Asian firms closing gap with Western brands

The economic slowdown may be bad news to large businesses, particularly in the United States and Western Europe, but it could be a silver lining in the cloud for Asian brands trying to establish themselves beyond their local markets, say analysts.

Matthew Boon, managing vice president at Gartner, told ZDNet Asia in a recent interview that the current climate would be opportune for Asian companies to compete with global multinational corporations (MNCs).

Sydney-based Boon also noted in a media briefing last month, that while IT spending is expected to continue amidst the slowdown, enterprise users--particularly in the hardware market--will likely exhibit lower brand loyalty and adopt a cost-conscious mindset.

"What organizations will [then] be looking for in a local market, is opportunities to go with vendors who understand their own needs better, and also offer a more competitive offering from a price point of view…[and] have the local support services that they need," he explained.

Boon added: "So that's where we're moving away from the brand loyalty piece--organizations will be looking to companies that can help them get through the kind of environment with a very local perspective on things, whereas multinationals typically don't have as strong a local understanding."

Andrew Milroy, ICT director at Frost & Sullivan, concurred that Asian businesses are in a "strong position right now to take advantage of the downturn". Cost competitiveness aside, such companies "typically have newer business models and less legacy, so they're often in a position to leapfrog", he said in a phone interview.

Rise of Asian brands
More Asian companies made it to ZDNet Asia's TopTech Index this year, compared to 2006. There are a total of 19 in this year's list, with Asustek, China Mobile, NTT Communications and ZTE as the new entrants.

According to results of the BrandZ Top 100 (PDF) brand value study by market research firm Millward Brown, released in April, domestic brands from emerging economies were "gaining momentum". In particular, China Mobile was ranked No. 5, reflecting a 39 percent increase in brand value over 2007's 5 percent.

Pierre Hennes, co-founder and partner of Upstream Ventures and former ZDNet Asia TopTech Index 2006/2007 advisor, noted an increase in investments in the region over the last couple of years which he said has resulted in more startups and spinoffs.

Hennes, in 2006, had pointed out that businesses were still investing their IT budgets on products and services offered by MNCs, and suggested that regional players could face difficulty in breaking out of their local markets. In a recent phone interview, however, the Singapore-based executive said he has observed "more local companies offering goods and services in the region".

Frost & Sullivan's Milroy noted that while big Japanese, Korean and Taiwanese players have typically been strong globally, the playing field now increasingly includes upcoming Chinese and Indian companies as well. Huawei, for example, has grown from a small Chinese "imitator of Cisco [Systems]" into a multinational by its own right; the likes of Infosys, Satyam, TCS and Wipro are directly taking on the major players such as IBM and EDS.

"Increasingly, Asian buyers are becoming comfortable working directly with Chinese and Indian companies," he said, adding that the stigma associated with buying Asian brands have been eroding over time. "The objections in the past will inevitably be overcome over time…we're seeing--it happened with the Indian outsourcers--attitudes toward them are changing."

Gartner's Boon added: "As we move to this very much global economic environment, the reticence which organizations typically had in dealing with non-Western brands in Western geographies, has moved away somewhat. I don't think the fact that something is made or branded in China or Taiwan, for example, is [now] as significant as it was maybe three or four years ago.

"Particularly in the IT sector, it's less of an issue for organizations where the IT service or product is coming from, [than] whether it meets the needs from a price and functionality point of view," he said.

Despite having economic conditions in their favor, Asian companies need to be careful in reaching out to outside of the region, said market watchers.

Asian vendors, said Boon, need to articulate very clearly their technology roadmap, their commitment to the technology and the industry, and the long-term viability of their product or service, when dealing with non-Asian organizations outside of Asia.

Upstream Ventures' Hennes added that very small outfits may need to focus on teaming up with "larger regional integrators" and enter into collaborations and strategic agreements, to increase their survivability.