Cloud computing giant Citrix can't beat its Chinese counterparts

The parent company of Citrix, a cloud service company, said in an open letter that it would stop all new trading in the Chinese market from December 3. This is equivalent to announcing that the American cloud computing giant will completely withdraw from the country.

In the era of cloud computing, "virtualization" technology has also been widely disseminated. When it comes to virtualization, Citrix, founded in the United States in 1989, is one of the leading companies. At its peak, Citrix accounted for half of the global desktop virtualization market, and VMware, the world's largest virtualization software company, could also wrestle with each other at that time.

Citrix has been in China for nearly 20 years. In the first half of 2023, CITRIX ranked third in the market share of the top five desktop cloud software vendors in China announced by IDC, and the top two positions have been occupied by Huawei Cloud and Sangfor. The official reason given for the exit from China is "the rising cost of commercial business activities", but behind this lies the fierce competition between overseas IT companies and domestic manufacturers such as Huawei, as well as the reshaping of the market structure in the process of domestic software substitution.

Inability to adapt to market challenges

Headquartered in Florida, Citrix, USA, has been listed on the NASDAQ for many years, with revenue of $3.217 billion in 2021 and a market capitalization of more than $13 billion. But in early 2022, Citrix announced its privatization, which was acquired by a private equity firm for $16.5 billion, and after the deal closed, Citrix was merged into the Cloud Software Group. This open letter was issued in the name of the latter.

Citrix's main business is cloud computing virtualization, virtual desktop and remote access technology, which has a high market share in the virtual desktop cloud and other markets, and has once become synonymous with desktop cloud.

The so-called desktop cloud is a desktop delivery model based on cloud computing, that is, the remote virtualization of the user's office environment. Users no longer need a bulky host, through the thin client or PC, Mac, tablet, mobile phone and other devices, install client software or browser, can connect to the virtual host, directly use their own office environment.

In the desktop cloud solution, all data and applications are stored in the cloud, and the computing is carried out on the server side, which can solve the problems of low efficiency, high cost, and security risks of traditional PC mode infrastructure. It has application advantages in scenarios such as remote office, remote teaching, and government and enterprise government affairs. The overall service plan, including cloud desktop, is also known as cloud computer.

Citrix has been working in the Chinese market for nearly 20 years. In 2004, Citrix set up an office in China for sales, and in 2009, Citrix upgraded its office to a wholly-owned subsidiary and registered a registered trademark. In 2011, Citrix officially established an R&D team in China.

In 2009, Citrix officially announced its development strategy for the Chinese market. According to the survey data of CCW, in the first half of 2009, in the brand structure of China's virtualization software and services market, Citrix ranked second with a market share of 19.4%, ranking ahead of Microsoft. At the time, the largest market share was the industry leader VMware, with a market share of 75%.

But in recent years, the market has changed dramatically. According to IDC's report, Citrix has shown a declining trend in the share of the domestic virtualization market: in 2017, its market share was still in the first place, accounting for 32.3%, but in 2021, it has fallen to the third place, and its market share has been reduced by half.

In the domestic market, in the face of the cloud migration needs of government and enterprise customers in recent years, a single desktop virtualization solution can no longer meet their needs. In addition, the wave of domestic software substitution is surging, and in the face of the rapid rise of domestic cloud service providers, Citrix also feels huge competitive pressure. Gartner's "Chinese Context: 2023Q2 Server Virtualization Market Guide" report also mentioned that more and more enterprises are moving from foreign suppliers (such as VMware, etc.) to Chinese suppliers.

Citrix cited the "rising cost of doing business" in China, which also means that it has been unable to adapt to the challenges of the market without increasing investment.

The industry is highly competitive

The domestic desktop cloud industry started in 2006, and around 2012, enterprises represented by Huawei and Sangfor have strengthened the research and development of desktop cloud technologies and products, and the industry has begun to enter a period of rapid growth. In 2018, after the state put forward the strategic goal of "enterprise cloud", the industry has developed more rapidly and the competition has become more and more fierce. In recent years, the hybrid work trend has been on the rise, and the need for remote and collaborative work is also growing.

According to the report of CCW, it is estimated that by 2025, the domestic desktop cloud market will exceed 10 billion yuan. In the next few years, the sales volume of desktop cloud solutions in China will grow from 2.994 million in 2021 to 6.730 million in 2025.

In addition, according to the 2022 desktop cloud market report of the Ministry of Industry and Information Technology, in 2022, the size of the mainland cloud computer market will be 117.59 billion yuan, and the domestic cloud computer market will maintain a rapid growth of more than 20% from 2023 to 2025.

In the first half of 2023, according to the IDC report, local vendors occupy four of the top six rankings in China's desktop cloud market. Citrix and VMware ranked third and fifth, respectively, with the top two positions occupied by Huawei and Sangfor, respectively. Since 2016, Huawei has been the top desktop cloud market share in IDC's report.

It is understood that HUAWEI CLOUD Desktop includes a variety of deployment forms of product solutions, including public cloud, hybrid cloud, and virtualization. Among them, there are two products: Workspace and FusionAccess. FusionAccess is a desktop virtualization solution that is deployed in customer data centers, while Workspace is a cloud service product that can be deployed on public clouds, HUAWEI CLOUD Stack, HCSO, and edge cells on the CloudPond base.

In addition, Sangfor has been in the field of cloud computing since 2012, and its desktop cloud terminal products, cloud desktop software such as desktop virtualization, application virtualization products, etc., have a market share that is also in the forefront. According to the company's financial report, in 2022, Sangfor's network security business revenue will be about 3.898 billion yuan, a year-on-year increase of 5.66%, and cloud computing and IT infrastructure business revenue will be about 2.859 billion yuan, a year-on-year increase of 20.17%.

Sangfor secretary also said on the investor platform that desktop cloud products are one of the company's core products, accounting for more than 10% of the company's total revenue, and changes in the competitive landscape are expected to bring replacement opportunities for some existing users.

In addition, Ruijie Network, Xinhua III, ZTE and other enterprises, as well as major operator cloud vendors, are also gearing up in this field. According to media reports, there are still about 80,000 users in the domestic market using Citrix products, and for domestic enterprises, how to grasp the market opportunities after Citrix exits will be a new topic for them.

Author | Yang Jie

Edit | Sun Chunfang

Operations | Liu Shan