Strategy-Based Operations: Neusoft Goes International

Six Years Hard Work to Accomplish
A Three-Major-Business-Focused Portfolio

Neusoft Group, a leading software and solution provider in China, held Neusoft 2005 Business Strategy Press Conference on March 22, 2005 that was themed Strategy-based Operations: Neusoft Goes International. During the press conference, Neusoft released its strategies for both the year of 2005 and the following five to ten years based on past six years of operation streamlining and strategy adjustment. Besides, its new logo with a more international look went public as well.

Dr. Liu Jiren, Chairman and CEO of Neusoft Group, accompanied by heads of Neusoft s three major business lines, namely, Lu Zhaoxia, Senior Vice-President & Chief Operating Officer of Neusoft Co., Ltd, Zheng Quanlu, president of Neusoft Medical Systems Co., Ltd, Wen Tao, president of Neusoft IIT, was present at the press conference, introducing the company s strategies for the year 2005 and its internationalization strategy. He also took questions from the correspondents in the press conference.

Dr. Liu noted at the press conference that Chinese software industry had frequent difficulties, but it has always been growing. Chinese software enterprises are also moving to a high level of maturity in their interactions with market. In the coming five to ten years, software industry is to achieve further growth as social infrastructures are fully completed and services are bringing increasingly more values to businesses.

Besides, since software is more and more becoming part of manufacturing industry, China sees great potential due to its development of embedded software and software outsourcing & BPO will boost as well. Hence, Neusoft will carry on its focus on software & services and reinforce its business portfolio consisting of software & services, medical products & services and IT education & training by inputting more into its major businesses including industry solutions, embedded software, software outsourcing and BPO.

By demonstrating values of technology by presenting various intelligent applications and quickening its steps in going international, Neusoft is to create its own business development mode catering to international demands.

It is reported that in 2005, Neusoft, adhering to a principle of accomplishing all its operational targets by continuously improving operating quality, optimizing business structure and accelerating internationalizing procedure of all businesses, expects to have a total contract volume of nearly RMB 4 billion Yuan by the end of 2005, among which, international businesses will rise to 12% from current 10%.

In the meantime, Neusoft will initiate a series of campaigns for its three major business lines to ensure its strategy of 2005, including improving business process, constructing tools and environment and advocating a theory of eco-nomic development for domestic solution business for more profits, expanding software outsourcing business into US in addition to winning more market share in Japan, investing more in new product development of medical business for a larger international market share and more revenues from related services, integrating the development of both human resource and industry more closely in its education & training service to provide the society with more talents of higher quality, and inputting more into fundamental research, talents cultivation as well as management systems.

The 2005 strategy of Neusoft, featuring discreetness and practicability, stresses construction of its internal systems and a strategy based operation, which is consistent with its operational philosophy. Based upon untiring improvement of its own capacities and such a judgment of rationality on industry environment, Neusoft has made successful strategy adjustment since 1998.

By now, a reasonable strategic layout that focuses on software technology with dedicated applications in software & services, medical products & services and IT education & training has come into shape at Neusoft, which lays a solid foundation for its going international.

In recent years, domestic informatization has enabled an annual increase of 20% of software industry. However, China has only a 2-3% share in the world market, half of which goes to Japan and US. It is a necessary trend for Chinese software enterprises to seek business in a bigger market. Statistics show that international business of Chinese software industry sees a 50% of composite growth in recent years, which has become a promising sector of IT service industry.

According to data released by CCID Consulting, Neusoft topped all other software manufacturers in China with US$33 million of software outsourcing revenues in 2004. The company has successfully set up with Philips in the business of digital medical products & services a joint venture that exports to Europe and US, which set a new example for integration of software and manufacturing and of software and technological patents for internationalization progress.

At an interview, Dr. Liu said that Neusoft had made big breakthrough in its strategy focusing on operating quality improvement in 2004. Neusoft was certified by CMMI Level 5 and upgraded its QCD system in terms of HR, process and technology.

Dr. Liu also commented that internationalization is based on maturity of the industry and is extension of an enterprise s capacity. Internationalization means to play against all other industry players from all over the world and maintain sustainable competence under the same criteria in the same environment.

The coming ten years are very important to Chinese software enterprises to go international. He also said that internationalization is the most key strategy of Neusoft and practicability & focus are constant pursue of Neusoft. The company expects to make some adjustment to its business structure in the following five to ten years, including domestic software & services from 70% to 40%, medical business from 20% to 35% and international business from 10% to 25%.

Such adjustments will enable a more sustainable, stable and secure business structure for Neusoft.

It is also learned that Neusoft released a new logo as its internationalization strategy moves on. The new logo carries a meaning of Beyond Technology, which is an extension to its philosophy of Software Creates Customers Values and covers its three major business lines. The new logo includes the word of Neusoft as before, but it looks more international and friendly. Neusoft is to register this new logo in over forty countries all over the world.

Industry expert analyses that the strategy presented by Dr. Liu Jiren is based on the following understanding of Neusoft, including solid domestic market, booming international business, and increasingly maturing internationalization capacity.

Background Data:

Neusoft s New Logo & Slogan

The new logo text of Neusoft remains unchanged, including an English word, Neusoft, and two Chinese characters, , which looks more international and friendly. The new logo, as a whole, presents a manner of solidity. The font is massive, simple, friendly and energetic. It is more likely to be internationally applied with fewer roadblocks in overseas registration. For the time being, Neusoft has submitted trademark applications in over forty major countries of the world and expects positive results by this June.

In addition, the new slogan of Neusoft, Beyond Technology, carries a more specific and simple meaning and loads more information of its three major business lines. It puts more emphasis on Neusoft s development of technology by applications and values businesses and knowledge of applications as much as software technology.

Figure: Neusoft's Logo & Slogan