Singapore’s information and communications technology (ICT) sector is remarkably vibrant. According to Infocomm Development Authority, the sector expanded by 8.9% in 2005 and was worth an estimated $24.1bn. External demand, which grew by 11%, provided much of the growth impetus. To give foreign companies a better understanding of how Singapore ICT companies think, do business and expand, I interviewed the CEOs of eSys, NCS and ST Electronics, all role models of excellence in serving and meeting marketplace needs.

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

 

eSys: We have moved specific operations to locations where they can be carried out in the most efficient and cost-effective manner. A case in point is the moving of our 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 lower costs of production. So our investment decisions in Asia, as anywhere else, are led by a ‘best fit’ approach.

NCS: One of NCS Group’s key markets is in government solutions. Often there is potentially only one client in a country – at the federal government level; for some geographies, however, there are state and local governments with significant IT budgets. NCS will set up offices in countries where we see potential in the size of market, tax-friendly policies, incentives and the 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. There are many infrastructure projects in China, which promises good prospects for electronic system 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 system solutions.

What are the attractive and unattractive aspects of 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 the availability of better skill sets.

From a socio-cultural standpoint, expatriates may have some problems adjusting to the new social and cultural set-up. But with integration and influence of global culture, this is not as pronounced as it was few years earlier; it can be tackled by hiring local talent.

NCS: Positives about doing business in Asia are: the short distance between Singapore and these cities; the familiarity of culture; liveable conditions; language advantages; affordable local manpower rates versus prices for services; and market growth rates for the underlying business.

Negatives include prices being lower than in western markets, hence, profit margin levels are lower. But the Asian countries have good revenue growth potential. Also, the countries in which we operate have a fair level of transparency in procurement. However, there are also 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 because there is less adjustment required when dealing with the different norms as compared with dealing with a totally different culture and norm from another region.

What other advice would you offer fDi readers?

 

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

Venturing out

Given the natural constraints of a small domestic market on Singaporean ICT companies, it is not surprising that they are forced to venture out to new territories in the quest for survival. Foreign companies will reap the rewards when they partner with these Asian conquistadors in shaping the new ICT world.

Lawrence Yeo is founder, CEO and principal consultant of AsiaBiz Strategy, a Singapore-based consultancy specialising in Asia investment promotion and market development services.

Email: Lawrence@asiabizstrategy.com