Pansoft Company Limited (PSOF-NASDAQ)

CEOCFO-Members Login

September 4, 2009 Issue

The Most Powerful Name In Corporate News and Information

Energy | Energy-Tech | Energy-Infrastructure | Oil & Gas | Natural-Gas | Clean Energy | Renewable-Energy | Green | Energy-Analyst

Precious-Metals | Resources | Mining | Metals | Gold | Capital Goods | Industrial-Goods | Product-Development | Waste-Management 

Healthcare  |  Biotechnology | Drug-Development | Pharma | Natural-Health | Medical-Device  | Medical-Tech  | Medical-Instruments

 Bank |  Financial | Business-Banks |  Community Banks |  Commercial-Bank   |  Regional-Banks  | Specialty-Finance | Bank-Analyst

Pacific-Bank | Business-Developmentt | REIT | Services | Business-Services | Global-Services | Retail | Canadian

Technology | Security | Authentication | Telecommunications | Semiconductor | Communications | Logistics-Tech

CURRENT ISSUE |  COVER ARCHIVES  |  INDEX  |  CONTACT  |  FINANCIALS |  SERVICES  | HOME PAGE

Customer-Driven ERP Software And Service Provider, Pansoft Company Is Helping The Oil Giants In China Centralize Their Accounting And Fund Management System And Focus On Their Long-Term Development Strategy

Company Profile:

Pansoft is a leading enterprise resource planning (ERP) software and professional services provider for the oil and gas industry in China. Its ERP software offers comprehensive solutions in various business operations including accounting, fund, delivery, invoicing, inventory control and customer relationship management.

Executive Bios:
Hugh Wang
Chairman and Founder
Mr. Wang founded Pansoft in 2001 and has been the Chairman since that time. Prior to founding Pansoft, from 1990-2001, Mr. Wang was Senior Vice President and one of the chief engineers of Inspur Group, a Chinese software company now listed on the Shanghai Stock Exchange. From 1987 to 1990, Mr. Wang was a lecturer in computer science at Shandong Teachers University. From 1982 to 1985, Mr. Wang served as Senior Programmer for the Information Center of Jinan Railway Management Bureau, one of 18 railway bureaus in China. Since 2006, Mr. Wang has served Shandong Teachers University on a part time basis as a professor in the computer science department focusing on software engineering. He also currently serves at Shandong University on a part-time basis as a professor in the computer science department focusing on enterprise internal process control models, data models and ERP systems. Mr. Wang received a bachelors degree in computer science from Shandong University and a masters degree in computer science and engineering from Tsing Hua University.



Allen Zhang, Chief Financial Officer

From 2002-2009, Mr. Zhang was an international business consultant of Oriental Connections and served for China Railway Construction 18th Bureau Corporation, a large construction corporation in China and Shanghai Power Transmission and Transformation Engineering Company, a large power line construction contractor in China. From 2005-2007, Mr. Zhang served as the Interim Chief Financial Officer and International Trade Director for the Japan/China Project office in Beijing of Westlake International, a diversified investment company with operations in China, Japan and the United States. From 2001 to 2002, Mr. Zhang served as the Chief Financial Officer and a director of Beijing Skill Technology Company, a medical device technology development company. Mr. Zhang served as the international business manager and special project leader of PacificNet.com, a provider of customer relationship management, mobile Internet, e-commerce and gaming technology in China. Mr. Zhang received a bachelors degree in Economics from the Peoples University of China and a masters degree in Agricultural and Applied Economics from the University of Minnesota.

Technology
Basic Software & Services
(PSOF-NASDAQ)

Pansoft Company Limited
3^rd Floor Qilu Software Park Building
Jinan Hi-tech Zone 1766
Jinan 250101 China
Phone: 86 531 8887 1166

 

Interview conducted by:, Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – September 4, 2009

CEOCFO: Mr. Wang, what was your vision when you founded the company and where are you today?

Mr. Wang: I have been in the software industry for more than 30 years, which includes academic and business operation experience in the industry. There is a huge demand for a service provider of software systems development in China. Most software businesses in China are the product driven businesses. Business customers just buy software products or packages and use them without any alteration. There were not too many service providers, which are oriented to work for particular customer demand or requirements. Therefore, I identified such a huge demand in China and started this company to serve the purpose.

CEOCFO: Why the focus on the oil and gas industry?

Mr. Wang: Even before I started Pansoft I was already engaged in Chinas oil industry starting with PetroChina. That was the breakthrough point to establish our business and the reason I have the idea on where our business could start.

CEOCFO: What is the competitive landscape like for you?

Mr. Wang: Our major competition does not come domestically, but internationally, including companies like SAP. Although SAP has international branding, they are more orientated to be a product provider, rather than a service provider. However, we are a service provider and driven by clients’ particular requirements and demands. With this vision, we can help our customers get a deep insights of their IT requirement and demand closely associated with their long-term overall business development strategy. In this way, we become a partner of these clients in their business expansion. So that is how we build our competitive edge.

CEOCFO: Would you give us an example of a problem or a challenge that you can solve for a company that they might not be able to do with other software?

Mr. Wang: One example of how we help our customers is PetroChina, which has half of the oil industry of the entire China. It is a huge company with thousands operations spread all over the country which were managed in several layers of accounting systems. It was not able to run its business in a unified accounting system due to its too big size. As a conglomerate, they also have different lines of their operations, starting from oil explorations down to the gas stations; all of these are under one corporate structure. Therefore, the big challenge for its accounting system is how to run this kind of multi-level and multi-operational business with thousands locations in one unified system. We helped them established a centralized accounting system to cover all their operations and merged multi-level consolidation and reconciliation processes into one under our software system. To my best knowledge, this is the first accounting software in such kind in China, possibly also in the world. This accounting and financial system covers 80,000 responsibility centers and processes 15 million transactions, 150 million accounting entries, approximately valued at 5 billion RMB in 105 regional subsidiaries annually. So far with what we have done for PetroChina, we do not think anybody else in China can offer the same service yet.

CEOCFO: Would you tell us about your three-year strategic plan and how have you adapted to the current economic conditions?

Mr. Wang: The economic climate is severe for most businesses in the world and China is affected as well. However, there is increasing demand for our solution offering, such as centralized accounting system and centralized funds management system. Due to the financial crisis in the world, the pressure is transferred to Chinas businesses as well, so they need to get more controls on their cash flows and to have tighter accounting policies in place for their business operations. Therefore, the demand for Pansofts software solutions is increasing. It is a great opportunity for Pansofts business expansion. We consider this kind of business expansion is organic growth. We are pretty confident that we will have more demand and more business in this year. In addition to the organic growth we also have a corporate expansion strategy, including a plan to step into other industries. We don’t want to be confined strictly in the oil industry; we want to expand into other industries. For this purpose, we will review and pursue strategic transactions such as merger and acquisition of other businesses. After our IPO we established a solid financial position to enable us to accomplish sizable merger and acquisition transaction as a part of our strategy to move into other industries. In early 2009 when we announced our three-year business expansion strategy, we stated that we expect to grow by 40% annually in our revenue. Half the year has passed already and we still feel confident in that statement.

CEOCFO: What is your revenue model?

Mr. Wang: Most of our revenue comes from contracts with our clients. We are purely a software developer and we provide our service in exchange for payment. So that is our main revenue driver. Occasionally we have a little hardware sales, but only at the request of a customer for their convenience.

CEOCFO: What is the key to your success; is it superior technology, or the right people to figure out how to do all these complex procedures?
Mr. Wang: There are two elements in terms of our strategy for success. First is our market positioning strategy, which had to be right or we would not have stayed in the market for so long. In the beginning when we started the company, we considered set up our business direction as customer driven software service. Up to now, we still stick to this particular positioning strategy that is going to drive our success in the future as well. Secondly is our key team as we have a strong engineering team. The businesses software industry in China usually have high turn-over rate but Pansoft has a pretty stable team. Of the sixty founding members of our engineering team, only one has left the company for personal reason. Most of them have stayed with Pansoft and have become employee stockholders now. They share the vision from our executives of the company, and most of them have more than ten years experience in the industry; not only the software programming experience, but also have industrial expertise to develop different business solutions. So that is another key resource to fuel Pansofts growing.

CEOCFO: You reported very good results for the 1^st Quarter; tell us how that was and how you continue?
Mr. Zhang: The first quarter numbers in 2009 were very good because we signed two new contracts with our major clients and we opened a new overseas branch in Hong Kong which immediately obtained new business contract from our long term client’s Hong Kong operation. Our 1^st Quarter financial result is exceptional one, because in most cases in the past years, our revenue in first and second quarter are low. This is due to high seasonality pattern of our revenue since our major clients tended to finalize or sign their vendors contracts and deliver their payment at the end of the year. Following this pattern, we usually have pretty good size of revenue realized in the 3^rd or 4^th Quarter of a year. However, we have been trying to convince our clients to change their contract signing pattern so that, hopefully, we can more even quarterly revenue growth in the future.

CEOCFO: In closing, there are so many companies to choose from, why should investors be looking at Pansoft?

Mr. Wang: First of all, we are not even a small cap, we are a micro cap company; however, we are a fast growing company. In the past every year Pansoft delivered almost 30% of revenue growth in average and we believe this pattern will continue. We see ourselves as a fast growing company with a great potential. Secondly, our market positioning strategy, as a solid and a long term vision, will play a key role to drive our future success. As I mentioned before, I don’t think too many businesses, especially in the software industry in China, share the same strategy that Pansoft has. We are confident that this strategy will lead us to many new customers, new business and new revenues. Looking at our financials, Pansoft has been a company with very solid financials. Even as a new company that is only 7 years old, we have been experiencing very positive cash flow for years. Our solid cash fund was not only from our IPO, but also from our profit accumulation in the operations in past years. Therefore, even without significant revenue, our cash reserve would allow us to maintain our operations for one or two years. In addition, looking at our revenue growth, every year we bring fresh money to our account. Therefore, we can confidently say that Pansoft has been delivering good cash flow, profits and earnings per share to our shareholders and, additionally, will deliver our shareholders a steady growing business with future corporate expansion opportunities. For example, we recently announced our solution provider agreement with Microsoft. As you know, Microsoft is a giant in the software industry worldwide, and they have thousands of partners in China, but most of them serve as their sales channels or maintenance service providers. Pansoft however, is the only one in China serves as their technology partner involved in Microsofts core ERP package, Dynamic AX. Pansofts software technology will facilitate and add value to Microsoft’s ERP platform. It further proves that Pansofts technological capability is recognized and our long term positioning is right. Our software solutions have been successfully executed in the oil and gas industry in China. Although it is a big industry, there are many other big industries in China, which we consider as our future market base. We believe that we will obtain access and domain knowledge in other industries through merger and acquisition transactions of selected targets. Our IPO has built us the core competence to conduct strategic transaction in the future to fulfill our expansion plan.

disclaimers

Any reproduction or further distribution of this article without the express written consent of CEOCFOinterviews.com is prohibited.

One example of how we help our customers is PetroChina, which has half of the oil industry of the entire China. It is a huge company with thousands operations spread all over the country which were managed in several layers of accounting systems… We helped them established a centralized accounting system to cover all their operations and merged multi-level consolidation and reconciliation processes into one under our software system. To my best knowledge, this is the first accounting software in such kind in China, possibly also in the world. This accounting and financial system covers 80,000 responsibility centers and processes 15 million transactions, 150 million accounting entries, approximately valued at 5 billion RMB in 105 regional subsidiaries annually. - Hugh Wang