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China Is Next Frontier in SaaS Revolution

NetworkNewsWire Editorial Coverage: Software-as-a-service (SaaS) in China is one of the fastest-growing industries in the world, and with the sector poised to double over the next few years, the boom has just begun. Cloud infrastructure spending in China increased from about USD $107 billion in 2019 to $142 billion in 2020, surging more than 32% in the last quarter of the year. China’s accelerating cloud migration is driven by long-term structural trends in the digitalization of the country’s economy plus increased business acceptance of cloud and SaaS solutions, all indicative of massive sector growth. These drivers, among others, are propelling the market higher as ever more companies shift to cloud-based infrastructure to reduce costs and increase revenue as well as enhance customer service and satisfaction. The process is also spawning a fusion of SaaS and customer-engagement actions from passive traditional efforts to proactive artificial intelligence (AI)-powered SaaS solutions. This is exactly the type of sea-change coveted by smart money. However, the country’s SaaS market is extremely fragmented; the top 10 vendors account for only about 35% of total market share. Led by industry visionaries, Infobird Co. Ltd. (NASDAQ: IFBD) (Profile) is launching the next generation of SaaS in China to capture a lion’s share of the massive market. With its past years of operation experiences, the company has served many leading enterprises in various industries, such as China Guangfa Bank and multinational ecommerce giant Alibaba Group Holding Limited (NYSE: BABA). Infobird’s solutions and product suites have been likened to Zendesk Inc. (NYSE: ZEN), except that Infobird’s solutions may appear to be more innovative and focused on proactive client engagements, which is to ultimately empower customers to increase sales. Other notable cloud-based SaaS companies include Twilio Inc. (NYSE: TWLO), an American cloud communications platform as a service company, and Salesforce.com Inc. (NYSE: CRM), the world’s predominant customer-relationship management (“CRM”) platform.

  • CMIT projects that China’s cloud market will experience a dazzling 30% compound annual growth rate through 2023.
  • IFBD is one of few SaaS companies in China with capability to transition to standard SaaS business model.
  • Infobird is the only known player in China that owns, applies cloud-native architecture in customer engagement.
  • Company’s strategic vision is to capitalize on massive digital transformation sweeping across China.

The SaaS Tsunami

Beyond structural trends and increased business acceptance of cloud services, the Chinese government also advocates for cloud adoption, issuing Guidelines for Promoting Enterprises to Move Business to Cloud Platforms in 2018. Cloud migration also accelerated with the emergence of COVID as work became remote. One million new Chinese companies planned to conduct business with cloud computing services last year alone. A transformational disruption is underway, evidenced by the CMIIT forecast that China’s cloud market would experience a dazzling 30% compound annual growth rate through 2023.

Even that stellar forecast could be a low estimate. As the idea of digital transformation sinks in and rises to become the hottest topic across industries in China, mid-to-large and leading enterprises in various industries have a high tendency to try out new digital and cloud-based solutions such as customer-engagement solutions, enterprise resource planning (also known as ERP solution) and operation solutions. At the same time, well over 90% of companies in China are still small- to medium-sized enterprises (SMEs), which contribute roughly 60% to China’s GDP. Normally SMEs don’t have sufficient cash reserves to invest in hardware and software upgrades, but millions of SMEs can afford the SaaS subscription model to improve their customer service, reduce costs and increase revenues.

This together represents an enormous underserved and untapped market, while tapping this burgeoning market also presents a real challenge for most SaaS companies in China. Chinese SaaS companies face challenges on how to achieve better balances on the mid-to-large enterprises and SME markets, as mid-to-large enterprises tend to have various customization needs but with potentially larger and more stable revenue contribution to the company, while SMEs mean smaller and less stable revenue contribution but also lower customization needs. Yet the market is there, and whoever can best solve this balance dilemma and quickly expand the market with standardized solutions will emerge as the next industry leader.

Riding the Wave

Infobird Co. Ltd. (NASDAQ: IFBD) is one of the few SaaS companies in China that has the capability to transition into a standard SaaS business model and to serve both the mid-to-large enterprises and SMEs under its standardized platform by leveraging its no-code development platform. A leading SaaS provider of patented, innovative AI-powered, customer-engagement solutions in China, the company earned its stripes by creating and delivering customized SaaS solutions for some of the largest commercial banks in the nation. Coming off a successful IPO, Infobird is now expanding its target market and rolling out standardized SaaS modules to service a myriad of other enterprises.

Infobird started on a small scale more than a decade ago by developing experimental cloud call center as well as intelligent telemarketing services to various clients, including Alibaba Group Holding Limited (NYSE: BABA) and the credit card division of China Guangfa Bank, one of the largest commercial banks in the country. Infobird’s long-term services with China Guangfa bank’s credit card center further consolidates and proves its capability on supporting ultra-large concurrence of agents with high security and service level.  As the relationship grew, so did Infobird’s experience and expertise in developing and delivering the best-class customer engagement SaaS solutions, which becomes the foundation for the company to develop its standardized SaaS services.

Infobird continued expanding and currently services various customers in the finance, education, public services, healthcare and consumer products industries. As Infobird grew, the company remained laser focused on research and development of new products and services, culminating in an intellectual property portfolio that currently consists of 19 patents and 51 software copyrights. The company remains committed to innovation; its R&D team accounts for about 40% of employees as of December 2020.

Now, leveraging its proficiency, R&D activities and half of its IPO proceeds, Infobird is undergoing the transition to providing more standardized SaaS services to both mid-to-large enterprises and the millions of SMEs in various industries across China. One key message to deliver is that, with currently developed standardized SaaS modules and its self-developed, no-code development platform, Infobird can quickly develop new SaaS modules with preprogrammed microservices at extremely low cost and rapidly react to shifting market demands and opportunities. It can therefore serve mid-to-large enterprises clients without any customization cost, get to market quickly and maintain its standards of excellence.

With a solid revenue base and well-established proven architecture in place, Infobird is creating high barriers to entry not easily emulated by competitors. The new standardized SaaS modules deliver tangible value for both mid-to-large enterprises and SME end users by resolving business pain points and generating more business opportunities. Infobird’s standardized SaaS solutions are fast and easy to roll out, and the company expects to scale quickly. As the roll out picks up steam, it can’t be overlooked that Infobird’s products are highly profitable software-based subscriptions, and the company expects to maintain 65% gross margins well into the future.

More Than Most

Infobird is the only known player in China that owns and applies cloud-native architecture in customer engagement industry that can fully release the power of cloud computing by ensuring flexible scale-out capabilities on a module basis. The company also has higher tolerance of failures and default capability and can support potentially unlimited concurrence of agents on the same platform, with enough resources supplied. The company also has self-developed and patented AI technologies such as natural language processing (“NLP”) and an innovative no-code development platform.

With its self-developed and patented products, Infobird is one of only a handful of SaaS companies in China that has provided customer engagement, CRM and call center expertise to large, demanding enterprises. In addition, Infobird’s platform maintained exceptional service and security levels. Few can compete with Infobird’s level of proficiency.

What’s more, unlike traditional CRM, Infobird’s customer-engagement software provides both AI customer engagement and AI Salesforce management. More robust and intuitive, customer engagement is next-generation CRM. The traditional CRM system is designed to passively track, monitor and analyze the operation of sales activities. It, therefore, cannot match up to today’s digitalized customer-interaction world.

The modern customer-engagement industry is, by nature, a “system of engagement,” which focuses on the active, ongoing engagement with customers by leveraging a broad range of applications, including omnichannel communication solutions, AI voice/text chatbots, intelligent quality inspection, and more. This modern approach is aimed at helping InfoBird’s clients to increase their interaction efficiency and effectiveness with their end customers at low cost and, ultimately, to increase revenue for its clients.

The Push Forward

Recognizing the enormous opportunity, Infobird founder, chair and CEO Yimin Wu laid out a simple, strategic vison for the company: transform Infobird from the customized SaaS model to standardized SaaS and capitalize on the massive digital transformation sweeping across China. To push the shift faster and achieve his objective, Wu launched Infobird’s IPO on April 20, 2021, resulting in gross proceeds of USD $25 million.

“We dream of letting the light of science and technology illuminate every corner of the business world,” said Wu. “Therefore, we choose to be listed on NASDAQ. We must accelerate development with a global vision. The IPO is not the end, it is a new starting point, and it means more opportunities and bigger responsibilities. In order to achieve new growth, we will face more tests and challenges in the future. Maybe Infobird will go through revolutions, but our mission to make customer engagement smart will not change.”

Beyond the success of the public offering, other important factors from the IPO are noteworthy, including comps to SaaS peers. At current levels, Infobird trades at a deep discount to peers based on price-to-sales (P/S) ratios. Price-to-sales is a valuation metric calculated by dividing market capitalization by total revenue in the most recent year. High ratios suggest overvaluation, and low ratios indicate undervaluation. Recently,  IFBD’s P/S was under 6, Twilio was 35 and Zendesk 17. The P/S ratios show that IFBD trades three to five times less than many SaaS comps, indicating it is undervalued at current levels.

Another important factor worth noting is the planned use of IPO proceeds. Infobird has allocated 24% of proceeds for further research and development, 26% for working capital, and 50% is dedicated to sales and marketing. This allocation is a clear reflection of Infobird’s longstanding commitment to innovation and clearly signals the company’s hard push forward and well beyond standardized SaaS. Infobird recognizes that China is the next frontier in the SaaS revolution and intends to aggressively capture market share, enter a new phase of high-speed growth and emerge as the market leader.

SaaS Apostles

Alibaba Group Holding Limited (NYSE: BABA) is a client that Infobird has served in the past. Also known as Alibaba Group and Alibaba.com, this Chinese multinational technology company specializing in e-commerce, retail, internet and technology. The company is the leading platform for global wholesale trade and offers several software products produced through a wholly owned subsidiary, Alibaba Software. Alibaba is currently one of the top three Infrastructure as a Service (IaaS) suppliers in the world through its Alibaba Cloud subsidiary.

Zendesk Inc. (NYSE: ZEN) is a service-first CRM company that builds software designed to improve customer relationships. Zendesk started the customer experience revolution in 2007 by enabling any business around the world to take its customer service online. Today, Zendesk is the champion of great service everywhere for everyone, and powers billions of conversations, connecting more than 100,000 brands with hundreds of millions of customers over telephony, chat, email, messaging, social channels, communities, review sites and help centers.

Twilio Inc. (NYSE: TWLO) is an American cloud communications platform as a service company based in San Francisco, California. Twilio allows software developers to programmatically make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs. Twilio has democratized communications channels such as voice, text, chat, video, and email by virtualizing the world’s communications infrastructure through APIs that are simple enough for any developer to use, yet robust enough to power the world’s most demanding applications.

Salesforce.com Inc. (NYSE: CRM) is an American cloud-based software company headquartered in San Francisco, California. It provides customer relationship management service and provides a complementary suite of enterprise applications focused on customer service, marketing automation, analytics and application development. Salesforce is the world’s number-one customer relationship management (“CRM”) platform.

There’s no question that a massive digital transformation is sweeping across China and that SaaS is integral to the process. This transformation presents unparalleled opportunity for select SaaS companies, and smart money has taken notice.

For more information about the company, visit Infobird Software Co.

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