Strangers in strange lands

Developing countries like India and China represent vast opportunities for growing businesses. But what kind of technological challenges will SMBs face?

The Singapore government has been urging local companies to venture into India and China. And small and medium-size businesses (SMBs) in the Republic have obliged, drawn by large domestic markets and skilled, low-cost resources.

According to a China Daily report, 90 percent of Singapore's investments into China are made by Singapore-based investors, including SMBs and multinationals. The remainder has been injected by Temasek-linked companies, such as CapitaLand. Singaporean investment in China has reached US$24 billion, the report adds.

In November, Singapore and China will start negotiating for a bilateral free trade agreement, a move which will spur the tide on.

But for SMBs preparing to enter the lucrative markets, one question may weigh heavy: Are there IT-related challenges in these developing markets?

Thankfully, according to companies and experts that CNETAsia spoke to, such problems are few.

War stories
Having sunk business roots into China, ACEsTEC is pleased with the connectivity in the Zhongshan Torch Hi-Tech Industry Development Zone, where its representative office is located.

Consulting firm AT Kearney says India outperforms China by a "very wide margin" because of its continuing cost advantages and increasing market maturity.
"I've no problem with Internet access," says Chong Ke Ren, managing director of ACEsTEC. "I have broadband access in the Zone after all. In hi-tech zones such as Zhongshan, the infrastructure is almost as good as Singapore's. 163.com, a private Internet Service Provider, allocates 15MB of space for each user."

The company, which promotes its showcase of IT companies at the Zhongshan Torch International Exhibition Center, plans to hire up to 10 Chinese nationals by October for its operations there, up from the current two.

"Our IT support staff is in Singapore. In time to come, we'll engage Chinese nationals to run our company's website and explore the China market. Now the representative office communicates with us any IT problems through e-mail," Chong adds.

Like ACEsTEC, ComSOC Technology's IT support staff is based in Singapore. Its Malaysian engineer doubles as an IT manager who resolves queries from its China operations by phone. Until the Chinese operations generate revenue, thereby enabling ComSOC to hire Chinese support staff, the arrangement will remain.

The company employs seven people in its engineering and sales office in Shenzhen, plus three in its Hong Kong sales office. The company designs integrated circuits.

Tan Juan Keat, ComSOC's design manager, says he's also had no problems with Internet access in China, as is the case in India.

"The hotels we checked into at Chennai, Bangalore, Hyderabad, Pune and New Delhi have Internet access. The hotels were rated four-star and above. We didn't encounter any problems with Internet access into our company's server," adds Tan.

Singapore is in the final stages of negotiations for a Comprehensive Economic Cooperation Agreement with India. International Enterprise Singapore, a government agency, says Singapore's cumulative investment in India was US$1.45 billion at the end of last year.

"A very common problem in many Indian cities, such as Bangalore, is the periodic power cuts of two hours each, once in the morning and once in the afternoon. "
Subha Rama, analyst, Frost & Sullivan
Hurdles to overcome
Consulting firm AT Kearney says India outperforms China by a "very wide margin" because of its continuing cost advantages and increasing market maturity. China scores poorly in the areas of intellectual property piracy and bureaucratic red tape, and that the nation needs to improve the English language skills of its workforce if it wishes to challenge India, AT Kearney adds.

That said, China's East Asian language skills, particularly Japanese, will likely give it an edge over India, AT Kearney says. China's national and regional governments are targeting the IT and Business Process Outsourcing sectors, with IT skills and language training, subsidies for certification, special economic zones and software industry parks.

However, the central government in China is trying to control which technologies are used and where they are produced, to limit foreign royalty fees and support local manufacturing, says Michael Warrilow, META Group's senior analyst.

"This has a technology impact to Singapore SMBs given that collaboration with local companies in China may result in the need to embrace those same standards," adds META Group's Singapore vice president and general manager, Damien Wong.

In India, Wong says, most established IT vendors are increasingly keen to penetrate the SMB segment. This means Singapore SMBs will have mid-market solutions to support their IT systems in India.

However, he notes that the supporting infrastructure outside the major cities tend to be "fairly medicocre".

"Hence if the SMB operates in remote townships or regions, then the availability and reliability of IT and communications infrastructure becomes an issue," Wong adds.

An Indian national and industry analyst with Frost & Sullivan, Subha Rama is familiar with IT-related conditions in her country.

"A very common problem in many Indian cities, such as Bangalore, is the periodic power cuts of two hours each, once in the morning and once in the afternoon. There's shortage of power due to the dry summer months when the output of the hydroelectricity generator is affected.

"Broadband penetration in India is low. Not many small companies can afford leased lines. The Internet connection speeds are low in any case," Rama says. Keeping it in sync
The good news, though, is that tariffs in India and China have brought down hardware and software prices, says Gartner's research director for Enterprise Application Software, Pranav Kumar.

"For services and support, they should select the vendor carefully. Many of the local vendors that focus on SMBs are not very professional," he adds. Kumar suggests that SMBs look at multiple vendors for infrastructure and services to get better prices and features.

"They should draft their contracts with vendors carefully, building in Service Level Agreements, exit clauses as well as penalties for default. Look at vendors that traditionally focus on large enterprises. There may be a cost to pay, but they are also a benefit in terms of better services," adds Kumar.

"SMBs can overcome many of their challenges by being clear about the types of controls they would like to have in place at each of the locations. "
Ajit Nair, director, Technology Solutions Group, EMC South Asia

EMC, for example, has been providing infrastructure to support banks, telecommunications providers, manufacturing plants and technology companies in India and China.

Says EMC South Asia director, Technology Solutions Group, Ajit Nair: "SMBs can overcome many of their challenges by being clear about the types of controls they would like to have in place at each of the locations. The information infrastructure should be tightly integrated with their business processes and IT infrastructure at the Singapore headquarters."

The next step, he adds, is to standardize the infrastructure and processes. "Many SMBs like to mix and match their solutions, often with the lowest price at the deciding factor. This can quicky turn into a business nightmare if each local office should purchase different flavours of servers, storage and applications," Nair says.

ComSOC's Tan should know. The company didn't have a common platform between its Singapore and China offices. Sensitive information, sales figures and profit margins were e-mailed.

"This year, we installed a new server in Singapore which allows our overseas offices to be updated online on sales figures. So we then have a secure system compared with one and a half years ago when we started up in China," says Tan. ComSOC spent S$30,000 (US$17,426) for its virtual private network and firewall.

"It will be good to plan early what IT system you need, and take into account scalability," adds Tan. "Don't just cater to your current needs because you might outgrow the system's capabilities. Think about expanding one or two years down the road."

Lai Ee Na is a freelance IT journalist based in Singapore.

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