Riding high, but tougher to ensure growth

Harsh economic climate will prove difficult for tech players to maintain growth in the coming year, where focus on business basics such as cost containment, will be vital.
Written by Eileen Yu, Senior Contributing Editor

To survive in a tumultuous market environment, IT players must realize that it is no longer just about providing the best technology but also about how they sell that technology.

This year's ZDNet Asia Top Tech 50 Index featured several repeat winners, and highlighted the importance of revenue and income growth as indication of a tech player's significance in the market.

According to Graeme Philipson, independent IT analyst and writer, the 50 companies that made the Top Tech Index were not unexpected. Neither was he surprised that some 40 names in this year's list were also in the previous 2006/2007 index.

Philipson, who is a Top Tech 50 advisor, said: "Computer companies rise and fall, but it usually takes a few years, not just one or two. So, it is natural that most companies would retain their position."

As in previous years, he noted, the Index is dominated by two main categories of players: large multinational systems vendors, and telecommunications companies. He said these suppliers do well in any benchmarking system because of their sheer size and importance.

Another group of vendors that typically do well, he said, are those that straddle IT and consumer electronics such as Canon, Samsung and Sony, signalling a merging of these two technology areas where there is "increasing digitization of consumer products".

Where size doesn't always matter
Philipson said: "Software and services companies, even those as large and as important as Microsoft, are always disadvantaged in these comparisons.

"They do not need to be as large, in terms of staff numbers or revenues, to have as big an impact on the industry. They do not have large manufacturing plants or sales teams, and can have an important influence way beyond their sheer size," he explained.

As such, he noted, a better measure of dynamic companies is their revenue and profit growth. Referring to the Top 10 fastest growing companies in the Index, based on average revenue and income growth, Philipson said each of these market players achieved strong growth for different reasons, each of which demonstrated an important industry dynamic.

Baidu.com, for instance, clocked the highest average revenue growth and second-highest average income growth. He said: "Baidu is the Google of China, which means it is the world's second-most important search company. Given the importance of search, that makes it the world's second-most important Internet company."

He added that Baidu was the first Chinese company to be listed on NASDAQ 100, and now has plans to extend its success outside of the Republic.

Philipson singled out another Chinese company, Lenovo, which beat the odds and silenced its critics. Logging the second-highest average revenue growth, the PC maker underscores the increased importance of China in the global IT scene, he said.

"When Lenovo bought IBM's PC business in 2005, most of those people who didn't ask 'who?' thought that it was a bad idea.

"Lenovo has proved the critics wrong, enhancing the ThinkPad's reputation for quality and successfully moving into the consumer space," he added.

Tough times ahead
However, Philipson warned that the next 12 months will be tough for all IT vendors, where growth of any kind will be difficult to achieve. "Survival will be the name of the game, and survival is not so much about technology as it is about business skills," he said.

"The companies most likely to do well, or least badly, will be those that pay attention to business basics, such as cost containment and cash flow. Most user organizations will be cutting back on or delaying IT investments."

Emily Chan, CIO, Disneyland Hong Kong, echoed his sentiments. Noting that as a CIO herself, she will be seeking tech players that can offer the best cost advantage.

"I am always looking for partners instead of vendors, partners who will always assist in looking for the best solution that's available at the most economical cost and most practical technologies," said Chan, who is also a Top Tech 50 advisor.

To retain their relevance in the current market conditions, vendors must offer products that require less total cost of ownership (TCO), she added.

Making the grade
Companies on the Top Tech 50 Index garnered the highest overall scores based on six key performance indicators, weighted, as indicated:

  • Latest global revenue (15%)
  • Latest global net income (15%)
  • Average year-on-year revenue growth over 4 years (25%)
  • Average year-on-year net income growth over 4 years (10%)
  • Global headcount (10%)
  • Asian presence in 10 economies: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam (25%)

Top Tech 50 winners are also tagged, according to the products and services they provide, into eight key industry categories:

1. Systems 5. Networking and Communications
2. Storage management 6. Security
3. Software infrastructure 7. Services
4. Business applications 8. Internet services

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