Chinese tech major Tencent has decided to turn its attention to the B2B sector, the company’s founder hinted in an open letter circulated internally among employees.
On October 31, founder Pony Ma said in the letter, “From now on, Tencent will strengthen its roots in the internet consumer field, including industrial services.”
This is the first time Ma confirms these plans publicly.
This move by Tencent has sparked debate in the Chinese media. Some analysts reckon that the company lacks the B2B DNA and that it should stick to its core area of consumer services. Others see the move as an inevitable step.
According to the tech portal Jiemian, a source from within Tencent’s messaging app Wechat told CCTV program Digital Observer that Tencent has been preparing for the B2B leap since last year. Since then, Tencent has released new products such as computing cloud services, Business Wechat and e-mail services for companies.
“These products already show that to-business services will play an important role in the future of the company”, the source was quoted as having said.
This Tencent employee is not surprised by the direction the company is taking.
“A company as big as Tencent cannot afford to let Alibaba control all the cloud computing industry,”he observed.
Other companies such as Xiaomi noticed this business opportunity long ago.
Lei Jun, Xiaomi’s founder, explained during a chat with reporters in 2014 the great opportunities that data would bring to companies.
“Despite the costs and the security concerns, this is a field that tech companies cannot ignore,” Lei had said.
Liu Wei, an associate partner at investment firm CBC Capital, explained to entrepreneurship portal The Founder: “With computing cloud services, Alibaba does not want to just assist small companies, it is also about building its own ecosystem.”
This is another driving factor that is motivating Tencent towards the sector.
However, Tencent could be late to this field. For example, Alibaba already controlled 47.6% of the market share in cloud computing services in the first half of 2017, according to data provider IDC. An internal source from Alibaba told Digital Observer that although Alibaba’s services are not that different to that of other companies, Alibaba is the leader because it was the first company to take the lead in this field.
“Tencent is five years late,” remarked the course.
The same person also explained the reason why Alibaba was the pioneer in this field in China: “Alibaba felt the pressure from the slowing of e-commerce so it had to search for other business opportunities.”
According to Liu Wei, “Alibaba serves customers and businesses simultaneously and its B2B business lines are already clearly defined.”
By contrast, the vast majority of Tencent’s business is still B2C.
In order to expand in the B2B services, Tencent can rely on its vast ecosystem. Companies that provide services in WeChat’s Miniprograms naturally choose Tencent’s cloud computing services. But over the last few years, there have been some obstacles to the full development of B2B services at Tencent.
According to Tencent insiders, the company lacks a centralised technology department until it recently re-arranged its whole structure.
Tech workers were scattered along different departments. For Tencent Cloud services, the team only had a modest amount of tech workers, it frequently had to rely on other departments.
With work divided across multiple departments, responding to client’s needs on time became a challenge. Every department kept shrugging responsibilities, he pointed out.
This anomaly was regretted in public by Tencent’s CTO Zhang Zhidong.
According to founder Pony Ma’s open letter, “Tencent will rely on its one billion users and its rich ecosystem to integrate its B2C services and B2B services.”
Chen Liwei, an associate partner at Oriental Fortune Capital, explained to The Founder: “Tencent’s best advantage to develop B2B services is the fact that people spend a lot of time on WeChat and currently there is no other application that threatens that superiority. For example, Baidu and Alibaba do not have anything like that.”
In his open letter, Pony Ma also insisted that the company would concentrate on “digitalization.”
“We want to keep working on our B2C services and at the same time, help all businesses to achieve digitalisation”. Tang Daosheng, Tencent’s vice-chairman explained during a meeting with Tencent associate partners from education, healthcare, retail and manufacturing. These are the fields the company wants to begin its expedition with.
A report by consultancy firm Accenture provides Tencent with more reasons for optimism. According to its report on digitalization in Chinese companies, only 7% of companies have undergone a successful digital transformation. This means that, although Alibaba is currently the uncontested leader, there is plenty of room for other companies to fill the gap.
Li Zhe, an analyst at Ifenxi, explained to The Founder, “Those who are Alibaba’s competitors in some field and those who have failed to receive investment from Tencent but want to build a strong relationship with them,” will be the companies that Tencent could partner with to implement its B2B ambitions.
However, there are voices that that advise caution.
B2B expert Zhang Lei declared to Jiemian: “Tencent’s DNA is B2C, it will be difficult for veterans to adapt their mentality, therefore it will be complicated for new employees to integrate with them.”
According to Zhang, “Tencent will also have to find competent cooperative partners, somebody who can help them sort out the data and produce valuable applications.”
According to Pony Ma’s open letter, “A B2B internet company without the assistance of internet consumer services is like a river that does not get to the sea and dries up inland.”
Now, what Pony Ma needs is a canal between its B2C and B2B wings.