In response, Gridsum Holdings stated that the company has two structural adjustments, one for its industry revenue structure and one for its product structure. With this structural adjustment, the proportion of each type of business, including products, services, and cloud networking virtualization software, will change. The company aims to increase the proportion of high-margin standardized products by 6-7 percentage points each year over the next three years, with a target of surpassing 60% of total revenue. This will improve the overall gross margin and profitability of the company.
The company also plans to focus on customized software and turn it into productized solutions as it sees potential for two of its larger products in this area. The company has a strong advantage in identity security products, which were primarily used by telecom operators but are now being explored by government and financial sectors. However, since they were previously customized, they would have low profit margins, so the company is continually modifying them to become standardized in order to improve margins and expand into industries beyond telecom.
Security services are another key part of the company's business and have been growing rapidly over the last two years. The company proactively focuses on building a platform for security services based on employees' knowledge and experience. By providing a service that integrates the company's products for customers, the company can create a more productized service, which will improve the gross margin.
Overall, Gridsum Holdings aims to become a product-capable company and has high requirements for the gross margin of its products. The company's standardized products have maintained an increasing gross margin, reflecting that the company's strategy is working. For cloud networking virtualization software, the company does not view this as a strategic business, but it does cooperate with clients to provide integrated solutions for basic software infrastructure. The company does not invest too much in this area and focuses more on high-margin standardized products.
