Composed, cautious and obviously media-trained, Francis Ng (pictured), Executive Director and CFO of Chinese software company Kingsoft Group exhibits the traits of the stereotypical CFO. Yet he does have a measured appetite for risk. In the early 1990s, he agreed to relocate to China from Hong Kong for PwC – just after the Communist Party’s pro-democracy crackdown in 1989.
“The market was quiet, inactive, after the Tiananmen Incident in 1989 when multinationals left the country,” he recalls. “After a while in the early 90s, some of these firms started to move back, requiring international accountants to help set up JVs and in M&A activities.”
It took Ng some time to adjust to life in a society that at the time was far less affluent than Hong Kong. But he has since spent most of his time in China, a witness to the rapid changes not only in business – founded in 1989, Kingsoft is one of the oldest IT firms in China – but also in the role of the CFO.
Ng spoke to CFO Innovation’s Teresa Leung about the changing CFO role, the relationship between technology and finance, opportunities in China and other issues. Edited excerpts:
How did your diverse experience—including stints in sectors like auditing, education, electronics, FMCG, and legal services—help you become a CFO?
That’s important to my career. My stint at Pricewaterhouse in particular offered me lots of opportunities to meet senior management from different firms and industries. Rare for a junior person, those were excellent training opportunities, which allowed me to learn a lot about their industry practices and compare their commonalities and differences.
Has the role of the CFO in China changed in many years you’ve been working there?
From my personal experience, I now spend more time making decisions related to corporate strategies with other senior management members. In Kingsoft, finance is no longer a unit that does only reporting and making sure reports are compliant with standards and can pass audits.
As finance has to contribute to business decision making, I encourage my colleagues to understand more about business. In the past, security, WPS [Kingsoft’s office productivity software suite], online games, and mobile were four different product lines. Today they have become individual subsidiaries.
With such a structure, the finance team in each of the subsidiaries plays an even more important role in supporting decision-making. And they can provide such support with their knowledge in areas such as financing and M&A.
As the CFO, how do you see Kingsoft’s position in the cloud services space, where competition is intensifying?
In China’s relatively new cloud space where the growth potential is colossal, I would expect three to five major players having up to 90% of the market in the future because only firms of large scale have the technologies and security required for cloud offerings.
There won’t be a firm that monopolizes the market because enterprises need to use at least one other cloud service provider for business continuity.
Those major players would come from these backgrounds: Internet giants, foreign firms that already have experience and cloud technologies, existing technology firms that provide IT facilities and bandwidth, and startups built by former employees of large technology companies.
To be a leading cloud player in China, you have to be part of a solid ecosystem that is able to provide the required technologies and security. I believe Kingsoft ticks those boxes. Besides being a major security product provider, Kingsoft has formed an ecosystem with key smartphone provider Xiaomi and enabled its MiCloud service with a daily data upload volume exceeding 400TB.
Another major business of Kingsoft is mobile apps. Cheetah Mobile is Kingsoft’s fastest-growing subsidiary, but the apps it develops are given out for free. What is the firm’s business model?
Cheetah Mobile used to be Kingsoft Internet Security, which provided paid software products. However, software piracy is rampant [in China] and we needed a different monetization model.
As a result, we now provide free mobile apps such as Clean Master, CM Security, and Battery Doctor for us to raise our monetization capabilities [via mobile advertising]. Our free apps are of high quality and downloaded by many users on Google Play. They have now reached critical mass to drives our mobile advertising business.
In Q2 2015, Cheetah Mobile’s revenues increased 31% quarter-on-quarter and 139% year-on-year to RMB843.8 million [US$132 million]. The increase is primarily attributable to growth from mobile advertising in both overseas and domestic markets.
Global markets are very nervous about China’s economic slowdown and prospect of a hard landing. How would China’s current economic situation affect Kingsoft’s business?
The devaluation of the RMB is a pleasant surprise [to us]. We believe this will help our business. We have a global strategy—70% of Cheetah Mobile’s user base already comes from overseas and [advertising targeting them] contributes to more than half of the subsidiary’s revenues.
Having said that, I am still positive about the local technology market.
As the CFO of a technology company, how do you see technology and finance? How does technology help your work?
Finance is an early adopter of technology in both technology and non-technology firms. Without technologies like ERP, there won’t be as much automation and improvement in the finance function’s efficiency. And there will be more inevitable human errors when we do reporting.
With the help of business intelligence software today, finance can provide more insights for better corporate decision making.
At Kingsoft, do you use the company’s own products—WPS and cloud storage? Can you use products from other technology companies?
At Kingsoft, we have a lot of flexibility. We use our own products at work but we also try out different products. For instance I use both iPhone and our business partner Xiaomi’s smartphone as well as Kingsoft’s storage services and those by other firms. Management encourages employees to do the same because we want to know how our products perform on different systems and devices by various vendors.