Did e-solutions providers jump the gun?

It is inevitable. The rumors in the industry get louder by the minute. By last count, there are supposed to be a host of dot-coms and solutions providers awaiting their turn for the chopping block. The name on many lips is GO2020, a solutions provider which started with a bang last year with its chairman and chief executive officer, Derrik Khoo blazing the trails. Life was good then. But market conditions have turned nasty and fund raising exercises, a pipe dream. Some observers say if GO2020 closes shop, which is rumored to be filing for bankruptcy by the end of this month, it could have a ripple effect on other e-solutions providers in the local market.

Others lament the government did not provide enough incentives for local software developers to make a lasting mark, instead focusing on tax breaks for hardware acquisitions. Another bone of contention was that these IT players were faced with high operating expenditures as they were prodded to move into expensive office space in the city center.

Be that as it may, an investment manager with a prominent local bank has another side of the story. He says that local IT companies' core skills remain entrenched in the services sector i.e. offering programming, web design, hosting and systems integration to customers and do not have the necessary domain knowledge and partners to jump into solutions providing business.

"Why some of these companies which tried to fashion themselves into solutions players failed to make an impact here was that they jumped too fast into this space without gathering the proper knowledge of a particular industry which they wanted to offer e-solutions to," the manager who declined to be named says.

"The market is very competitive and tough. A bank for instance will not simply take your solutions unless you can show them that you have the necessary experience of working in the banking sector and understanding its needs. If company X comes to me and tells me it has the right solutions for my financial portal for instance, I want to know if this company really understands the financial business. Do they understand the global Internet banking mechanism for instance? Many companies, sad to say, do not know the niche markets they are targeting.

He contended that many "e-solutions" players that are facing hardship now, tried to package their solutions as a "one-size-fits-all" product. "This does not work as the client would have to modify and customize the product for his or her niche needs which is just time consuming and inefficient." MyBiz International Group founder and chief executive officer Cheong Yuk Wai adds to this argument. He says most IT companies here resell technologies from the rest of the world that is due to the pressure to generate revenue quickly. Consequently, there is less money and time poured into research and development. "So even when most solutions-based offerings were marketed, they were largely services to bundle imported technologies," he says.

"This had persisted during the dot-com fever ... thus we have not nurtured a culture of innovation and risk taking. This largely explains why there is little recognition of locally developed solutions and technologies," Cheong says.

Local software solutions provider, The Media Shoppe which won the best software award with its tmsPUBLISHER offering at the recently concluded Comdex/Asia 2001 held in Singapore, says IT services companies inevitably try to offer solutions, hoping to create alternative revenue streams in the current age of e-enable corporations.

Its chief executive officer Chris Chan however differs with the argument that locals firms lack the necessary technical skills but agreed that these firms must have a solid knowledge of a core sector to successfully market their products. "Unless the entrepreneur has enough capital and expertise in the market, it's going to be tough to brand a service," he says.

"Products are more difficult for several reasons mainly due to the high cost of developing them, cost of acquisition (clients won't pay a lot for an off-the-shelf product) and an unforgiving market (the market requires a lot of hand-holding and education when it comes to new local software products)," Chan explains.

So, what happened to the GO2020 story? Did they jump too fast into the nascent solutions scene? Chan's point of view on this is that the market was not ready for its services. "Everyone is trying to be a utility company and peddle products that could be obtained for less in the marketplace. Unless a clear value proposition is established, clients will ask for more for less, and because IT involves so quickly, the service value lessens over time." This is one point, Chan says, many people fail to see.

But Andersen's senior manager for business consulting Goban Arasu says another reason why many IT firms are finding the solutions market tough is because of the incredible rate of information change. "We don't know where the fundamentals lie, and people make business decisions on certain assumed fundamentals." But this is something businesses in the United States are also grappling with, Arasu points out. But he disagrees with the contention that IT firms moved too fast into the solutions arena even though he admits some had over-promised and under-delivered. "Yes, these companies do lack the core knowledge or domain skills of a particular industry but you can partner with entities with the necessary knowledge.