Liu Jiren, the pioneer of China's software industry, has always held a grand vision of creating a series of publicly listed companies to build up a business empire known as the "Neusoft Group." Under the leadership of its parent company, Neusoft Group, the "Neusoft Group" has successfully brought its subsidiaries, Neusoft Education and Neusoft Carrier, to the capital market. However, as of May 21, the market capitalization of these two subsidiaries was HK$2.152 billion and HK$766 million respectively, relatively small in scale.

Neusoft Group was once a leading enterprise in China's software industry and faced a turning point after experiencing a net loss of 343 million yuan in 2022. According to the performance report published by the company in 2023, Neusoft Group achieved a total revenue of 10.544 billion yuan in the past year, with net profit attributable to the parent company reaching 739.125 million yuan. However, the company's net profit excluding non-recurring gains and losses was still in a state of loss for the second consecutive year, with a loss of 147 million yuan.

Neusoft has enjoyed glorious honors in the industry, not only as the first domestic software enterprise to go public but also by investing 500 million yuan in 1997 to build China's first software park. The software park saw the birth of the country's first clinical application CT machine, which ended the monopoly of foreign companies in this field. Neusoft also became the first domestic software company with a workforce exceeding 10,000 employees, and its Chairman and founder Liu Jiren has been respectfully referred to as the "Software Godfather" within the industry.

Under the leadership of Liu Jiren, the capital structure of the "Neusoft Group" gradually took shape. In 2023, the subsidiary Neusoft Carrier was successfully listed on the Hong Kong stock market. However, under the watchful eyes of the public and capital markets, Neusoft's influence has gradually weakened, with its market value not matching that of later competitors such as Yonyou and Kingdee. Moreover, the label of "software outsourcing" has always been a predicament that Neusoft has struggled to shed. Faced with the industry wave of artificial intelligence technology, Neusoft is also standing on the path to strategic transformation.

In 1989, during a lecture at the Northeast Institute of Technology in Shenyang (now Northeastern University), Liu Jiren, as the director of the "Department of Computer Science Software and Network Engineering Research Lab," gave an impressive speech to the Japanese company Alpine. Because of their appreciation for Liu Jiren's technical expertise, Alpine promptly expressed their intention to collaborate and inquired about the price. As China's first Ph.D. in computer applications and the Vice President of Northeastern University at the time, Liu Jiren seized the opportunity without hesitation and proposed a high price of 300,000 U.S. dollars. In the context where China's software industry was just starting, this collaboration represented a significant leap forward for the industry, and Alpine agreed to it in a short period of time.

In the late 1980s, a scholar received a considerable sum of money, which he did not take 50 years to fully utilize but effectively invested shortly after. The scholar was named Liu Jiren, who quickly went to Beijing and used the funds to purchase a series of advanced equipment.

When scientific research results could be transformed into tangible investments, Liu Jiren, a scholar, initially hesitated. He insisted on naming the joint venture "Shenyang Dongbei Alpine Yun Software Research Institute," but during the registration process with the Administration for Industry and Commerce, he had to add the words "Limited Company" to the name. As Northeast Institute of Technology was renamed Northeastern University, the company also became known in the industry as "Northeastern Alpine," specializing in software outsourcing services and developing automotive software systems for Alpine. Later on, they also established Northeastern Development Software Systems Co., Ltd., which took on other orders from Japan. These two companies were the precursors of the Neusoft Group, and their merger, reorganization, and restructuring eventually led "Northeastern Alpine" to successfully enter the Shanghai Stock Exchange in 1996, becoming the "first software stock" in the A-share market.

By 1998, Neusoft Corporation was officially established and achieved overall listing in 2008. Neusoft started with outsourcing business, hence becoming synonymous with the company in many people's minds. Especially since the year 2000, with the rapid development of globalization and the internet, in 2006 Neusoft became the first domestic software enterprise with outsourcing revenue exceeding 100 million US dollars, holding more than 7% of the domestic software outsourcing market share with the strength of a single company. In Northeast China, Neusoft's software business is also outstanding. When the Dalian Software Park opened in 1998, Neusoft was one of the first companies to settle in, successfully attracting numerous Japanese clients.

However, all these glorious achievements have become history. Nowadays, Neusoft rarely mentions its outsourcing business. The era of low-cost human resources in the software industry became a thing of the past after 2008, and Liu Jiren, the founder himself, has made it clear that "the software outsourcing model will enter a dead-end." After Neusoft's listing, the business model underwent several major adjustments. Since piracy was prevalent in the early market and neither users nor enterprises were accustomed to paying for software, Neusoft decided to take two different paths: one was to venture into system integration, developing and selling combined hardware and software; the other was to realize the integration of software services, becoming a provider of solutions.

Since 1999, Neusoft began implementing digital transformation in multiple fields such as telecommunications, taxation, finance, power, education, transportation, and social security, a strategy the company referred to as "digital land-grabbing." In the 21st century, Neusoft actively expanded international outsourcing business, and in 2009 began shifting from B2B to B2C mode, fully committing to the field of health management.

In areas less known to the public, Neusoft has achieved many groundbreaking results. In August 2002, State Council Document No. 17 proposed the "Twelve Gold" projects, and at that time, the social security department invited four companies to jointly develop a unified national social security system, with Neusoft being one of them and taking the role of group leader. This undoubtedly proved Neusoft's strength. By 2006, Neusoft's market share in China's labor and social security domain ranked first. And this was just a part of Neusoft's information business; in its service portfolio, medical hardware is one of the most noteworthy highlights.

In Neusoft Corporation's 2022 annual report, Liu Jiren expressed an optimistic outlook for the future. He mentioned that the era of the digital economy will bring infinite opportunities, especially in the software industry, with broader development in the intelligent digital realm. This positive outlook seems to have been validated in 2023, as Neusoft Corporation has recovered from its previous losses. However, the company's net profit excluding extraordinary items still registered a loss of 147 million yuan in 2023. Since 2019, except for 2021, the company's non-GAAP net profit has consistently been in the red, which is undoubtedly a challenge for its billions in revenue.

A closer examination of the financial reports reveals that Neusoft Corporation's operating income and performance costs are excessively high. By the end of 2023, the company reported inventory balance reached 5.155 billion yuan, with performance costs accounting for 4.592 billion yuan. Inventory depreciation reserves stood at 208 million yuan, with performance costs impairment reserves making up 170 million yuan.

In addition to performance costs, Neusoft Corporation's actions in recent years to spin off its subsidiary businesses have also impacted the group's performance growth. For some of the group's subsidiary businesses, they are no longer within the scope of Neusoft's consolidated statements. Liu Jiren has an ambitious vision—to create a cluster of publicly-listed companies centered around Neusoft. This strategy was particularly evident in 2023, and it was in this year that Neusoft's subsidiary, Neusoft Xikang, was successfully listed on the Hong Kong Stock Exchange.

Neusoft Education is a successful case of Neusoft's spin-off strategy. In 2011, Neusoft Corporation divested its business segment that mainly provided IT higher education services and got listed on the Hong Kong Stock Market in September 2020. The issue price was HK$6.22, and the stock surged 25% on its first day of trading, temporarily reaching a market value of HK$4.5 billion. After the independent listing of Neusoft Education, Neusoft Corporation accelerated the spin-off of its other business sectors, with the healthcare and wellness sector being particularly notable. From 2014 to 2016, Neusoft Corporation spun off Neusoft Medical, Neusoft Xikang, and Neusoft Wandai (later renamed Wandai Xikang), which operated hospital big data and supply chain management, in just three years.

Neusoft Medical received significant strategic investments at the end of 2014, including a total investment of RMB 2.733 billion from investment institutions such as Legend Capital, Goldman Sachs, and Tonghe Capital. Liu Jiren had high hopes for Neusoft Medical, and the group even signed a bet agreement with investors, promising that Neusoft Medical and Neusoft Xikang would go public within six years after 2016. Although Neusoft Xikang successfully went public in September 2023, its share price broke on the first day, and to this day, Neusoft Medical's listing plan is still far off. Wandai Xikang completed its final round of private financing in 2017 and was also preparing for a sprint on the STAR Market in 2020. However, it has not been listed yet.

In the field of autonomous driving, Neusoft also made active arrangements. In July 2015, the group and other partners jointly invested to establish Neusoft Reach for the R&D of autonomous driving technology. By October 2021, Neusoft Reach had completed its first round of financing of RMB 650 million, and in the same year's financial report, it brought Neusoft Corporation an investment income of RMB 1.01 billion, with the annual net profit attributable to the parent company exceeding RMB 1.1 billion, making it the only year with positive non-IFRS net profit in the past five years.

The deal completion of Neusoft Reach marked an important turning point, which the outside world saw as a sign that Neusoft was preparing its subsidiaries for public listing. Looking ahead, if all of Neusoft Corporation’s subsidiaries can go public successfully, Liu Jiren's business empire may expand to six listed companies. However, after prolonged planning, only two subsidiaries have achieved this to date.

According to the public financial data, Neusoft Education's revenue in 2023 was RMB 1.806 billion, and as of May 21, the company's market value reached HK$2.152 billion. Neusoft Xikang's total revenue last year was RMB 538 million, with a loss of RMB 155 million. Meanwhile, its share price fell to HK$0.99 per share, and its market value was only HK$766 million. Although the group is full of anticipation for listing, it cannot hide the current profit dilemma it faces.

For Neusoft Corporation, building a new industrial imagination is a major challenge. Although this company with a history of over thirty years has an annual revenue of more than ten billion, its brand image has not achieved a breakthrough renewal. In many people's eyes, Neusoft still remains the old impression of a "software outsourcing company," lacking in new products that can leave a deep memory. Liu Jiren once said that in a market environment full of pirated software, if one only focuses on the domestic market, Neusoft might have become unsustainable a long time ago.

For many years, Neusoft's core technology position has been questioned by the outside world. Especially the “Chengdu nucleic acid testing system crash” incident in 2022, which once again brought Neusoft into the focus of public debate, forcing it to defend its substantial capabilities. How to eliminate the stereotyped impact brought by the long-standing "outsourcing" image has become an ongoing trouble for Neusoft.

In fields such as medical health, intelligent automobiles, and smart cities, Neusoft Group faces tremendous market pressure. In the field of medical imaging equipment, Neusoft Medical, ranking among the top domestic manufacturers, achieved a revenue of 3.181 billion yuan and a net profit of 307 million yuan in 2023. However, its competitor United Imaging Healthcare had already been listed on the STAR market and made significant breakthroughs in high-end products. United Imaging Healthcare's total revenue for 2023 reached 11.411 billion yuan, with a net profit of 1.974 billion yuan, an increase of 19.21% year over year.

As for the intelligent vehicle connectivity field, Neusoft, by developing the next-generation intelligent cockpit platform based on Qualcomm's fourth-generation Snapdragon 8295 chip, has been implemented and mass-produced in several car models on the market. Despite the continuous growth of shipments of Neusoft's intelligent cockpits, intelligent communication, and global navigation products as shown in financial reports, Neusoft still faces challenges from strong competitors such as Huawei, Tencent, and Baidu in this race. In response, Liu Jiren stated that the company needs to "continuously reflect on its own problems and shortcomings."

Neusoft Group is dedicated to finding breakthroughs in cutting-edge technology, with a current focus on "intelligentization". With the deep development of artificial intelligence technology and the emergence of large models, the way of human-computer interaction has seen a refreshing wave, offering new opportunities for the commercial application landing. Neusoft Group's founder Liu Jiren firmly believes that grasping the key moment of artificial intelligence and the data value transformation is a great opportunity for Neusoft's future advancement.

On March 11 of this year, Neusoft Group held a strategic-level press conference, announcing the full-scale launch of the intelligentized solution strategy. This strategy focuses on key business areas such as smart cities, medical health, intelligent vehicle interconnection, and enterprise digital transformation, aiming to deepen market influence through the strong empowerment of AI and solutions for data and service value transformation.

To cater to the growth trend driven by intelligentization, Neusoft decided to make significant adjustments to its organizational structure. It is committed to reconfiguring the company's marketing organization, through strengthening unified deployment, building a powerful marketing team, establishing a multi-tiered marketing organization system, and a new customer relationship model. Neusoft hopes that these changes will make the enterprise more youthful and vibrant. At the press conference, Liu Jiren emphasized that youth means having a keen perception of changes in the world and being willing to quickly face the challenges of the times.

But harvesting the dividends of technology is no easy task; it first requires continuous investment and exploration in technology. Data from 2023 shows that Neusoft Group's investment in R&D reached 1.065 billion Yuan, an increase of 9.87% from last year and accounting for 10% of the company's total revenue. However, in comparison to industry leaders, such as Yonyou which spent 2.106 billion Yuan on R&D last year, and Kingdee at 1.439 billion Yuan, Neusoft's R&D expenditure still appears insufficient. As a once-giant in the software industry, Neusoft faces obvious challenges in its journey to return to the summit.