Alibaba.com to offer online software to small enterprises

South China Morning Post
By Bien Perez
18 August 2009

Mainland e-commerce giant Alibaba.com aims to expand its operations by becoming an online supplier of business automation software to the country's small enterprises.

The company took a step forward yesterday by agreeing to pay 208 million yuan (HK$235.89 million) to acquire the business management software division of Alisoft Holding, a subsidiary of Hangzhou-based parent Alibaba Group.

That transaction, expected to close on September 1, will transfer to Alibaba.com a suite of online business applications, more than 250 Alisoft employees, relevant computer equipment, trademarks, all customer contracts and associated liabilities.
Jack Ma Yun, the chairman of Alibaba Group and Alibaba.com, described the Alisoft division as a leading provider of software as a service (SaaS) on the mainland. SaaS is a fast-growing segment of the information technology market that delivers, maintains and sells low-cost business software through subscriptions over the internet.

Research firm Analysys International says Alisoft commands more than 40 per cent of the mainland SaaS market.
The [Alisoft] business management software products have been developed specifically to address the emerging needs of small businesses engaging in e-commerce, said Mr Ma.

These include Alisoft Export Edition, an e-commerce management solution for use by exporters; e-Net, a sales, marketing and customer management system for small businesses; Shopkeeper, a free accounting, financial and inventory management package; and NetBuild Xplatform, a not-for-sale software development tool used to create business management-related solutions.

The Alisoft assets that will not be transferred to Alibaba.com include non-management-software-related technologies, which will remain the responsibility of Alibaba Group chief strategy officer Zeng Ming and chief architect Wang Jian.

CLSA analyst Elinor Leung said the improving economy may have prompted Alibaba.com to relaunch the software business and benefit from a likely steady increase in spending by its member companies.

Alibaba.com, which operates the world's largest business-to-business e-commerce service, with more than 42 million users, will fold the acquired Alisoft division into its newly formed information technology business unit.

David Wei Zhe, Alibaba.com's chief executive, said adding the software products would help transform the company's e-commerce service from an online meeting place of buyers and sellers into a virtual workplace where members had tools to manage key aspects of their business operations via the internet.

Alibaba.com announced last week its reorganisation into four core business units: China, international, information technology and Ali-Institute.

Mr Wei said the information technology business unit and Ali-Institute will help small businesses get simpler access to technology to upgrade their operations and train their personnel to better use technology.

While meeting software demand on the mainland is its priority, Alibaba.com plans to expand this new business line to its growing membership overseas. It has more than one million members in India and channel partners in 13 countries that drive new paid subscriptions.

The company reported last week a 34.23 per cent decline in net earnings in the quarter to June to 260.74 million yuan from 396.46 million yuan a year ago.

Revenue, however, rose 23.56 per cent to 908.27 million yuan from 735.08 million yuan, while the number of paying members jumped 44.4 per cent to 531,471 from 368,006.

A report from JP Morgan attributed the better than expected revenue and paying member growth to stabilising economic fundamentals and greater adoption of online marketing by small companies.