In November 2011, Atos and Yonyou (formerly Ufida) announced the creation of a joint venture dubbed Yunano™ aimed at the European SMB market. The two companies are at it again, this time focusing specifically on the Chinese domestic market.  I recently met with Herbie Leung, CEO of Atos in Asia Pacific, to discuss the partnership and future market opportunities in China. This new agreement essentially covers three areas of collaboration:

• Bringing PLM and MES expertise to Yonyou customers. With more than 1.5 million customers, Yonyou is one of the largest software providers in China with strengths in ERP and CRM solutions. However, the company lacks capabilities in adjacent areas like product lifecycle management (PLM) and manufacturing execution systems (MES). Following the SIS acquisition, Atos has significantly strengthened its capabilities in these domains and will offer them to Yonyou clients.
• Helping Yonyou’s customers migrate to private cloud architectures. The lack of private cloud technical skills in China led Yonyou to leverage Atos’s expertise to develop private cloud assessment workshops and ERP migration services targeting the China market. Atos will in turn leverage Canopy, a company it recently created in partnership with EMC and VMware to provide cloud solutions to its clients globally.
• Helping Yonyou expand into new markets in Asia. Like many Chinese companies, Yonyou has global aspirations.While theYunano joint venture focuses on bringing Yonyou’s ERP solutions to the mid-market in EMEA, the new partnership will leverage Atos go-to-market capabilities to take the Yonyou solutions to other markets in Asia.

This announcement is particularly interesting as it positions Atos to better exploit market opportunities in China:

• Forrester estimates that the China domestic IT services market will grow at about 11% in 2012, with the manufacturing sector representing almost 25% of this annual growth. 
• Forrester sees a strong demand from Chinese companies in 2012 for private cloud architectures for their data centers, while the lack of outsourcing culture in China is still a clear barrier to strong public cloud services adoption.

For Atos, the aim is not only to develop its Chinese clientele but also position itself as a provider of choice for future data center services opportunities when the China outsourcing market finally opens up. Forrester indeed believes that the emerging data center services market in China will explode over the next three to five years around offerings like as-a-service and virtual private cloud services, with the demand coming mostly from small and medium-size businesses (SMBs) and government agencies.

With this partnership, I believe that Atos has put a stake in the ground in the emerging China outsourcing market. To succeed the company will have to actively participate in the evangelization of outsourcing models to its Chinese clients. More importantly, it will have to learn on the fly in a market where innovation must come from commercialization models rather than pure technological features.