The Chinese market is very different from the rest of the world on four levels: user habits, digital ecosystem, talent, and laws and regulations. These differences fundamentally dictate that for MNCs, entering China needs a deep localization of technology, culture and management. In this blog, we will first analyze the stages of MNCs' (multinational companies) entry into China and explore the potential challenges represented by cloud migration as a cross-cutting theme.
Three Stages of MNC Entry into China
By looking at the degree of localization of digital products and services, we can divide the process of MNCs' entry into China into three stages: Quick Start, Localization of Marketing Strategy, and Localization of Digital Capabilities.
The key word for the quick start phase is "availability." Such MNCs have mature digital products and a stable customer base overseas, but have not yet made any customization for the Chinese market; their digital products are likely to be unable to reach Chinese users well due to legal restrictions and network delays. As a first step to explore the Chinese market, the focus of this phase should be compliance; on the technical side, the general approach is to reuse existing systems whenever possible, migrate those that must be migrated to China, and replace platforms that cannot be used in China (such as Google's services, payment and login methods, etc.), replicate or build a new front-end from scratch, so that the digital products are available in China.
The key word for the localization of the marketing strategy phase is "growth". Business growth is the primary goal in this phase. To accomplish this goal, MNCs build marketing and sales teams in China and purchase the necessary enterprise suites, marketing tools, etc. to integrate into the local digital ecosystem as soon as possible, which may lead to the creation of localized business models. From the user perspective, more touch points related to the multinational will appear on the market, such as mini programs, mobile apps, online and offline events, etc.
The key word for the localization of digital capabilities phase is "empowerment". Not all MNCs need to enter this phase, because the main motivation for entering this phase is to solve one internal contradiction and one external risk. The internal contradiction is that as business grows in China, China departments gain a deeper understanding of their digital products and corresponding users, and begin to expect to have more say and be able to develop their own product strategies based on market demand to assist in greater growth; therefore, China will expect to customize some of its core business systems (e.g., supplier management system, core business process management system, etc.). External risks are: geopolitical influence, cyberspace sovereignty exacerbating the Splinternet phenomenon, which brings uncontrollable risks to the business continuity of MNCs in China. The usual response to both issues is to migrate more core business systems to China and build digital capabilities within China to maintain and customize the migrated systems.
Throughout all three stages, cloud migration is a constant topic that involves many stakeholders
Due to the Great Chinese Firewall and personal information protection laws, MNCs need to migrate some of their required systems to China from the quick start phase. We have encountered many such cases, whether the goal is to get an app on the market in China or to create a homepage in China, some of the systems behind it need to be extended to China to various degrees. And in the localization of digital capabilities phase, as the demand for digital product customization grows, more and more core business systems will be included in the migration. Therefore, we believe that cloud migration is a topic that cannot be escaped and is always present in the process of MNCs entering China.
We often define cloud migration as a technical issue and consider it a one-time action, often focusing on "what to move, where to move, and how to move." This may be true for other cloud migration scenarios, but for MNCs entering China, especially those in the localization of digital capabilities phase, cloud migration shouldn’t be defined as a one-time technical problem that can be solved, not only because it is long-term, but also because it implies a shift in system ownership and the resulting change in architecture.
From many customer cases, we have found that migration continues throughout a MNC' entry into China, from the initial migration of the smallest set to the migration of core systems in the localization of digital capabilities phase, involving a large number of services and a long duration. Throughout this process, you might face the following challenges:
Who will update and maintain the system after migration? How to update and maintain? A systematic solution needs to be given based on the scenario.
How to adapt to the new cloud environment? What modifications need to be made? What changes will this bring to the existing project codebase, delivery process, deployment architecture, and monitoring? How to balance between minimizing impact to the system and maximizing local capabilities?
When migrating a relatively large number of services, how should the migration be organized? As the business and technology stacks may vary from service to service, it is not easy to assess the migration effort and develop the optimal migration path, and the manual analysis approach is likely to be no longer applicable.
How to respond to rapidly changing systems? Services are not static during the migration process; each business line is actively developing according to its own plans, which means that the migration plan needs to be able to respond quickly to changes in system content.
Generally speaking, the move to China is a strategic plan for the company and not business line driven, so the migration is led and implemented by the platform team, so how can the platform team manage the expectations of the business team?
For these reasons, we believe that cloud migration at this point is a change that involves many stakeholders, rather than a technology initiative or platform project. In the next part of this article, we’ll explore the core issues of cloud migration and potential solutions.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.
