvendorsGovernmentplayscentralroleinSmartCityprograms,therefore,Microsoftneedtoapproachrelevantdepartmentsofgovernmentdirectly,insteadofpartneringwithlocalITvendorsMicrosoftneedstogetinvolvedinearlystagesbeforetheconstructionofthedatacenter,otherwise,itwillbetoolatetofitAzureintothesmartcitysolutionValuepropositionsofMicrosoftarecapitalinvestment,Azuretechnology,andbrandingtohelptoattractmoreapplicationdeveloperstogeneratedemandSOURCE:Litsearch,expertinterview,teamanalysis23TableofcontentFinancialServiceverticalGovernmentverticalManufacturingverticalandERMmarketTelecomverticalMultiplierRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina24CorefabricDatacenterfacilitiesITinfra.HWITinfra.SWContentanddataApp.dev.platform,toolsApps.andwebservicesEnd-userdevicesLastmileconnect-ivityOnlinemarkets12345678910ReviewoftelecomleadingvendorsandtheircurrentbusinessmodelLeadingTelecomindustrysolutionproviders1189018339302LeadingplayersRevenue1

($M)423427211.RevenueinthisindustrySOURCE:Litsearch,expertinterview,teamanalysisBusinessmodel-GTMsalesteammodelPresalesteamSalesteamImplementationteamProvincialoperatorProvincialoperatorProvincialoperatorGTMteamoftheseplayersByaccountcoveragemodelSolutionsincludeBSS,OSS,BI,VAS,MSS,etc25KeychallengesoflaunchingpubliccloudfortelecomvendorsandimplicationtoMSandAzureSOURCE:Litsearch,expertinterview,teamanalysisInformationsecurityconcernsofTelecomoperatorsonPublicCloudTelecomoperatorsare“self-government”ineachofprovince,soitisverydifficulttopushthemmoveonCloud,becauseallofthemhaveinformationsharingandsecurityconcernsTelecomoperatorsarekeentobuildownsystemstosupporttheirdifferentiatedbusinessmodelsofcorebusinessforcompetitionKeychallengesImplicationonMicrosoftAzurelandingHardtopersuadeoperatorstomigratetheiron-premisesystemstotheCloudandlandAzurePublicCloudplatforminTelecomindustryHowever,thecurrentITspendforeachofTelecomoperatorsinChinaishuge(ITspendof3operatorsrepresentsover13%oftotalITspendinChina),implyinghugecostreductionopportunitytoapplyPrivateCloudsolutionintheirdatacenters26However,outsideofTelecomcorebusiness,thereisaninterestingbusinessmodelcalledapplicationoutsourcingforSMBcustomersCurrentbusinessPerformance#ofEnterpriseusers:200k~250K

YearlyRev.,~200MUSD(includingWAP,SMS,appsconnection)MobileappsSMSWAPEnterpriseCustomersChinamobileDCApplicationServiceInfrastructurehostingServiceTelecomconnectionTelecomapplicationserviceTelecomoperatorsgetbigpotentialtolaunchPublicCloudservicebyLeverageexistinglargeSMBcustomerbaseofhostingandapplicationoutsourcingserviceLeverageexistingdatacenterfacilitiesandsufficientcomputingpoweralloverthecountrySOURCE:Litsearch,expertinterview,teamanalysisImplicationonMicrosoftAzureMicrosoftmayneedtoactivelyconnectwithTelecomoperators,offerAzureplatformandnegotiaterevenuesharingmodel27TableofcontentFinancialServiceverticalGovernmentverticalManufacturingverticalandERMmarketTelecomverticalMultiplierRecapofPhaseI–WhichmarketsegmentsaremostattractiveDeepdiveonprioritysegments(leadingplayers&businessmodels)ReviewoverallprojectscopeandkeyquestionstobeansweredIdentifytheopportunitiesforAzureinpriorityverticalsDeepdiveonSMBopportunityDeepdiveonmultiplieropportunityAlignonoverallopportunitiesforlandingAzureinChina28SOURCE:Litsearch;teamanalysisQuickscanofcurrentMultiplierplayersinChinaCorefabricDatacenterfacilitiesITinfra.HWITinfra.SWContentanddataApp.dev.platform,toolsApps.andwebservicesEnd-userdevicesLastmileconnect-ivityOnlinemarkets123456789100.240.190.88Onlinestorage0.29NameRevenue2010USDmillions4315121661VideoNameRevenue2010USDmillions15,4223,6552,9535,38238,2453rdpartypaymentNameVolume12010USDmillions1,25676.5484023,118SNSNameRevenue2010USDmillions8821,619794351308E-commerceNameRevenue2010USDmillionsEnduserdeviceNameTaobaoKaixinTenpayAlipayChinaPNRKuaipanAliyunmobilephone1Theannualtransactionamount0.2929LargeplayersandgrowthchampionsarethemostpromisingGTMpartnersforMSDominantpositioninfocusedareasLargeuserbaseExperienceonopenplatformDemandforabetterPassplatformRapidgrowthinafastemergingmarketLeaderpositioninitsfocusedareaGreatpotentialinSaaSorPassDemandforabetterPassplatformSOURCE:SourceCriteriafordominantplayersinmaturesegmentCriteriaforfast-growingplayersinemergingsegmentTaobaoKuaipanTaobaoKuaipanChinaPNRTenpayAlipayVdisk30KSFsDoubleclickoninterestingSaaSplayersinChina–TaobaoOnlineC2CmarketplaceTaobaoTaobaoapplicationsTaobaoSellersThirdpartydevelopersRevenuecollectedthroughAlipayRevenuesharingOther3rdpartyapplicationsOthersolutionsusingTaobaoAPITaobaoservice3rdpartyserviceOOperationmodelLeveragetheexistinguserbaseandAlipayinTaobaomarketplaceSaasexperiencefromAlisoft

3rdpartyapplicationTaobaoapplicationMoneyflowSOURCE:SourceChallengesDifficultytofulfillvariablerequirementsfromusersLackoftechnologymanagementskillsandexpertiseonmanagingacomplexITarchitect31DoubleclickoninterestingSaaSplayersinChina–QzonePhotoQZONEDairyMusicetcUsersThirdpartydevelopersSubscriptionfeecollectedthroughvirtualcurrencyorTenpayRevenuesharing3rdpartyWebGamesOther3rdpartyapplicationsetcBasicservice3rdpartyserviceOpenplatformOperationmodel3rdpartyapplicationQzoneapplicationMoneyflowSOURCE:SourceKSFs