Attractive Sectors
Singapore

ICT

Singapore ICT Sector to Grow Exponentially

Vibrant Singapore ICT Sector

Singapore is very small in natural size with very limited natural resources and much obstacles to overcome. However, we like what Dr Phil Pringle wrote in his book, Leadership Excellence: “It’s not the size of the dog in the fight. It’s the size of the fight in the dog. The fight draws out of us far more than we think we have. The desperation aroused overcoming life-threatening moments surfaces courage and strength that remain undiscovered in comfort” (page 97). Let’s look at one such pit-bull terrier fighter, the Singapore ICT sector.

Singapore’s ICT sector is simply vibrant. According to Infocomm Development Authority (IDA), the sector expanded by 8.9% in 2005 and was worth an estimated US$24.1 billion. External demand, which grew by 11%, provided much of the growth impetus. The export market (58%) contributed more to the total ICT industry's revenue than the domestic market (42%) in 2005. As in previous years, the export market (58%) contributed more to the total infocomm industry's revenue than the domestic market (42%) in 2005. This vibrancy is due to 3 main factors: its excellent ICT infrastructure, regulatory environment and the readiness and willingness on the part of the three main stakeholders (i.e. governments, business communities and households) to adopt new technologies and to fully benefit from ICT. World Economic Forum in its Global Information Technology Report (GITR) ranked Singapore #1 (2004 to 2005) and #2 (2005 to 2006) on Networked Readiness Index (NRI) which measures the degree of preparation of a nation to participate in and benefit from ICT developments. Hot on Singapore’s heels are other Asian countries like Taiwan (#7), Hong Kong (#11), South Korea (#14), Australia (#15), Japan (#6), New Zealand (#21), Malaysia (#24), Thailand (#34), India (#40) and China (#50). We’ll review Asia’s intra-competition in future articles where we see Great Danes fighting with Bull Mastiffs and other dogs. Currently, Singapore’s ICT industry contributes over 6% of Singapore’s GDP, revealing much room for further growth. NCS Group Chairman Mr. Lee Kwok Cheong sees a bright future for this sector. Infocomm Development Authority (IDA) has formulated iN2015, the ICT masterplan for the next big leap. iN2015 is a 3Ps effort involving the public, private and people sectors working hand in hand.

Domestic ICT Powerhouse

Domestically, global ICT companies have established operations in Singapore, ranging from research to product development to marketing and serving Asian markets and beyond from Singapore. Singapore offers excellent intellectual property protection and data security. The IDA 2005 Annual Survey of Infocomm Usage in Households and by Individuals show that 74% of households own personal computers, with 28% owning two or more in each home. Two out of every three such households (or 66%) enjoy Internet access with 52% already on broadband. The internet has become the preferred mode of inter-personal communications in Singapore, with nine in ten (or 90%) using the Internet to send or receive emails. Singaporeans have embraced ICT for work, learning and leisure which has made ICT now very much a part of local lifestyle. Even top-dogs need to have top trainers and groomers and the Singapore government executes its role superbly. In ICT infrastructure, the Singapore government will soon launch a high-speed, next-generation National Broadband Network. IDA will enhance its manpower development schemes under its 5-year Infocomm Manpower Development Roadmap so as to attract and groom ICT talent.

Accelerating Internationalisation of Singapore

ICT Singapore ICT companies are entering emerging markets in Africa, Eastern Europe and the MiddleEast. They help to bring the ‘Made in Singapore’ quality branding overseas. These companies offer vertical applications and next-generation ICT technologies like interactive and digital media, entertainment, education, financial services, government services, healthcare, tourism and manufacturing. International Enterprise of Singapore (IE) has a major role and mandate to help Singapore-based companies internationalise, says Mr. Andrew Khaw (Acting Director, Electronics & Precision Engineering and Infocommunications Technology Divisions).

He listed some of these initiatives.

The first is the LEAD (Local Enterprise and Association Development) programme. IE Singapore is currently working with SiTF to leverage on LEAD funding to strengthen Singapore’s ICT capabilities.

The second is ‘brand Singapore’ systems. IE aims to leverage on Singapore’s strong brand name, track record and experience as a regional financial and transport hub by showcasing and marketing Singapore companies who have the products and solutions to enable other countries to capture the same best practices.

A third is cross-fertilizer industry consortiums. IE Singapore initiated its iPartners Programme where it encourages Singapore companies to band together as an alliance to combine their strengths and resources to offer a comprehensive suite of solutions to customers.

Fourth, IE helps to increase participation in international showcases like CeBIT, GITEX, and Consumer Electronics Trade Show in the United States. Fifth is the integration of design process. IE Singapore launched the Iconic Design Initiative to help Singapore-based companies develop iconic products to enhance their competitiveness in the global marketplace. The programme also seeks to encourage companies to integrate design processes as part of their medium- to long-term product management and business strategies. Sixth, through the multi-agency initiative, BrandPact, IE Singapore supports both firm-level branding capability development as well as industry-wide branding efforts.

Opportunities for Foreign Companies

Foreign companies can explore Singapore ICT capabilities and evaluate which Singapore ICT companies to engage their services, to partner with or trade with to serve the needs of their local economies. Key sectors are e-government, financial technology and intelligent transport systems.

E-government

Singapore is a recognised global leader in e-government. Singapore ICT companies deploy a wide spectrum of unique technologies and solutions to provide services in functional areas of Infrastructure, Technology Solutioning, Managed Services, Master-planning, and Consultancy in key sectors such as Defence, Education, Health, Law, Trade, and Transport. Key Singapore players include NCS Group, ST Electronics, Crimson Logic and Ecquaria.

Financial Technology

Singapore is a known leading financial centre. Its financial technology companies have developed well-rounded exposure and substantial experience in understanding the needs of financial institutions, providing end-to-end services and financial software solutions ranging from IT infrastructure outsourcing, IT applications outsourcing, business process outsourcing (BPO) to business transformation outsourcing. Key Singapore players include System Access, BCSIS and Fairex.

Intelligent Transport Systems (ITS)

Singapore’s highly urbanised and land-scarce city has helped it to develop an efficient traffic management system. Singapore’s ITS providers thus have an edge in the development and application of advanced technologies such as Artificial Intelligence, Mobile Communications, Global Positioning System, Smart Card, and Internet technologies to meet the needs of airports, sea ports, transport hubs, transport infrastructure operators, and other end users. Key Singapore players include ST Electronics.

Consumer ICT Industry

Singapore-based consumer electronic companies continue to deliver high-quality products and useful innovations to end consumers through a fast expanding global distribution network. Creative Technology’s world-leading audio cards are installed in about 70% of the world’s PC audio systems. eSys is the global leader in the technology distribution of desktop hard disk drives. Trek 2000 produces the ThumbDrive, the world's first and smallest portable storage drive. Muvee Technologies produces muvee autoProducer, the world’s only smart automatic video editing software. Akira, Enzer, Mercury and Shiro are just some of the upcoming brands that have penetrated many markets with their attractive product designs and competitive pricing, while Aztech, Compex and SmartBridges have also won international success in the area of networking products. With more than 300 points of presence in Southeast Asia and China, and a further 100 each in the Americas, Europe, North Asia and Pacific, Singapore ICT companies’ global presence means that they are able to meet the varying needs of OEMs across many sectors.

Interviews with Singapore ICT CEOs

To give foreign companies a better understanding of how Singapore ICT companies think, do business and expand, we interviewed 3 CEOs of several Singapore ICT companies, all role models of excellence in serving and meeting marketplace needs:

Q1: What are your expansion plans? Are there plans for new facilities, and if so, where in Asia? How important is Asia to you?

eSys: Asia is very important market for us. We have broadly divided it into 3 parts – ASEAN, Indian Subcontinent and China. We are moving ahead steadily with our expansion plans in three sub regions. Last year we acquired a company in Vietnam and now eSys has a strong network of channel partners and we have been able to extend our global vendor relationships to Vietnam. We are in the process of setting up office in Philippines. This year our state-of-the-art PC manufacturing facility with annual production capacity of 3 million units became operational in Singapore. In India for technology distribution, we have countrywide reach through 30 offices. We are setting up a 2000 employee Integrated Facility in Chandigarh in North India. China is a huge market as well as sourcing hub. Some of eSys branded IT products and peripherals are being sourced from China. We have expansion plans for China and we are working towards it.

NCS: NCS intends to expand into additional Asian markets like Korea & Japan, as well as into additional cities in China. These represent the greatest source of growth for the company. We envisage that our processing centres in Suzhou and Chengdu will grow. We foresee that processing centres in cities like Dalian will be setup to cater to the Korean and Japanese markets in the near future. We also think that our existing processing centres will expand to involve call-centres from cities in China. Asia is certainly very important for NCS Group.

ST Electronics: We plan to expand our marketing and project offices in Asia to reach out to global clients for our line of system offerings, and to provide responsive support. We also selectively build up overseas facilities for production of hardware and development of software to improve on our cost competitiveness. In Asia, we will continue to increase our presence in China, covering more provinces and cities. We will also be looking at other Asian countries, particularly South East Asian countries to increase our presence. Asia is an important market for us. We already have major projects and track records in Asia, in the areas of mass rapid transit (MRT) systems, intelligent buildings, intelligent transportation, public safety command and control and e-government systems. These include rail projects in China (Guangzhou and a recently awarded project in Beijing), Taiwan, Manila, Thailand and Singapore as well as e-Government projects in Singapore, Botswana, Hong Kong and Maldives.

Q2: What is your company’s company's general approach to Asia investment?

eSys: We have moved specific operations to locations where they can be carried out in most efficient and cost effective manner. Case in point is moving of PC Manufacturing facility to Singapore. This is a calculated decision because efficiencies in terms of logistics, higher productivity, automation and good infrastructure have resulted in lesser cost of production. So our investment decisions in Asia, as anywhere else, are led by ‘best fit’ approach i.e. making investments where we find the appropriate skill sets and facilities for a particular task.

NCS: One of NCS Group’s key markets is in government solutions. Often there is potentially only one client in a country – that is at the Federal Government level; for some geographies however, there are State and even Local Governments who have significant IT budgets; NCS will setup offices in countries where we see potential for size of market, tax-friendly policies, incentives, and ability to deliver our services without compromise.

ST Electronics: For marketing and project offices, we tend to look at locations where we plan to launch our systems, products and services. China is one country where it has many infrastructure projects and promises good business prospects for electronic system solutions. For examples, in the areas of MRT systems, we will set up operations where the Government has approved budgets or plans to implement new MRT lines or expand existing MRT lines. With presence in about seven cities in China we have ensured that our offices synergise with each other, focusing on the growth areas of intelligent rail and road transportation solutions, intelligent building management systems, pubic safety solutions and e-government solutions. For facilities to support our global operations, we tend to look at locations where quality and cost-competitive resources such as software expertise and hardware supplies are readily available. We will also examine other factors such as tax incentives, and proximity to markets where we sell our system solutions.

Q3: In what ways has your company's Asia expansion and investment strategies differed from your rivals from your home region?

eSys: Where as majority of other companies have seen Asia either solely as a back office, sourcing center for cheap labour or products, we have done a paradigm shift by shifting the nerve center of the business to Asia. Case in point is our integrated facility in North India. This facility acts as nerve center of our business and carries out the concept of TBO – Total Business Outsourcing. All the major functions like Sales, Marketing, Finance, Human Resources for our global offices are carried out from this nerve center in India. Only the essential physical tasks like warehousing and actual physical delivery of goods is carried in the respective countries.

NCS: Our strategy has been to operate in markets where there is substantial traction for our services. Outside of Singapore, our primary markets are Hong Kong, Australia and China; NCS Group experience in HK has been good. Although the market is relatively small, there is strong demand for our offerings. Hence, we have invested in larger office space after 5 years in HK, and we have also invested in hiring of permanent staff. We started with 5 staff when we opened in 1998 and we have more than 200 today. In China, our Shanghai business has good traction amongst MNC clients, as well as with China’s local banks. We have invested in large processing centres and application development and management centres in Suzhou and Chengdu, primarily because of good incentives given by the local state government in these cities. These processing centres serve our clients from Singapore, Australia, HK as well as China itself. Our approach is to expand with the business. We are unlikely to build infrastructure or invest heavily ahead of demand.

ST Electronics: Being from the Asian region ourselves, our competitors for major regional system projects are mainly MNCs from Europe, USA and Japan. Being an Asian company operating in Asia we have a certain edge over foreign players as we are closer to these markets and will naturally be committed to these markets for a longer-term. For example in China, we have invested resources in terms of time, manpower and costs since the 1990s. We ensure that long and lasting relationships are fostered and strengthened year-on-year, yet results can only be seen when trust is developed among all parties. Our differentiating factor lies in our ability to understand customers well and provide a right solution to the customer. Customers trust our quality and particularly our ability to work with them in improving their service to their own customers. This is what we call our “Service Transformation” approach.

Q4: What is attractive and unattractive about doing business in Asia?

eSys: In terms of market potential Asia is the most attractive of the world economies today. Cost savings are still one of the factors when we talk about relocating business to Asia but not the only factor. Now businesses are being moved due to reasons such as availability if better skill sets. From socio cultural standpoint, expatriates may have some adjustment problems to the new social and cultural set up. But with integration and influence of global culture this problem is not as pronounced as it was few years earlier. This can also be tackled by hiring local talent.

NCS: Positives about doing business in Asia are: a. Short distance between Singapore and these cities b. Familiarity of culture c. Liveable conditions d. Language advantages, for example China, HK, Australia, and so forth e. Affordable local manpower rates vs prices for services; f. Market growth rates for the underlying business; Negatives are: a. The prices are lower than the western markets in US and Europe. Hence, profit margin levels are lower. However, the Asian countries have good revenue growth potential. b. The countries we operate in have a fair level of transparency within the various procurement processes. However, there are many other markets where procurement may be based purely on relationships rather than price and capabilities. Good management can overcome this.

ST Electronics: Although there are differences in culture and business practices, being Asian allows us to relate to the environment better as there is less adjustment required when dealing with the different norms as compared to if we were dealing with a totally different culture and norm from another region.

Q5: Tell us more about what you know and feel about the Asian culture. What have you observed so far about working with Asian customers, suppliers or associates? How important is it to know the Asian culture? Why?

eSys: Being a global company we try to understand and adapt ourselves to different cultures depending on which country we are working in. We have done the same in Asia. We have done this by hiring local talent which bring in the local perspectives, including cultural.

NCS: Being able to communicate in the business language of that country is very important. Customers feel comfortable when doing business, especially if you are just setting up in that country. Next, it is important to cultivate like-minded suppliers and partners for even if you don’t speak the language, you can rely on them to work with you in convincing potential customers. In essence, knowing the language is knowing the culture of that country.

ST Electronics: There is a need to invest time, effort and resources to develop longer term relationship with not only customers but also business partners and suppliers. Even within ethnic groups, practices differ from country to country and we must be mindful of cultural and business practices so as not to inadvertently upset our associates and customers. It is important to develop a strong and trusting relation with your working counterparts so that business is based on a strong foundation and conflicts are minimised or overcome.

Q6: People factor: how do you train, condition and equip your people before sending them outwards to new Asia locations?

eSys: Normally we hire local staff and that is applicable to all 33 countries where eSys has offices. We follow similar strategy in Asia. We have training programmes where in new hires spend time with local staff and functional experts to gain insights into local market as well as specific functional areas.

NCS: Our people are taught to be self-reliant from day one; starting up in a new country is very challenging for there are many unknowns that they will have to face. Having said that, they are aware of the different groups within the organisation that they can turn to when they need to. To motivate locally hired staff, we bring our staff programmes to the country.

ST Electronics: Staff sent to work overseas must be given the necessary support to ensure that their environment is conducive to help them perform their work well. Family support, proper housing and other amenities must be available so that they do not worry about their domestic issues. For training of such staff, it is critical that they receive the support and learn from the experience of all parties within the organisation. This will benefit them and better equip them for dealing with the business, cultural and environmental diversities.

Q7: What other advice, warnings and tips would you share to your global readers about investing and doing business in Asia?

NCS: We have always believed that Asian markets are susceptible to the management approach of ‘thinking local, but acting global’. We have natural advantages with our multilingual heritage – yet in certain Asian countries which are new to us, we also must be familiar with the local language, as it is also the prevailing business language. This is certainly the case with Korea, for example. So, it has always been our business philosophy to try to get locals from day one, as they are familiar with the local culture and business practices.

It’s often quoted that people make up organisations but less so on how people shake economies and shape countries. Given the natural constraints of small domestic market size faced by Singapore ICT companies, it’s not surprising that reserved yet fighting Singaporeans are forced to venture out to conquer new territories in the quest for survival. Foreign companies will reap much when they partner with these Asian conquistadors in shaping the New ICT World. We will interview more such Asian conquerors in future!