In March 2006, the company took the first steps towards splitting off CDC Software, the enterprise applications division that was formed from multiple acquisitions in the ERP, SCM, and CRM markets, and includes ERP vendor Ross Systems, and CRM player Pivotal from the CDC Corp patent company.
CDC CEO Peter Yip said he hopes to take it public this year and is currently looking at the best place to float. As part of this process, he said he has been looking at the London stock exchange. A key factor regarding the timing of the float will be energy prices, on the grounds that problems in this area tend to cause the market to drop creating a poor environment for an IPO.
Despite similarities in terms of acquisition-led growth and mid-market manufacturing focus, CDC’s company strategy is very different from its rival SSA Global. Yip said CDC is vertically driven, wholly centered on micro-verticals within process manufacturing, avoiding the large area of discrete manufacturing because that is where every ERP vendor plays.
He admitted that the company is almost hiding in its chosen verticals. Its plan is to gain a dominant position within process manufacturing verticals such as pharmaceuticals and food and beverage, before moving into another area. Future acquisitions will be aimed at filling in missing pieces in terms of functionality for micro-verticals or even vertical expertise via consultancy acquisitions. In the CRM area, the Onyx buy will enable CDC to add insurance to its financial services portfolio for instance.
Services are another core component of CDC’s growth strategy. With a background in consultancy, Yip is very service-oriented, seeing it as a way to generate additional high-margin business from existing and new customers. He cited $1m worth of additional warehouse management-related services business with British Airways in relation to the logistics for its in-flight meals, as evidence that it is a viable growth path. Differentiating CDC from SSA, he said SSA would probably concentrate on license sales whereas CDC buys to expand the product offering, not just the software. However, SSA has recently ramped up its service offering in the form of its Framework for Excellence business consulting methodology.
We all want more business from existing customers but it is how you deliver it that is important, said Yip, and that is where CDC’s real advantage lies. With the combination of its Chinese base and its verticalized process-centric approach, it has an established presence within the downstream part of the supply chain as well as detailed supply chain knowledge.
CDC understands the layers in the supply chain because it is Chinese manufacturers who are doing the manufacturing, said Yip. By supplying the ERP software to the Chinese factories that supply the US corporations, he said that eventually CDC gets put in front of the board of the US organization. Its bottom-up approach is designed to enable it to move up the supply chain from an established base, while other vendors are struggling to move downstream to gain a presence in the Chinese market. As a Chinese company doing business in the Chinese market it has another advantage that western vendors do not.
