Gridsum Holding Inc. (NMS:GSUM) is a company that provides data analysis software for multinational and domestic enterprises, and government agencies in China, addressing big data solutions. The company’s CEO, Guosheng Qi, sat down with Executive Casts at the company’s headquarters in Beijing, China to discuss some of the most important things that will help investors connect with and learn about the company beyond what is usually gleaned from brief post-earnings conference calls. Below is his take on what he feels to be GSUM’s competitive advantage, the company’s client base, and current and future opportunity in big data.
- What is Gridsum’s Competitive Advantage
- How Gridsum Built an Impressive Client Base Quickly
- Future Opportunities and The Legacy System Problem
- Currently Addressable Market Opportunities
Guosheng Qi on Gridsum’s Competitive Advantage – Early Mover in Big Data
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I think definitely that our continuous innovation, our technology…as I said, we’re very fortunate to have our name Gridsum as the first group of people who realize the importance of distributed computing and we’re also fortunate to make the right decisions on cloud computing.
We are definitely the first mover in this sector, in this enterprise software as a service, and definitely early mover in big data in China. In TMD sectors, sometimes the early mover is not an advantage because you see it’s so many new companies have huge success and [puts] stress on the older ones, but in the data analytics and enterprise services sectors, I really think that first among advantage is a very solid advantage because you accumulate data, and data is so important.
As I mentioned, you have no chance to serve this company for three years if you cannot make predictions, even if you have the best algorithm, even if you have smarter people, if you don’t have historical data [to] serve the industries, serve the client and basically…especially when now there’s AI, AI is based on historical data.
So, you serve your client better, you collect more data and the data helps you serve your client better and better. This is really how you see re-enforcing cycle and I think that is our biggest advantage as a first mover and accumulate a lot of data from different industries and use the data wisely and keep optimizing our client’s performance. That is the advantage.
How Gridsum Built an Impressive Client Base Quickly
I think it’s a bit definitely thanks to, first, to our technology which, as I mentioned, if you have a great sales guy that spends 20 minutes to explain it and then the audience can feel that, “Oh, this is better. I want to try.” Thanks for that and also thanks to the team. I had a fantastic team we were very fortunate they build a great team.
So, my head of sales joined the company in 2009, who was the first sales director of Baidu. And he served the Baidu from 2004 to 2009 as this is was the golden age of Baidu. And he was the first sales director and he was also the founder of Baidu key accounts sales team. Key account sales from Baidu means not small and medium enterprises. These are the only big, like fortune 500 enterprises.
So, he has connections. I don’t have to wait there and then try to get to know all these potential clients. He knows all of them and he was impressed by our technology and decided to leave Baidu and joined our company in 2009. He knows everybody and basically he knocks on a door and comes into their office and introduces a product. So, that’s the reason why we can quickly build such an impressive client base it’s because of technology and our team.
Future Opportunities and The Legacy System Problem
I think the reason why I’m excited about my business and I have this confidence is that, if you look at the big picture, we talk about details of the addressable market. If we look at the big picture for China, our consumer internet industry it’s already, as a developer, an advanced world. Based on our own population and based on the economic growth of China, I have strong confidence that the China consumer internet industry will be much bigger in the future compared with of maybe the entire western world.
So, what about our enterprise service sectors? it’s still like a very early stage it looks like, it’s still like zero. As I also have mentioned about a corporate governance, as long as China enterprise becomes more and more sophisticated they want to incorporate the corporate governance. What is corporate governance? It’s based on like a data driven decisions, it’s like a rule by rule, and nobody could easily change your rules. So, you need IT, you need technology, you need automations, workflow automations. But at that time, then, people will try to rely on more and more solutions which are provided by a company like Gridsum.
I think I have reason to believe that China enterprise services sectors, one day – I don’t know how long will it take maybe five years, maybe very fast, but maybe ten years or 20 years – will be as big at the United States. But the one thing we’re very good, which we don’t have, and in the Western world because you’re a very well developer for more than hundred of years, you have is like a legacy system problem.
I talked with a lot of entrepreneurs, a lot of software guys in United States. The biggest challenges they deal with, especially data analytics companies, big data companies, is they face the legacy system problem. Like 20 years ago people began to buy software, 30 years ago began to buy software. It’s different than business units buying their own software for their own purpose and now there’s some data analytics provider here that wants to collect all their data, to integrate their data and so they had to dig into the system and then they find data inconsistency and now they find a big holes, find the data to be missing. People believed it was there and are finding it was not there.
So, there are a lot of problems triggered by the legacy system problem and issues which do not exist in China. We don’t have a legacy system. It’s like China consumer internet. So many people who never have owned a PC directly bought a smartphone and connect it with the internet without a cable line. That happens in China. That kind of like leapfrogging things, and I would say that that will help in China, in enterprise sectors. So, we bypass the legacy system and directly go to the big data in AI, that is definitely possible. So, that’s my vision in the future and it is my confidence to my country and in my business and also the industry.
Currently Addressable Market Opportunities
So, because we have different business sectors. I will say one by one. Like in marketing automation, digital marketing sectors, the addressable market is pretty clear because we only focus on big clients. In this stage, we only focus on big clients. And big clients will identify as a company who has a budget, marketing budget, which is more than ten million US dollars every year. So, these are big company and we have a list, internally, we have like a 2,000 [potential] client list. Now, we have like 300 of them and they have a marketing budget more than 10 million US dollar a year and these are our very accurate addressable market, for marketing automations switch. And this market is growing, as I mentioned, it’s better [than] the digital part, it’s growing faster than the entire China economy, the entire marketing part. I think this market is growing at a 20, 30% very conservatively and this is our addressable market for the 2,000 [potential] clients for the digital marketing part and for government.
China is very different than the Western world in that we have a huge country to manage and the country is, originally, it’s very developed into levels that are very different. You went to Beijing and Shanghai, you saw that’s a very developed country and went to the country side, the remote province is very under-developed. So, this makes the China government so hard to manage as such a big country with such huge population and so they spend a lot of money on IT and technology to help them. And we’re digging into the numbers and their budget for every year, especially for last year, their budget for IT services related to data, to internet, to better understand how people consume…it’s roughly like 20 billion RMB – that’s just for last year. And a lot of budget is still grabbing the traditional IT services companies. And we’re trying to view the software as a service of government as service solutions to help them better spend this money and to better serve the people, serve the citizens. That’s the government and also, if we talk about the legal services…
So, you know because we have such a huge population, we have a lot of courts, we have a huge amount of judge teams and a lot of lawyers. So, we have 3,000 courts around China and we have a legal professional team like judges, it was like more than 100,000 judges. And double or triple time with the legal service guys like lawyers, paralegals and that’s a big market…along with the economic growth. And in China people tend to use legal litigation to solve their conflicts more and more and that is happening. And if you talk to most of the judges in China, actually they have cases which they cannot review on time; there’s too many cases that keep flowing into the judicial system and into their court. And it’s just because China has a huge population and economy becomes better and better and people realize their own right and become more civilized. So, they choose to use litigation to solve their problems, that’s very normal. You also see that China began to pay more attention on intellectual property protections and so even foreigners, even foreign company sometimes can win cases in China for intellectual properties and that was basically very good. And as we mentioned with intellectual property sectors, they’re trying to move from, transform from, civil law to common law and this is a huge market. It’s all the corporate, all the big companies, whatever Western Companies or local company. They have intellectual properties and the litigation by intellectual property – the fees – is pretty thick. So, it’s good and our solution will address that very big market.
Guosheng Qi, Chairman of the Board, Chief Executive Officer of Gridsum
Guosheng Qi is one of our co-founders and has served as our chief executive officer and chairman of our Board of Directors since our inception. Mr. Qi founded Beijing Gridsum in 2005 when he was a student at Tsinghua University. Mr. Qi holds a bachelor’s degree in computer software from Tsinghua University. See more of Guosheng Qi’s Executive Casts here.
Article by GEO Investing