ZARA TECHNOLOGY: GO TO MARKET STRATEGY

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ZARA TECHNOLOGY: GO TO
MARKET STRATEGY
Version 1.3
5/20/2008
Professor Arun K. Jain prepared this case solely as the basis for class discussion rather than
to illustrate either effective or ineffective handling of an administrative situation. This case
was made possible through the generous support of Zara Technology Pte. Ltd., Singapore;
SIM, Singapore; Spring Singapore; IDA, Singapore; SUN Microsystems, Singapore; SingTel,
Singapore; 1-Net, Singapore; Chee Fatt Co. Pte. Ltd., Singapore; Matco Asia Pte. Ltd.,
Singapore; Singapore Department of Statistics, Singapore; Center for Entrepreneurial
Leadership, School of Management, University at Buffalo; and Samuel P. Capen Professorship
in Marketing Research Funds. The author made extensive use of published information about
the industry and acknowledges contributions of numerous IT experts playing a critical role in
the development of the IT industry.
© 2008 Arun K. Jain, Executive MBA Program, University at Buffalo, New York, 14260.
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Zara Technology: Go to Market Strategy
It was a balmy morning in September, 2007 as two entrepreneurs, Francis Lim
and Christopher Harvey, were sipping their robust Singapore Coffee with Kaya butter
toast at the nimble office of Zara Technology. Chris, the Group CEO and computer
wizard, fired his Apple and instinctively logged on to listen to the Podcast of Eweek.com.
AMR Research’s President and CEO, Tony Friscia, and Chief Research Officer, Bruce
Richardson, were discussing the resurgence of the enterprise software market and its
affect on small and medium-sized businesses:
Hi, I’m Tony Friscia, CEO of AMR Research, and I’m here with
Bruce Richardson, our Chief Research Officer. Bruce, I wanted to talk
today about the overall technology economy because clearly what we’re
seeing is a resurgence in many ways.
………..Tony, most of our listeners, uh, today, are small, are
executives at small or mid-size companies. I think that they’re looking to
invest in probably two areas. One is in driving efficiencies in their
business, and this is leading to huge investments in software as a service.
The second thing is continuing to invest in productivity tools, and this is
leading to small and mid-sized companies spending a lot more money than
they have in the past on Blackberries and other devices that allow
employees to sort of be in touch 24/7 to the business, and I think those are
sort of two critical trends.
One thing that’s happened when we look at the small to mid-sized
players, five or six years ago, we kept hearing the internet changes
everything. When you look at the big spending in the late ‘90’s into 2000,
it was largely driven by the mega-companies, the big companies making
multi-hundred million dollar investments in software and new
infrastructure. What the internet has really done now is open the door for
the small and mid-sized companies to get into the game.
On the business systems side though, I’m not convinced that the
large companies, SAP included, can do it organically that, I think that
what you’re going to have to do is buy a market leader and move into this
space, and one of the things I’ve always questioned I mentioned earlier
that, Oracle’s Larry Ellison owns, you know, three-quarters of Net Suite,
does that become Oracle’s play within the mid-market? Do they buy a
company like Net Suite? I think it’s way too hard for a fifteen-billion or
an eighteen-billion-dollar company to try and guess what the needs of a
small or mid-sized company are. It’s just a much more different market
and perspective, and the channels are completely different, so I think
you’ve got to buy the channel capabilities, I think you’ve got to buy the
product, you’ve got to buy the easy-to-use technology, you have to simplify
the message. Small and mid-sized business owners, they don’t know what
you’re talking about if you start talking about grids and APservers and
XML and Middleware and Vizdal. You’ll send them running from the
building if you start talking about things like that. You have to talk about
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business value, you have to talk about cost-effective operations, and you
have to talk about productivity.
I was talking to Greg G. in Forte who is the founder and CEO of a
company called Right Now Technologies which provides on-demand
software or software as a service for managing customer services types of
applications. He has a mix of on-demand software and on-premise
software meaning that it runs on the server in his IT shops, and he woke
up one day and said, you know, “This is crazy”. “Here I am building a
global presence.” He said, “I have more people in my internal IT group
than I have in my externally-facing customer support group”. He said, “I
got, you know, we just have to stop the nonsense here”, and I think you’re
right. As a small business owner, what you’re looking to do is invest in
the areas that are critical to you, and you want IT functionality. You don’t
necessarily need to build a huge IT staff to be able to get at that. What
you want is innovation, not complexity, and not a bureaucracy or not
another layer of support in there, and I think software as a service has an
incredible future ahead of it.
Chris and Francis were elated and concerned about what to do as they absorbed
implications of the comments of Frisca and Richardson. Their intuition was right, a big
opportunity awaited Zara in the market for backroom data management for Small and
Medium Size Enterprises (SMEs). “We needed to decide where and how to position
ourselves in this emerging market” explained Francis. Chris and Francis wondered how
they should enter the market. Throwing his steel tip dart on the big regulation-size
Piranha dart board, “Waiting is not an option for us,” said Chris. As Francis picked the
second dart, he said, “We need to hit the eye of the fish.”
The Market for Business Data Management
Early in the ‘60’s as main-frame computers became ubiquitous in the corporate
world, software was developed to help businesses achieve efficiency and competitive
advantage in the market place through inventory control. Systems software was designed
to handle inventory based in traditional inventory concepts. The initial success of such
applications led to a shift of focus in the 1970’s towards MRP (Material Requirement
Planning). In the ‘80’s, this software encompassed the role of manufacturing resource
planning to optimize plant production processes. In more recent years, such software has
sought to integrate all departments and functions across a company into a single
computer system. Commonly referred to as ERP (Enterprise Resource Planning)
systems, at an average cost of over $15 million, large businesses use ERP software to
capture data about historical activity, their current operations, and future plans to develop
strategic options in market place. According to Forrester Research, most large companies
and governmental organizations have committed to one or other ERP systems and the
market for ERP systems has achieved a “high level of maturity”. As the growth in
market for large businesses is slowing down, attention is shifting towards newly
emerging economies and smaller businesses. As such, a battle is brewing for the growing
small and medium-size ERP business application market.
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Software for SMEs
With the success of ERP at large businesses and wide availability of inexpensive,
PCs, SMEs also started integrating computers to better manage their enterprises. A wide
variety of business application software is available for use by SMEs. They differ in
terms of functionality, required user expertise, hardware requirement, comprehensiveness,
integration with internet, connectivity with other software, and cost. Besides, numerous
industry specific software (e.g., Parking Lot Management for managing parking lots) are
available which focus on the needs of a specific industry. At the lowest level, a small
business may elect to use the standard Microsoft’s Office Suite (or the free OpenOffice
from the open-source project) to manage their books using the spread sheet, writing,
drawing, presentation, and data storage features. Except for preparation of very simple,
basic documents, presentation, and spread-sheet, prospective users require significant
expertise in computing to develop specialized modules for performing managerially
critical repetitive tasks.
A popular option among SMEs has been the use of accounting software to
computerize accounting related functions. These functions include identification of
accounts receivable/payable, maintenance of general ledger, billing, keeping record of
inventory, and management of purchase/sale orders. Such software serves as an
accounting information system which can be used to perform accounting audit and
prepare tax returns. Developed internally or acquired externally, most offer optional addons which can perform functions such as payroll, debt collection, response to inquiries,
maintenance of employee timesheet, etc. Most are bought off the shelf with the buyer
responsible for implementation. Many, such as Quicken, have “certified” experts who
can assist the buyer in implementing the software. Often, this task is performed by the
CCA (equivalent to a CPA in the US) as an add-on service or gratis in anticipation of
future revenue. According to Wikipedia, users can normally expect on paying roughly
50-200% of the price of the software in implementation and consulting fees. Table 1
provides a comparison of the top 10 accounting software developed by TopTenReviews
(A more exhaustive comparison is provided by Wikipedia.)
A third option is primary function plus, where a prominent software developer
invites smaller, lesser-known software developers to develop missing functionality in
their software. Thus, for example, SalesForce, software developed for managing
customer relationship (CRM), invited independent software developers to design
software for functionalities missing in SalesForce, e.g., finance and accounting, project
management, inventory control, etc. Towards this, a platform is created (e.g.,
Appexchane for SalesForce) where such add-ons are listed. Thus, instead of the
software company investing their own resources to develop full-fledged ERP software,
others are asked to supplement the missing features. It is accomplished by creating an
Application Programming Interface (API), and providing developers with a free Software
Developer Kit (SDK). The specific functionality and its implementation are left to the
developer while integration with the parent software becomes the responsibility of the
user. Thus, an SME with little or no IT background and resources is left with the task of
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selecting from among hundreds of independent software to perform critical business
functions and integrating it with the parent software. The three leading single function
SME oriented software are : SalesForce, PeachTree, and QuickBook .
A fourth option is to buy an ERP type of software dedicated to SMEs. The
leading software is NetSuite. Although it was initially launched under the name of
Oracle Small Business Suite to benefit from the brand equity of Oracle, it has no
technical relationship with Oracle with the exception that Oracle’s CEO, Larry Ellison, is
a major investor in the company. NetSuite can be accessed over a Web browser which
permits users to log on the system from anywhere internet is available. Furthermore, it
permits all employees to access business data in real-time. The data is backed up every
night at a central site. There are no upgrades to buy, and thus need for maintenance on the
part of the customer is eliminated. Smelling the aroma of opportunity, Oracle launched
E-Business Suite Special Edition (EBSE) at a price tag of about $100,000. It is a watered
down version of their E-Business Suite which allows small companies to manage
financials, inventories, purchasing, and sales orders. The target market for EBSE is a
company with 100 to 500 employees and sales revenue not exceeding USD $250 million.
Meanwhile, Microsoft has packaged their family of Microsoft Business Solutions as
Dynamics to cater to SMEs. Not to be left out, SAP purchased TopManage Financial
Systems, an Israel -based developer of business applications and branded it as SAP
Business One. Borrowing from the strategy of single function software, these ERP
packages are also offered in unbundled versions (i.e., user can get single function
software) and permit third party add-ons to their software. For example, a business may
adopt NetSuite as the main platform but could elect to use Onsite developed by Another9
LLC to automate their point of sale activities. A comparison of the leading software
offering single functionality and ERP is provided in Table 2.
Over the years, NetSuite has been bundled and re-bundled in six different
versions/platforms: NetSuite, NetSuite Small Business, NetSuite CRM, NetSuite CRM+,
NetERP, NetCommerce, and NetSuite Limited. The various incarnations of NetSuite
differ primarily in terms of the functionality offered and the usage fee.
User Experiences
Discussions in the US and Singapore with SMEs, System integrators (SI),
government officials, and content analysis of User Forums offers valuable insights into
SME concerns and evaluation of current options in the market place. In general, first,
there is significant concern regarding the cost of acquiring and using the software.
SMEs find the usage cost of ERPs to be high. Comments such as: “NetSuite came back
with $20,000 for 3 years of license. In all, these companies who are pitching their
solutions for small and medium companies are not realistic”, “$60,000 is not an
enterprise-wide deal for a fortune 1000, but, at the same time, it's not a solution you are
going to get many 10-persons, 2-year-old companies to bite on”, “While I did like the
iCode software, they just lost me with pricing”, “They just don't seem to understand that
a 2-year-old business with 7 employees cannot invest $40-50K in software and then
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spend another $10-15K on hardware and implementation. I believe someone over there
needs to recognize that there are companies like us who want a full soup-to-nuts solution
for 10 users for $10-15K”, “NetSuite was impressive but we needed the complete version
and price quickly added-up. Over a 3-year period, we expected it would cost
considerably more than iCode. If we added more staff than expected, it's per user/per
month/year-after-year cost would outstrip a purchased license even quicker”, “NetSuite:
pretty much the same experience as SalesForce. Multiple pushy sales reps. I really
wanted to buy this software at the beginning - it looked perfect for us. But the attitudes of
the reps and the avoidance of quoting prices just made me feel I was being lined up to be
suckered”, “”the cost to add on new licenses or modules is very expensive”, “I see that
NetSuite raised their price for their "distribution" edition yet again from $399/mo for the
first user to $999/mo. Given their triple digit yearly price increases why would anyone
want to take a chance on giving the complete control over their system?”, “They have
been raising the fees to users so much each year (latest increase from $399/mo first user
to $999/mo first user)”, “I suspect that there are very few companies with 1-25
employees for which NetSuite, Oracle, SAP and the like are appropriate or economical.
Just yesterday I spoke to one of our new users who left NetSuite because it was much too
complex and because they were charging him $600 per month for one user”, “Why do
these software guys think you'll go from a few hundred dollars for QB [Quick Book] or
PT [Peach Tree] to $50k or more?”, “Why should anyone need to purchase version
upgrades, if the version they're using now works just fine? If the version they're using
now doesn't work fine, why won't the S/W Company fix the problems? These things
(forced upgrades) are just a mechanism to introduce artificial scarcity into a marketplace
to generate more income” express concerns regarding high (a) base cost, (b) additional
user cost, (c) price inflation in later years, and (c) upgrade cost. There is also concern
about lack of software ownership and future inflexibility to move to different software:
“If I buy a software package, and the vendor refuses to give me the source code or easy
access to my data at any time, then migration to a different package is difficult.”
Second issue deals with the cost of implantation/adoption of the software.
Users, particularly those not competent in IT or lacking time/trained personnel to
implement are either reluctant to adopt a system or become frustrated. Comments such
as these are frequently made: “...As do all the software companies, sell licenses at 20% of
the list and make your money on the services. The fact they would not do that sent me a
message that they are not really out there for the small business like us, they want the
medium sized businesses”, “Implementation costs had doubled and they wanted over
$16k with a possibility it could hit $20k. I was going to go ahead, but they were bookedup till early '05. We called them early in Jan. Now, they wanted to send a new quote! It
came in at $37k not counting the add-ons we still needed. After adding those, the bill
would be $45k with more due for the 2 new seats I wanted by that time”, “You can't get
any service or qualify for the annual maintenance plan until you pass a 23 page exam
and pay them $2700 per try for a remote system-analysis performed by their engineer
until you finally pass (probably after you've spent thousands more guessing what you'll
need to fix)”, “.. they wanted $5,000 plus for unlimited support and maintenance on 10
seats per year. I am an experienced user and don't need that sort of hand holding”, “We
paid more than $100K for an iCode "implementation" and we are still not up and
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running more than two months after our scheduled completion date. All attempts to work
with iCode to try to fix the situation have been met with a "not our problem" attitude, and
their proposed solution to every concern has been to ask us to pay large additional fees.
They are also very specific about letting us know that despite their recommendations and
regardless of what we spend, they will not provide any guarantees that anything will
work”, “the cost to add on new licenses or modules is very expensive (we were able to
negotiate a great price for the first 10 licenses, yet their costs to add more licenses and
modules are absolutely crazy)”, “fail to recognize (as do many other vendors) that a
$50,000++ initial investment + training, hosting and maintenance fees is a very large
investment for a $2million company”. According to industry experts, SMEs often to turn
to ERP as a method of planning for future growth, and it tends to be a watermark project
for many. "These companies are often smaller, with less experience, and it’s often the
first major project they’ve done on their own,” said Maria E. Anzilotti, vice president and
CIO at Camden Property Trust, a real estate construction and management company in
Houston. "It is a bit of a challenge." Among the issues: many IT employees lack
experience in large-scale implementations such as these, while subject matter experts
(SMEs) on the business side of the house are already strapped for time and find it
difficult to get heavily involved in ERP. "What makes this different for SMEs is the
limited SME time, and how to scale ERP as the business grows while being cognizant of
budget”, said Tom Cullen, CIO at Peet's Coffee & Tea Inc. in Emeryville, Calif. "We
can't build a 30-person development team to run ERP.” According to industry experts,
ease of use, acquisition cost (subscription cost) and cost avoidance are important criteria
for selection of an ERP system.
Inability to easily upgrade from accounting software, integrate with different
software, and lack of comprehensive functionality necessary for business functions
are also mentioned as a critical limitations of the currently available software. It is not
unusual to hear comments such as: “One size doesn't fit all... being a hosted solution you
lose certain functionality such as POS, which is sole functionality requirements for retail
industry”, “the technical support basically doesn't exist. The downloadable software
used for integration with Microsoft Outlook is not compatible with Windows Vista or
Microsoft Windows Mobile 5.0/6.0, which means you have to pay for an extra service to
access data through your mobile phone. The representative neglected to mention this,
even after explaining that it was an interregnal part of my business”, “when I asked the
sales representative if certain things could be done using NetSuite, he replied simply,
“Yes, they can be done” but neglected to mention it required scripting”, “be careful with
NetSuite. They have a technologically beautiful system, but we discovered alarming
errors, omissions, and shortcomings. To make a long story short, they signed us up
cheap, made clear promises that they failed to deliver, and attempted to raise our
renewal fees at alarming rates”, “my impression was they are only interested in fast sales
and don’t have the internal or external resources to modify the program to suit the
client”, “the deal killer was that it had no facility to generate quotes/order/invoices
online”, “a little nervous to base our company functions on a package that is largely
developed and is supported out of India”, “they currently do NOT work with outside
analytics software because they have an advanced analytics package of their own, yet
their analytics cannot provide us with accurate ROI on our PPC campaigns”, “Software
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packages for small businesses solve limited issues and leave you with multiple islands of
data and expensive integration projects that never work. Information has to be manually
re-entered or batched into other applications—wasting time and money.”
There is also concern about lack of software ownership and future inflexibility
to move to different software. Typically, SMEs raise concerns such as: “If I buy a
software package, and the vendor refuses to give me the source code or easy access to my
data at any time, then migration to a different package is difficult”, “With companies
such as NetSuite and Microsoft, customers can't switch to another vendor because the
current vendor makes it difficult to do so (thus removing the customer's Perfect Liberty,
and disobeying the laws of the free market)”, “You’re locked into Netsuite with no
portability out of NetSuite once you moved your business on to their platform. They
control you’re operational costs, when you upgrade and what you can do with every
aspect of your business accounting, inventory and ecommerce. Most businesses cannot
afford to give up that much control”, “a little nervous to base our company functions on
a package that is largely developed and is supported out of India.”
Despite their promotional campaigns, many small businesses users believe that
major software vendors do not adequately address their needs. SMEs frequently
lament: “Microsoft talks about SMB [SME] having fewer than 50 PCs. IBM pegs it at
100 to 1,000 employees, Oracle at $500 million or less. But what about the one-personpart-time companies, and those with up to 10 or 15 employees?”, “NetSuite and Everest
are totally inappropriate for companies like [these]. They need tools that are designed
for the way they do business, and priced within their budgets”, “Anyone who serves the
tech needs of "small business" needs to be able to help that small business owner define
his or her tech needs in terms of industry and size -- and do so in business terms, not tech
jargon”, “I suspect that there are very few companies with 1-25 employees for which
NetSuite, Oracle, SAP and the like are appropriate or economical”, “NetSuite .. [is] not
a solution you are going to get many 10 person, two year old companies to bite on.”
Above all, there is persistent fear among SMEs of losing control of proprietary
information, particularly financial data, should the information be placed off the
premises.
There is also concern regarding virus/worm attacks and
hacking/information theft. Most small businesses lack IT personnel and computer
skills (and time to attend to IT functions). Owners fear that a virus attacks will force
them to shut down their business resulting in loss of business. Hacking could result in
loss of customer financial data (e.g., credit card numbers, bank account numbers) causing
serious problems with their customers. Keeping information on computer data base also
opens the possibility of rogue employees stealing information to sell to competitors
and/or establishing a competing business of their own. Concern is also expressed
regarding potential for disconnection (denial) of service due to high traffic in the
system. This happens when simultaneously lot of high end activities happen on the
network. In such situations, local routers put on the premises of SMEs are unable to
handle the traffic resulting in a jam and hence requiring frequent restart of the system, a
pain for unsophisticated SMEs. However, it is well understood by SMEs that these issues
are not directly related to any specific software, they are part and parcel of going digital.
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SMEs frequently advance these as rationale/concern when making decision to go digital.
They express need to balance these concerns against increasing pressure from both
suppliers and customers for web presence and computerization of their business
operation. Large suppliers increasingly want access to inventory related information on
the web to replenish stock, process orders, settle bills, and capture up-to-the-minute
information about sale trends. Similarly, large customers want to bypass sales staff to
directly view inventory levels, progress on orders, find price, place orders, and settle
bills. “If we ignore our customers and suppliers, we will become history,” observed
president of a small wholesaler, “but I don’t have the resources to do what they want. I
am caught between a rock and a hard place.”
The Company
Zara technology was formed in 1997 by two entrepreneurs, Francis Lim and
Christopher (Chris) Harvey. Born in England, Chris is a technology wizard and straight
arrow shooter. In 1984 he obtained his degree in computing Science at Staffordshire
University, England and faithfully joined the PhD program in Computer Science at Aston
University, Birmingham. Dissatisfied with the pure academic orientation of Aston and
finding himself in the midst of sea of opportunities in the industrial town of Birmingham,
Chris quit the PhD program in 1986 and, with two associates, formed his own company,
Bright Associates Limited. It followed by formation of three additional companies,
Binary Star Ltd, Veytan Enterprises Pte Ltd, and Harvey Software Pte Ltd (later
renamed as Zara Technology Pte. Ltd.), each focused on serving the needs of small and
medium sized enterprises. In each venture, Chris was the technical guru behind the
organization contributing cutting-edge technology. He learned about “open-system” in
software design and became a champion of it. Chris moved to Singapore in 1993 and
experienced how co-workers could fleece unsuspecting partners. While working as a
principal of Veytan, Chris met with Francis Lim, a Singapore based entrepreneur who
had a housing rental business, MacKenzie Housing Services, Pvt Ltd. MacKenzie with
an employee base of 30 was growing fast and needed to move beyond a spreadsheet to
effectively manage their backroom data base.
Francis Lim was born with a silver spoon in his mouth in an affluent Singapore
family. Lims had numerous business interests with annual revenue of over S$200
million. They lost everything during the energy crisis of the 70’s. With nothing left, the
Lim family had to live literally out of their suitcases through the generosity of friends and
relatives. Francis managed to obtain undergraduate degree in Economics from Indiana
and worked for seven years as a bond and foreign exchange trader in Singapore with
frequent overseas stints. Later, he obtained his MBA from University at Buffalo in 1993
and returned to Singapore and launched his accommodation service business. He quickly
built it up to a $10 million revenue base only to be confronted with the Asian financial
crisis when he was forced to shut down the business and in the process lost his highly
leveraged home.
Ever an entrepreneur, Francis joined with Chris to tightly focus their attention on
the SME market. “I knew the market and experienced the consequences of not having
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access to any software to help me. I was forced to use a patchwork of unworkable
software secured from a variety of suppliers. I figured, I was no exception and other
SMEs must be facing similar challenges. If we could develop something which will meet
the needs of this large neglected market, we could be winners,” recalled Francis. As the
Asian financial crisis faded, Francis brought in several external angel investors and, with
Chris as in charge of technology, Zara started developing Window based software, later
christened as SteelClaws (SC), to help SMEs. Francis became the business face of Zara,
concentrating his energy on marketing and finance while Chris was focused on the design
and development of software. “We did not take just any client who called us. Instead,
we focused our attention on those SMEs where we could learn about their business
operations and procedures. We wanted to fully integrate ourselves into the operations of
our clients so that we may develop software which reflects their needs and not our
theoretical vision,” explained Francis. The Dot Com bubble of 2000 convinced Zara that
they needed to move to an internet based software. “We saw how the legacy software
companies were collecting huge licensing fee from users. On top of it, they imposed
requirements for expensive hardware. It increased the usage cost to SMEs by some 40%.
This shrunk the number of potential customers.” The entire software was re-written in
the open source Java promoted by SUN Microsystems. Instead of hiring a permanent
staff, Zara outsourced portions of the coding work overseas to contacts of Chris in
England and others in Asia and thus kept their payroll very lean. The burst of Dot-Com
and outbreak of SARS in Asia slowed down business in Singapore and that of Zara. A
decision was made to cut cost by shifting operations from a rental facility to their home.
As Singapore was emerging from SARS, Zara embraced Web 2.0 promoted by O'Reilly
Media. It had the attractive feature of ability of users to work with the data stored on
servers. “We figured this feature could eliminate the need for PCs for the users of SC
and provide better protection to them against viruses lurking on the web,” said Chris.
“We also wanted to wring out any excess fat from the usage cost of SteelClaws.”
A New Approach: SUN Ray Thin Client
In 1997, Oracle chief executive Larry Ellison and SUN Microsystems' chief
executive Scott McNealy proposed thin client computer as a replacement for the
corporate PC. They envisioned a client device which will be used to access applications
and information running on a back-end server. Towards this, in September, 1999 SUN
launched Sun Ray I aimed at corporate environments.
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Figure 1
SUN Ray I
Source: Sun Microsystems
It featured a smartcard reader which was connected to a flat panel display, a key
board, and mouse. Sun Ray I was connected via an Ethernet network to a Sun Ray
Server on which resided all the software and hard drives to store data. Sun Ray Server
Software (SRSS) was offered for the Solaris Operating System and Linux. Rather than
using the X Display protocol, SUN developed a separate secure bitmap-based network
protocol Appliance Link Protocol (ALP) for the Sun Ray system.
The server was connected to internet via LAN. In order to perform any operation,
all a user had to do was slip in the card, enter their password when prompted, and they
were able to perform any operation they would otherwise do on a PC. In the background,
applications run on the server with the results displayed on the quiet monitor. Sun Ray
made any session portable. The users could move from any Sun Ray client to another
and resume their desktop sessions with instant right-where-they-left-off access. SUN
asked the potential users to “think of freezing live TV and then driving to your friend's
house to restart the program in the exact same spot.” Just, “you pull your ID card out of
one Sun Ray Client without saving or pausing anything on your desktop and move to
another Sun Ray Client—across the office, down the hall, in the conference room, or
across the ocean, wherever there’s an authorized network connection—without losing a
single thing.” Without the smartcard, the procedure is almost identical, except the user
has to specify their username as well as password to get their session. In either case, if a
session did not yet exist, a new one is created the first time they connected. SUN Ray
provided multi-channel audio and video input and output capabilities. Dubbed as SUN
Ray enterprise system, it was essentially a Solaris server running the SUN Ray Enterprise
server software. The system provided the user access to all Solaris applications including
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those based on Java. The following represents a schematic of the SUN Ray Enterprise
System:
Figure 2
Schematic of SUN Ray Enterprise System
Source: Sun Micro Systems
The system had limited success. In addition to a lack of Windows support,
network latency proved to be a technical hurdle. It caused a time delay between a user’s
command and the actual response on the screen. When a window was dragged to a new
position, for instance, it took a short while before it actually moved on the screen because
the command and response had to travel through the network.
In 2006, SUN unveiled an ultra-thin version of its SUN Ray, SUN Ray II:
Figure 3
SUN Ray II
Source: SUN Microsystems
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SUN Ray II won the prestigious 2007 innovations Design and Engineering
Award given by the International Consumer Electronics Association for environmentally
friendly design and use of environmentally sustainable technology. Network Computing
bestowed upon it the Well-Connected Award for Best Design, Innovation, or
Enhancement in the Network Infrastructure category at their 12th Annual conference.
Unlike the previous incarnation, SUN Ray II provides instantaneous, seamless access to
users operations without any delay. Sun Ray Software enables users to display fullscreen Windows, Linux and Solaris OS desktops on the monitor. With Sun Secure
Global Desktop software, users can access all other types of legacy applications, such as
those running on HP-UX, AIX, mainframe, and midrange systems. So, whatever the
users operating environment or application needs are, they can access and display just
about anything on a Sun Ray Client. Priced at $249, it offers an inexpensive alternative
to a Microsoft Environment. The Smart Card used with SUN Ray II costs approximately
$10.
SUN Ray II offers a big contrast to the traditional Window based PCs used by
SMEs. It offers significant cost savings since there is no need to pay for the hardware
(e.g., hard drive, memory, etc.) and software (e.g., operating system, application
software) needed for each PC user. Instead, the user only needs a monitor, keyboard, and
a mouse. The power consumption by SUN Ray II is only 4 Watts- about 5 percent of a
PC. Sun Ray II client doesn’t produce as much heat or require the noisy fan of a PC.
It’s silent and runs cooler, which improves reliability. Any updates in the software are
installed on the server thus eliminating the time and cost of installing and maintaining
desktops. Users can unpack a Sun Ray device, plug it in, and be running in minutes,
without administrative assistance. Theirs is no need for the System Administrator to visit
the user desk—for maintenance or administration—unless the entire unit needs
replacement, indicated by a status light. An administrator can manage from a central
location 1000 Sun Ray II clients almost as easily as one unit.
A Sun Ray Client contains no resident operating system or applications, which
makes it virtually immune to viruses and service attacks. Since a Sun Ray terminal
doesn’t contain a disk drive or any means of persistent data storage, it’s not an attractive
target for theft. All of the data and applications displayed on screen disappear the instant
the client is turned off or the access card is removed. Firm’s intellectual property can be
secured by eliminating access to USB mass storage devices. The Administrator only
needs to secure the server. Using internet a user can access the Sun Ray Enterprise
system from any corner of the world via telephone, satellite, or cable.
13
Figure 4
Schematic of SUN Ray Enterprise System
Source: SUN Microsystems
Hundreds of schools, colleges, universities, and libraries around the world are
deploying Sun Ray technology. It is particularly well suited for cost-sensitive
environments such as call centers, education, healthcare, service providers, and finance.
Verizon wireless has replaced thousands of call center PCs with Sun Microsystems’ thin
client terminals. With about 5,000 Sun Ray terminals installed at three Western call
centers, and a fourth in progress, Verizon has seen a 60% to 70% drop in desktop
problems and a 30% decline in electrical use at each center. The carrier plans to keep
rolling out Sun Rays in new and existing call centers. SUN Microsystems has partnered
with General Dynamics (formerly Tadpole), Naturetech, and Accutech to manufacture
laptops which can serve as SUN Ray II mobile work stations using smart cards.
14
Figure 5
Work Stations for SUN Ray Enterprise System
Gobi 7 Portable Thin Client
For SUN Ray by Accutech
Naturetech 747 Unix
Portable Work Station by Naturetech
Comet 12 Portable Work
Work Station by General Dynamics
Since 1999, thin clients market has grown steadily. According to IDC, total sales
of thin client PCs in the Asia/Pacific, including Japan (APJ), market reached 279,513
units in 2005, representing an increase of 64 percent over the previous year. Revenue
increased 65 percent over the same period. IDC expects IT managers across the region
to consider thin clients as desktop PC replacements, helping drive a compound annual
growth rate of 34 percent through 2010. In terms of market share, according to IDC,
Wyse leads APJ sales with 35% share in 2005, followed by HP with 16%, VXL with
10%, and Changchun Xinyu and HCL both with 8% share - the latter two vendors
garner most sales from the PRC and India.
15
According to analyst firm IDC, the worldwide market for thin clients is gaining
momentum. The devices make up less than 1 per cent of overall desktop shipments, but
are growing twice as fast as PCs. The analyst firm projected last year that by 2008, thin
clients might account for a 10 per cent share of the enterprise client market. Although
SUN Microsystems was a key player in the promotion of thin computing and SUN Ray
offers real advantages over the competition, it has remained a minor player in APJ and
the world market. When asked, SUN executives in Singapore pointed out thin profit
margins on SUN Ray 2 as compared to other products in their portfolio as a factor
contributing to relatively modest number of units sold. However, given the increased
focus of SMEs towards IT to enhance their market place effectiveness, SUN has revived
their commitment to partner with companies who could help them sell more SUN Rays
and servers. During a strategy meeting with Zara Technology executives, Allen Lai,
executive responsible for the development of market in APJ and Jean Tee, Partner
Marketing Manager, reiterated that Zara Technology is an attractive partner in their
efforts to expand sales of SUN Rays.
SUN Microsystems
SUN Microsystems is a Silicon Valley based IT Company with a market
capitalization of $17.6 billion and sales revenue of $13.87 billion in fiscal year 20062007. It was established in 1982 by three fellow Stanford graduate students Vinod
Khosla, Scott McNealy, and Bill Joy. It is active in more than 100 countries worldwide.
SUN is known as the developer of Java platform and Network File System protocol. It
has recently emerged as one of the leading proponents and contributors of open source
software. Its products include computer servers and workstations; storage systems; and,
a suite of software products including the Solaris Operating System. Open source refers
to the creative practice of appropriating software codes of others without payment of any
royalty and making public new codes written. According to market research firm IDC,
SUN commands 13% of the worldwide server market, trailing IBM with 31% and
Hewlett-Packard Co. with 28 %. Fortune magazine ranked SUN Microsystems as one
of the world’s most admired 350 companies in 2006. Zara Technology has been
designated by SUN Microsystems as a Principal Partner in Asia Pacific, including
Japan (APJ), region by meeting their stringent criteria for excellence as an IT solutions
provider for SMEs and by committing to tight strategic and technical alignment with Sun.
In 1999, SUN acquired the German software company Star Division and with it
StarOffice. In 2000 it created OpenOffice.org with the objective of providing free, open
source productivity suite for the world. Towards it, SUN released StarOffice as the
office suite by OpenOffice.org. The suite includes word processing, spreadsheet,
presentation, drawing, database, and other modules. The software uses the ODF as its
native file format and fully supports other common file formats (including Microsoft
Office). The software runs on all major platforms, including Windows, Vista, Linux,
Solaris, Mac OS X, and is available in over 100 languages.
As an international team of volunteer and sponsored contributors, the OpenOffice.org
community has created what is widely regarded as the most important open-source project in the
16
world today. However, the technology reporter of the British newspaper, the Guardian, Mr.
Andrew Brow has questioned the so-called global effort: “Despite the open source rhetoric
…almost all the work on it is now done by about 100 full-time Sun programmers.” Although
himself a user of Open Office “long before it was usable,” Mr. Brown writes, “More than
50,000 bugs have been reported. And how many have been fixed by open source’s uniquely
efficient processes? According to the (public) bugs database, at last count, there were more than
6,000 unfixed bugs, and more than 5,000 feature requests.” Notwithstanding Mr. Browns
ranting, nearly 100 million users have downloaded Office Suite and thousands contribute to it.
As a matter of fact, according to the Yankee Group analyst Laura DiDio, the free Office Suite
has attained a 19% market share among the cost conscious SMEs. According to Prianka
Srinivasan, a market analyst for IDC, SMEs “... perceived open source technology as providing
better security compared to proprietary products.” The study also concluded that more SMEs
were using open source software as compared to large businesses. Although cost-efficiency
remained a key decision factor, according to Ms Srinivasan, SMEs were selecting open source
software due to their ability to fulfill their requirements for specific software functionalities. In
September, 2007 IBM joined Openoffice.org community to collaborate on the development and
promotion of the software. SUN Microsystems has partnered with General Dynamics (formerly
Tadpole), Naturetech, and Accutech to manufacture laptops which can serve as SUN Ray 2
mobile work stations using smart cards.
Data Center
A data center is like a bank vault. It is a safe storage space for data which are
constantly being accessed and modified. It houses computers system and all associated
components such as telecommunication system and data storage devices. It has
redundant or backup power supply, environmental controls, and security system (See
Figure 6):
17
Figure 6
Schematic layout of an internet data center
Source: Sun Microsystems
A typical data center occupies one or more rooms in a building (Figures 7 and 8).
The room is partitioned into cages, with each cage belonging to individual user. Cages
have racks which contain servers, computers, and hard drives to store data.
18
Figure 7
Data Center Building
Figure 8
Data Center Cages
Most of the equipment is often in the form of servers racked up into 19 inch rack
cabinets, which are usually placed in single rows forming corridors between them. This
allows people access to the front and rear of each cabinet (Figure 9)
19
Figure 9
Data Center Access to Cages
Data centers typically have raised flooring made up of 60 cm (2 ft) removable square tiles
(Figure 10). These provide a plenum for air to circulate below the floor, as part of the air
conditioning system, as well as providing space for power cabling. Data cabling is
typically routed through overhead cable trays in modern data centers. Smaller/less
expensive data centers without raised flooring may use anti-static tiles for a flooring
surface.
Figure 10
Data Center Flooring
20
Electronic equipments in a confined space generate significant amount of heat.
Air-conditioning is used to keep humidity within acceptable level. Generally temperature
is kept between 67 and 72 degrees Fahrenheit. Data centers often have elaborate fire
prevention and fire extinguishing systems so that a fire can be easily detected and
extinguished. Like a bank vault, access to the site is restricted to selected personnel.
Data Centers use Video camera surveillance (Figure 11) and permanent security guards to
protect centers hosting sensitive information. Data centers communicate with the
external word via networks running the IP protocol suite. To enable this, data centers
contain a set of routers and switches which transport traffic between the servers and to
the outside world.
Figure 11
Security Systems at Data Centers
While large corporations maintain their own data centers, many businesses,
particularly smaller ones find it more cost effective to store most of their computational
equipment and data at a third-party data center. It provides security at a very affordable
cost. The system servicing is also outsourced to cut down IT personnel cost. Outsource
companies keep personnel at such data centers to service systems of their clients hosted at
the center and thereby minimize their own cost and as such fee charged from their
customers.
Singapore
Country
Singapore is a diamond shaped island of 699 Square Kilometers located at the
southern tip of Malaysian Peninsula between Malaysia and Indonesia. It is slightly more
than 3.2 times of Washington D.C in terms of land mass. Singapore has a population of
21
4.48 million as estimated by 2005 census. It is a multiracial city state with a majority
population of Chinese with substantial Malay and Tamil Indian minorities.
The country is a parliamentary republic where a Prime Minister is the head of the
government. It has a multiparty system and an independent judiciary. Since its
inception, Singapore has been lead by People’s Action Party (PAP). Government
bureaucracy is managed by national Civil Service. A hallmark of good governance by
PAP has been relentless focus on service to the various constituencies and an uncorrupt
bureaucracy. This has spanned into a large bureaucracy organized to serve individual
constituencies within business community and citizenry at large. The Civil Service seeks
to attract the best and brightest in the country to serve the public at a salary benchmarked
with the private sector. Leadership is required to clearly enunciate the agenda and
measure outcomes as they believe appropriate. In terms of accountability, any criticism
of the bureaucracy, particularly in media, is vigorously defended. Leadership in civil
service is regularly rotated to infuse new blood and prevent possible encroachment of
corruption as a result of longevity of leadership in a decision making position. The Wall
Street Journal and The Heritage Foundation, Washington’s preeminent think tank, have
for over a decade tracked the march of economic freedom around the world with their
influential Index of Economic Freedom. Singapore ranks 5th out of 158 countries in their
Corruption Perceptions Index for 2005.
Relationship with Business
Singapore Government is generally considered to be pro-business, in a unique
partnership with them. One senior Civil servant has gone so far as to describe business as
government’s “customer.” Following the recommendations of the United Nation’s
Development Committee, in 1961 the Ministry of Trade and Industry (MITI) established
the Economic Development Board (EBD) to foster economic growth in the country. It
has served as “one stop shop” for international investors. EBD has been very successful
in its mission. Singapore is home to 3,000 multinational corporations (MNCs) from the
United States, Japan, and Europe engaged in almost all sectors of the economy. They
account for more than two-thirds of manufacturing output and direct export sales,
although certain services sectors remain dominated by government-linked corporations.
Despite its small size, Singapore is now the tenth-largest trading partner of the United
States.
Rewards of Government’s pro-business policies have been spectacular. Although
Singapore’s economy is small by global standards, it is a relatively rich country. In 2006,
Singapore’s GDP was US$141 billion with a per capita GNP of US $31,400. The per
capita GDP of the tiny island nation equals that of the four largest European countries
and is five times that of its nearest neighbor, Malaysia. Singapore’s economy grew at the
7.9% in 2006. In the face of increasing global competition, Singapore continues to build
on its core advantages--a good geographical location, developed infrastructure, a good
communications system, political stability and a disciplined workforce--while always
looking to develop new economic strengths.
22
SMEs in Singapore
While MNCs have contributed significantly to Singapore's GDP, according to
Yasmin Aladad Khan, General Manager, DHL Express (Singapore) Pte Ltd, “it is the
Small and Medium –sized Enterprises (SMEs) that have been the building blocks of the
Singapore economy. Over three decades of export-led growth, they have helped make
Singapore a vibrant trading hub”. Singapore’s SME sector, comprising more than
135,000 local companies, employs up to half of the working population, generates over
one third of value-added in the local economy and contributes a over 25% of national
Gross Domestic Product. The National Committee on Singapore’s Competitiveness has
issued a clarion call to nurture locally owned SMEs, make them more efficient and
competitive in the market place. Focusing on the role of SMEs in national economy, Mr.
Png Cheong Boon, deputy chief executive of Spring Singapore said, “(SMEs) provide a
source of products and services to the domestic market, so we need them to be
competitive. Or else, Singaporeans will pay more for these products and services”. “And
if they are not competitive, they also cannot pay their employees well.”
The important role played by SMEs in Singapore’s economy is evident from the
recent data released by DP Information Group through its annual SME 500 publications.
It selected and ranked SMEs based on their audited financial figures i.e. Sales/Turnover
or Net Profit for financial period ending between June 1, 2004 and May 31, 2005.
Among the top 500 SMEs ranked in terms of sales, 53 companies (10.6%) have achieved
a turnover of $50 million or more. Furthermore, 30 (6.0%) of these companies have
average monthly turnover of above $5 million per month. (Table A).
23
Table A
Performance of Top 500 SMEs in Singapore
BUSINESS CLASSIFICATION
Wholesale
Manufacturing
Construction
Services
Communication, Transport, & Storage
Retail
Property
Finance
Holdings
Hotel/Food Establishments
TOTAL SME 500 COMPANIES
Total No of
Companies
194
90
59
57
46
19
13
15
4
3
500
Total No
of
Employees
5,417
9,483
3,936
2,053
1,458
742
335
398
20
452
24,294
Total Section
Turnover
SGD '000
5,993,972
2,184,644
1,358,714
7,242,259
1,124,054
571,544
476,818
367,900
108,618
57,225
13,485,749
Company with
Highest
Turnover
SGD '000
$ 79,582.00
$ 73,486.00
$ 50,072.00
$ 65,022.00
$ 64,304.00
$ 73,224.00
$ 66,577.00
$ 54,780.00
$ 52,911.00
$ 28,271.00
SME Sales
Rank of
Company
with
Highest
Turnover
1
6
53
18
19
7
16
41
47
175
Composition and Operation Characteristics of SMEs
According to the Economic Survey Series published by Statistics Singapore , an
agency of Singapore Government, in 2005 SMEs were distributed in the following
sectors of the economy:
Table B
Distribution of Business Types in 2005
Business Type
Whole sale (WS)
Retail (RT)
Transportation (TS)
Accommodation (AS)
Food and Beverage (FB)
Information and Communication (IC)
Finance and Insurance (FI)
Real Estate and Business (RB)
Community, Social, and Personal Services
(CSP)
Freq
36121
19959
9258
249
4476
5733
8440
31159
%
26.04
14.39
6.67
0.18
3.23
4.13
6.08
22.46
23310
16.81
24
Economic Surveys of Singapore Department of Statistics further classifies establishments
within each sector in terms of the number of employees hired by the enterprise and their
realized revenue. Tables 3 and 4 present such breakdowns for 2005.
According to a study conducted by IDA in 2006, the extent of IT usage by SMEs
significantly differs depending upon the number of employees at the business. Figure 12
depicts such differences in terms of usage of computers, internet, access to broadband,
and web presence.
Figure 12
Information Technology Adoption by SMEs in Singapore
Adoption of information technology varies significantly across industries.
According to the IDA study (Figure 13); it ranges between 93% for professional,
scientific, and technical activities to a low of 42% among enterprises dealing with realestate and rentals:
25
Figure 13
IT Usage by Industry Sector
Not surprisingly, smaller the numbers of employees at an SME, a higher proportion of
them use computer and internet for business purposes (Figures 14 and 15):
26
Figure 14
Proportion of Employees Who Used the Computer at Work at least once a week
Figure 15
Proportion of Employees Who Used the Internet at Work at Least Once a Week
Besides e-mailing, as shown in Table C, Internet is primarily used by SMEs to deal with
government agencies in Singapore:
27
Table C
Uses of Internet
Use
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
For Sending or receiving mails
For Information search
For obtaining information from government
organizations (e.g. for web sites of via e-mail)
For downloading or requesting government forms
For completing government forms online or sending
completed government forms
For banking and financial services
For making online payments to government
organizations
For placing orders for goods/ services
For receiving orders for goods/ services
For marketing/ promotion activities
As a platform to deliver contents/ services
For monitoring purposes
For payment of goods/ services
Other communications (e.g. instant messaging)
For Finding information about employment
opportunities (recruitment and search)
For telephoning over the phone (VOIP)
For access collaborative tools (e.g. file sharing)
For telecommuting/remote access
For formal education or training activities
Video-conferencing
Video-streaming
For rich media creations
Internet Data Centre (IDC) services
Blogging
Proportion of Companies
Internet
95.0%
90.7%
Broadband
Internet
Access
90.4%
87.6%
Narrowband
Internet
80.4%
73.8%
70.0%
67.5%
68.8%
66.3%
48.9%
48.3%
60.5%
44.2%
60.1%
45.8%
39.7%
25.9%
42.0%
35.3%
33.8%
32.8%
30.8%
28.9%
26.8%
24.2%
42.5%
36.4%
34.8%
33.9%
30.8%
30.3%
27.7%
26.6%
27.8%
22.2%
20.7%
18.2%
18.2%
15.1%
16.2%
8.0%
24.1%
21.1%
20.7%
17.0%
12.8%
10.9%
9.7%
9.2%
0.5%
7.8%
25.7%
22.7%
22.3%
18.3%
13.5%
11.8%
10.2%
9.8%
9.3%
8.2%
10.5%
6.5%
7.6%
5.8%
6.7%
4.0%
4.1%
4.8%
3.9%
2.7%
28
Technological complexity is cited as the key barrier to the integration of
computers in business by SMES not presently using computers (Figure 16):
Figure 16
Barriers to adoption of IT by SMEs
29
However, it is the lack of perceived benefit which has primarily held back SMEs in
Singapore from greater use of Internet in their business (Figure 17):
Figure 17
Barriers to Internet Usage by SMEs
Lack of confidence in the security of Singapore’s Cyberspace has contributed to their
relatively modest use of Internet by current Internet users. This is more greatly felt by
smaller SMEs than the larger SMEs (Figure 18):
30
Figure 18
Confidence Level in Singapore as a Trusted Environment to Conduct
Business in Cyber Space
Figure 19, shows the security measures employed by SMEs in Singapore. The specific
measures employed vary in proportion to the size of the enterprise:
31
Figure 19
Usage of IT Security Measures by SMEs
32
Management Style of SMEs in Singapore1
A typical SME in Singapore is a Chinese owned family business where the elder
of the family (be a father or elder brother) serves as the head. It has under 25 employees
with many family members (wife, sister-in-law, brother, children) working side-by-side
with non-family members. The decision making process is centralized around the head
of the family and a core group of family members. Decision making responsibility and
authority is retained by the family. Head of the family typically has the final word and
can (and frequently does) overrule decisions of others. Business information is usually
considered as trade secret and shared mostly among family members. Chinese
entrepreneurs typically believe that they are well informed. This over-confidence may
explain why decisions are often made intuitively and why systematic strategic planning is
often neglected. Relationships (guanxi) are paramount for business initiations as the
trustworthiness of a business partner is of the highest priority. Frequently, oral
agreements are seen as equivalent to contractual ones, particularly among the older
generation. Middlemen and presence of (in)formal interest groups in the Chinese
business community serve as the guarantors of ethical business practices and honoring of
business deals.
Government Support for SMEs
Ministry of Trade and Industry (MTI) and other industry specific trade
associations (Singapore Chinese Chamber of Commerce and Industry, Association of
Small and Medium Enterprises, Singapore Manufactures Federation) jointly and
individually work to encourage and support the growth of SMEs in Singapore through
SPRING Singapore and Infocomm Development Authority of Singapore (IDA).
A. Infocomm Development Authority of Singapore (IDA)
As a statutory body and an arm of MICA, IDA is responsible for creating an
infocomm environment that is conducive, innovative, and competitive for both
consumers and business. As part of this mission career Civil Servants have been
entrusted with the responsibility to promote the use of infocomm by SMEs to enhance
nation’s economic competitiveness. A survey of SMEs conducted by IDA in 2006
revealed that while 68% of the businesses used computers as a resource, only 49% used
broadband, and even a lesser number (30%) had web presence. The study revealed that
the adoption of infocomm further decreases among businesses with smaller number of
employees. The survey indicated that the top barriers to the adoption of infocomm by
SMEs were the lack of perceived benefits, complexity of technology, and cost. When
asked what all this meant from SMEs perspective, Mr. Yoong Khong Lo, Acting Cluster
Director of IDA, could not identify what was exactly missing and needed in the
1
This section is based upon “Corporate Change Management in Asian Business – A
Comparison between Chinese-Educated and English-Educated Chinese Entrepreneurs in Singapore”
authored by Thomas Menkhoff, Ulrike Badibanga, and Chay Yue Wah, November 2005, Singapore
Management University, Singapore
33
infocomm technology directed at SMEs. However, IDA has set the target of achieving
80% broadband usage and web presence of SMEs by 2010.
Mr. Yoong Khong Lo, Acting Cluster Director at IDA identified four strategies in
place to enhance infocomm use by SMEs:
1. Help on common software
IDA has funded an SME Infocomm Resource Center (SIRC) to help SMEs
learn about and obtain advice on infocomm usage. They help SMEs try out new
ideas and develop proof-of-concept for untested innovative solutions. For a fee,
SIRC will also develop web page for SMEs.
2. Technology Innovation Program (TIP)
IDA will invest up to S$ 5 million for three years to support SMEs in
infocomm innovation which will increase revenue or add value to their market
offerings. Funds could be used to develop manpower, pay for professional
services, and defray hardware and software costs. The support is at two levels:
Table D
Support to SMEs under the TIP Program
Enterprise-level
Industry-level
Project done by an individual SME
Projects which can benefit other members
of the industry
Up to 50% support
Up to 70% support for all participants
(including SMEs)
3. Subsidy on registration of Web domain name
Till the end of 2007, IDA will offer a $30 discount to SMEs when they first
register their Web Domain Name
4. Hiring a consultant to help in implementation of infocomm
SMEs can apply for a Local Enterprise Technical Assistance Scheme
(LETAS) grant to help defray up to 50% of external consultancy cost.
B. SPRING Singapore
SPRING Singapore was formed in 2000 as a merger of two statutory boards – the
National Productivity Board (NPB) and the Singapore Institute of Standards and
34
Industrial Research (SISIR).At the Launch of Enterprise 50 in April, 2007, Mr. Philip
Yeo, Chairman, SPRING Singapore stated that the mission of the organization is “to
bring HOPE (Hope springs eternal!) and give HELP to SMEs.” According to Spring
Singapore’s deputy chief executive, Png Cheong Boon, “(SMEs) provide a source of
products and services to the domestic market, so we need them to be competitive. Or else,
Singaporeans will pay more for these products and services. And if they are not
competitive, they also cannot pay their employees well.” In addition, he noted, SMEs
also serve MNCs located in Singapore which need to be competitive too in order to
survive in the competitive global market place. “If not, the MNCs will move away from
Singapore to places like China.” Comparing the Singapore economy to a human being,
Mr. Png observed, “You need two strong legs to run fast. Historically, the MNC leg has
been strong and the SME leg not as strong. By building up the SME leg, we can run
faster.”
SPRING Singapore offers a variety of programs to meet the needs of enterprises
at different stages of development. These include loans, support for activities to build
capabilities to compete in the market place, and management development programs.
The TIPs program of IDA is part of these support programs for SMEs. An SME may
seek a grant of up to $250,000 to fund hard ware, software, and consultancy services. Of
the awarded funds, TIP expects 80 to 85% will be used towards consultancy services and
the remainder 15% to 20% will be employed to acquire new hardware and software. This
has contributed to much consternation among SMEs with IT needs. Truly needy SMEs
either refuse to apply for the grant or when they do, it is their expectation that the IT
provider will meet both, their equipment as well as software needs from the grant. The
TIP funding clearly targets a segment of the SME market that wants to move up the value
chain. This group is willing to go through the strict standards imposed by SPRING. In
terms of management development program, a range of postgraduate and executive
development courses customized for SME business owners and top executives have been
approved by SPRING. However, most are beyond the skill base of a majority of SMEs
who lack education beyond high school.
In November, 2007 IDA issued a Call for Collaboration (CFC) to seek business
package solutions for SMEs, especially for start-ups. Such solutions may include entrylevel ICT hardware and software packages such as laptop, printer, basic office software,
connectivity with onsite setup; web content development; non-ICT packages such as
company stamp, logo design, letter head, paper; and any other value-added services.
These packages could either be in outsourced, utility or SME-owned model. IDA would
select one or more consortia from the submitted CFCs and co-fund SMEs who adopt
them. IDA was willing to entertain proposals which will provide end-to-end and
seamless packaged solution such that “SMEs can be effectively relieved from their
operational hassle and are thus better able to focus on running their core business.”
This could include providing an SME access to a pay-per-use web based application.
35
Data centers in Singapore
Singapore has multiple data centers serving a wide variety of domestic and
international customers. In some cases, these data centers are an independent business
unit, purely performing functions of a data center. However, in other cases, data center
represents an extension activity of their core business. Three of the largest and most
respected data centers in the country are those of SingTel, 1-Net Singapore, and Pacific
Net. A brief description of each follows.
Singapore Telecommunications Limited (SingTel)
SingTel was incorporated in March 1992 and became a public company in
October 1993. It was listed on the Singapore Exchange in November 1993 and on the
Australian Stock Exchange in September 2001. It is the largest company listed on the
Singapore Exchange and has a market capitalization of about S$40 billion (US$24
billion) as of May 2004.
SingTel's has a highly developed international network which provides to her
customers direct connections from Singapore to more than 100 countries, as well as
second-to-third country connectivity. SingTel also operates a pan-Asian chain of
world-class data centers, providing a suite of managed hosting telecommunication
solutions branded as SXPAN. These data centers are located in Australia, Hong Kong,
Japan, Korea, Taiwan and Singapore. Over the years, SingTel has garnered numerous
awards for excellence of service, governance, leadership, profitability, etc. According to
a study commissioned by the Reputation Management Associates in 2006, SingTel
commands the second highest reputation amongst Singapore based corporations. Its’
core business comprises of internet service, mobile phone and fixed line telephony
services. In 2007, SingTel launched a pay TV service, named mio TV. It also maintains
ΣXPAN, a pan-Asian chain of data network centers which provide highly secure hosting
environment where customers can host their application and network systems, and have
access to high-end technologies and data centre resources. There are four ΣXPAN data
canters in Singapore alone. They are being used by both small and large companies such
as HP, Teckwah Online, Coffee Club, DFS Group, and popular internet travel site
Zuji. It has positioned itself as the source for meeting all the IT/Communication needs of
the entire country, be it a household, business, domestic or international customer.
36
As the telecom market was deregulated in Singapore, SingTel’s strong hold on
the telecom market has evaporated. Mobile One entered in the market in 1997 and has
captured 30% of the cellular market with their CDMA network. This was followed by
the successful entry of StarHub and M1 resulting in significant loss of market share.
Popularity of internet telephony has further eroded SingTel’s revenue from international
calls. While SingTel can deliver high-speed Internet access to practically every
household, according to Peter Milliken, telecom analyst with Lehman Brothers in Hong
Kong, “StarHub has out-marketed SingTel” in broadband market resulting in shrinking
of their market share to 50%.
SingTel considers SME as an emerging opportunity for them to enhance their
revenue streams. Their productivity suites target SME by offering connectivity, mobility,
security, and marketing advantage. Their business development team of Ronnie Lim,
Meng Ger Lim, and Hai Guan Tan view Zara Technology as a potential partner to
capture significant portions of IT related SME business.
1-Net Singapore
1-Net is a division of Media Corp which is owned by the investment arm of the
Singapore government, the Temasek Holdings. It operates a nationwide core network of
Asynchronous Transfer Mode (ATM) switches to facilitate the delivery of broadband
multimedia services. 1-Net currently manages telco-class Internet Data Centers, along
with providing domestic and international connectivity, professional services, managed
services and media delivery services. Over the years 1-Net Singapore has earned the
reputation of being a trusted and integrated infocomm service provider, hosting some of
the nation’s most mission-critical applications and the local broadband exchange. They
have been very successful in capturing most of the related business of government
agencies and statutory boards in Singapore.
1-Net is an exclusive partner with SIAG (Secure Infostore AG), a private Swiss
company, which owns the Swiss Fort Knox , Europe’s most secure data centre. It
provides to 1-Net, exclusive distribution rights to SWISSVAULT, a fully automatic
online data backup service. SWISSVAULT is hosted in the data centre located inside the
Swiss Alps- Swiss Fort Knox. In the event of an emergency, file based restore
functionality via the Internet is available to the customers of SWISSVAULT on a 24hour basis. Various add-on functions such as web access have turned SWISSVAULT
into a worldwide success story for individuals as well as large corporations.
37
PacificNet
Pacific Internet Limited (PacNet) started in 1991 as TechNet, a research and
development computer network for academics’ use at Singapore’s premier National
University of Singapore. As the use of internet exploded in the US, sensing the aroma of
opportunity, the Sembawang Group, a diversified Singapore conglomerate, purchased
TechNet and commercialized its services in September 1995 and launched it as Pacific
Internet Corporation Pte. Ltd. It went public on the NASDAQ in February 1999 and
operates in Singapore, Hong Kong, the Philippines, Australia, India, Thailand, Malaysia,
and Vietnam.
Pacific Internet’s state-of-the-art Internet Data Center (IDC) has one of the best
infrastructures in Singapore to house servers in a secured, high-speed and reliable
environment. It comes with 3 different server housing facilities – common locked racks,
caged solution for more privacy, as well as even fully customized private room for
privacy and security. It has sought to position itself firmly as the answer to the needs of
SMEs.
In a survey of SMEs conducted by Pacific Internet in Singapore, data security emerged
as the critical issue for SMEs with respect to using IT and internet in their business. PacNet
has skillfully highlighted these risks (e.g., businesses are exposed to, on average, 39 malicious
attacks each day) to position itself as the guarantor of security for SMEs doing business on
internet. Towards, this, in addition to the standard security technology offered by all IDCs,
PacNet has introduced use of biometric to prevent unauthorized access to servers housed at
their IDCs. Further, in partnership with Cisco, PacNet has developed a subscription based
NetworkGuard (Figure 20) service which promises an “enterprise grade” network firewall
protection without the need to invest in expensive hardware.
38
Figure 20
How PacNet Network Guard Works
Projections of IT Expenditures by SMEs
According to the market research firm IDC, IT spending among small, medium
and medium-large businesses in Asia-Pacific (excluding Japan) is expected to grow by
10% in 2007 and will reach US$52 billion. The size of the market is likely to reach
US$66 billion in 2010. The six key countries across the South-East Asia region Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam – are expected to
invest US$630 million in 2007 to enhance their data storage. Investments on hardware
storage are likely to account for more than 50% of this spending.
The Product-SteelClaws
Zara has developed SteelClaws (SC) to enable SMEs to integrate recording of
enterprise business processes and accounting functions with Web Mail, Document
Library, Product Catalog Management, and Website Management in one central
location. Thus, once a contact is made with a client, all interactions are captured,
recorded, and can be easily retrieved with the click of a button by authorized personnel
using internet. As add on functionality, SC also permits Internet Telephony (VOIP)
and Video Conferencing (to plug network cameras, not web-cams) to afford inexpensive
global networking and development of business opportunities. “With SC our efforts have
been to level the playing field for SMEs so that they may compete with and participate in
the emerging opportunities in the global market place without incurring huge cost,”
observed Chris.
39
Chris sketched the entire operation of SC on the Black Board (See Figure 21). In
his dry British humor, he laughed, “this looks like the diagram of a circuitry, but it is not.
This is how we handle information within SteelClaws.” When a party initiates
interaction, typically request for a quote or information, “customer” information (such as
name, address, telephone number, fax number, e-mail address, etc.) is accessed. In the
event the “customer” is new and no information is available in the data base, a new entry
is made and a unique code is assigned. Product information is generated (typically by
providing web link of product catalog), inventory is checked, price quote is generated,
and a response is forwarded. Should the quotation be accepted, the request is converted
into a sales order. SC automatically converts all details from the quotation into a new
sales order and a Picking list is created. It is used to collect the requested items for
shipment. Picking list is used to generate a Delivery Order which is used by Accounts to
generate Sales Invoice. It initiates activities for account through Debit Notes, Credit
Notes (for previously returned merchandise), or actual payment through a check, bank
draft, or bank transfer. In the event item is not in stock, purchase order is generated for
the vendor for delivery within the stipulated time and the delivery status is tracked. Price
quotation is based upon agreed upon, pre-established discount and is automatically
triggered once the customer information is logged into SC. When the order is fulfilled,
inventory level is automatically adjusted and a flag is placed should it fall below the
established level for re-order from the vendor.
Supplier information and product catalogs are maintained in SC with unique
product and supplier codes and associated cost and delivery terms. Upon receipt of the
order, inventory is updated and vendor’s account is credited for payment. SC recognizes
payment received through Credit Notes, Debit Notes, Check, Bank Draft or Bank
Transfer for creditor settlement. SteelClaws tracks the status of the order received from a
customer and placed with a vendor. It also reconciles payments to vendors and receipt of
outstanding bills and prepares ageing schedule. Payment vouchers are generated for both
vendors and suppliers. At any stage, information about bank balances, outstanding bills
of vendors and payments due from customers can be generated. Profitability of different
customers, products, geographical regions can be determined and performance of
individual sales people extracted. System can generate statutory reports for tax payments
and information for payroll. Given that many businesses deal with customers beyond
political boundaries, SC permits recording of information in multiple currencies.
Powerful search engines permit fast and accurate identification of business information to
customers as well as the personnel. E-mail is fully-integrated with document processing
and the document library.
40
Figure 21
A Schematic Representation of SteelClaws
41
SteelClaws is written in Java (distributed as free software by SUN under the
GNU (General Public License) using Web 2.0 platform. It has incorporated Freeware,
such as OpenOffice.org which provides Microsoft compatible word processor, spread
sheet, presentation, and data base program. The SteelClaws software application grid is
based on the Solaris operating system – which Chris describes as the “most advanced
operating system on the planet”. SteelClaws includes the following fully integrated
application suites:
•
ERP
The ERP application comprises orders and fulfillment functions.
Specifically, on the sales side: quotations, sales orders, sales order
confirmations, picking lists, delivery orders, sales invoices, pro-forma
invoices, sales debit notes, and sales credit notes; and on the purchases
side: purchase orders, local purchase requisitions, goods received notes,
purchase invoices, purchase debit notes, and purchase credit notes.
•
SCM
The supply chain management application provides external access to
partner companies (customers and suppliers) to sales and purchasing
information. Product catalogs integrate with the inventory module of the
ERP system. Additionally, the SCM subsystem provides B2B end-to-end
integration.
•
Catalog Management
SteelClaws provides an easy-to-use tool to create dynamic product
catalogs. It can effectively maintain SME product range in catalog format
whilst integrating with back-end inventory pricing and availability.
•
CRM
The SteelClaws CRM subsystem manages both customers and suppliers.
This permits the use of the database of company details to perform
analysis and generate reports based upon the business transactions of both
customers and suppliers. SteelClaws allows user to create a database of
business contacts; and subsequently keep those people up-to-date with
company’s products and services.
•
Mail Management
Email is centrally managed. Thus, even though it can be downloaded by
the recipient via internet, it remains on one central location. Thus, in the
event the mail recipient is not at the desk, urgent business related mail can
be retrieved to maintain normal business function. SteelClaws Mail is
fully-integrated with document processing and the document library.
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•
Document Management
The SteelClaws document library centralizes and organizes documents
into a readily-accessible structure. The library helps the user share
information with internal or external users, on a secured-access basis.
•
Site Management
In the past, websites have been static because there is a dependency on,
and payment to, third parties to create and edit the content. With
SteelClaws content management users can change the look-and-feel of
their website at any time and link with back-end business processes. Thus,
customers can, for example, look at the inventory level and status of their
order and billing information.
•
Financials
The SteelClaws accounting subsystem provides a fully-integrated multicurrency general ledger. Accounts GL services are designed to provide
critical information to management without having to wait for accounts
personnel to “close the accounts”.
•
Project Management
SteelClaws project module recognizes that many companies conduct
project-based work. The key to any successful project is collaboration;
both within a company and between partner companies. To this end
SteelClaws focuses on integrating information from ongoing project
operations with project documentation. In order to ensure that customers
are continually “in the loop”, external access may be granted to that
information considered important and appropriate.
•
Report Analytics
The SteelClaws reports module provides analytical information to
supervisors and management. The module is designed to consolidate and
add value to the large amount of data that accumulates within a database.
Typical areas of analysis relate to stock (movement of items, stocking
quantities held, etc.) and customer payment trends (settlement of invoices
as related to time).
•
Inbox Alerts
Whilst legacy systems work on the assumption that users will look for
information, SteelClaws takes a more proactive approach: information will
be “pushed” to users as and when available, based upon preferences and
conditions defined by users.
•
Administration
The SteelClaws administration module has been designed to ensure that
SteelClaws users have the power to maintain and administer all aspects of
the SteelClaws application suite. There are no dependencies or lock-ins.
43
The designated system administrator is free to perform functions raging
from adding new tax rates to exporting all database data.
Market Entry Plans
Given the competitive environment and concern of SMEs, Chris and Francis
wondered whether they should jump into the market offering SteelClaws as a SaaS
(Software as a Service) instead of outright selling the software package. “We want to
encourage as many small companies as possible to adopt SC. We do not want price
barriers to the adoption of our enterprise suite.” said Francis. He continued, “A user fee
of S$88 per user per month or U$65 will be a reasonable fee for the first user using SC.”
This will include 100Mb of storage. For subsequent users the monthly charge will reduce
to S$25 or US$20 and each additional 100Mb of storage will be S$45 or US$35.
As part of the monthly fee, Zara would continuously upgrade the software,
provide access to it 24/7, and secure the data on a server at a Data Center. On line
instructions for using Steel Claws would be provided at no cost to the users. For a fee of
S$350 per person for a minimum of 5 employees, Zara would also offer a two day onsite training for implementing SC at the business. Additional, off-site two-day training
courses will be available for a fee of $320 per employee. The courses will be offered by
Zara trained personnel. Zara plans to outsource the training function. Trainers,
especially consultants to SMEs, will be able to create additional revenues. Zara plans to
train and certify people in implementing SC. Such trained personnel will assist users in
implementing SC. All SC users will need to have a Dynamic Internet connection. This
will be payable to an ISP and cost of the connection ranges from $100 for 1Mb, $250 for
2Mb, and $700 per month for 4Mb.
Francis was considering three different modes of providing access to SteelClaws
to prospective users:
1. Direct connection to SC via Internet
A new way for SMEs to adopt leading edge technology, without the pain and long
lead time of bespoke software development, is to use Software-as-a-Service.
Customers just have to sign-up for the services. Small Businesses with PCs and
access to Internet will connect to SC using a Web browser. They will not need to
change their existing hardware infrastructure. SC will reside on a Zara owned
server at a Data Center. Using a password, registered users will access the
software. All business information will be saved on Zara’s server at the Data
center. As part of SC suite, users will also have the option of integrated e-mail
hosted on SC. Zara will protect the client data, update SC, and make it
accessible 24/7 to the user. The user will be responsible for upgrading and the
protection of all PCs from virus, spam, and hacking. Zara will also recommend
customers to install other open source productivity software (i.e.
www.OpenOffice.org ).
44
2. Server, Data and SC located on Client Premises
Zara will install a Sun Microsystems’s Ultra 40 server at the site of the customer.
SC is optimized on Solaris. The server will host the SteelClaws application and
database. Users have the option to continue using their PCs and access SC via a
browser. Alternatively they have the option of installing Sun Ray II which
includes a key board and mouse to access the system or a combination of PCs and
Sun Rays. Sun Ray’s will prevent users from downloading anything that may
otherwise infect the network. In addition, the server will support a fax modem;
used to allow direct faxing from SteelClaws applications. A router will connect
the server to Internet via a DSL modem. PCs, and printers will be connected to
the server to access SC. Zara will also recommend customers to install other open
source productivity software (i.e. www.OpenOffice.org), if additional PCs are
installed. The data would reside at the client’s premises with the Client doing his
own backup on the server. Alternatively, Zara can provide a daily data backup
service at the Data Center for a fee of $100 per month per server. Zara will
protect the data from virus by putting a firewall at the server. Client will be
responsible for upgrading and maintaining the PCs while Zara will continuously
upgrade the SC application. Figure 22 represents a schematic of the proposed
infrastructure.
Figure 22
Schematic of SC Implementation at Client Site
45
Optional Data Centre Backup
Source: Zara Technology
The hardware at the client’s site will cost an additional $30, 600. It includes
the cost of a SUN Ultra 40 M2 Work station with Solaris 10 and warranty, 4 GB
Memory, set-up for up to 10 users (SUN Ray II, Monitor, Keyboard, Smart card,
warranty, and SUN Ray software), router, installation cable, etc. Additional, setup for users will be charged S$ 1620. Businesses not needing 10 set-ups will get
rebate @ $1620 per set-up. Zara will assume the responsibility to regularly
maintain the servers and SUN Rays for an annual fee of 20% of the set-up cost.
The cost for this option assumes that the client changes the entire infrastructure to
Sun Rays. If the client retains the use of some PCs, his cost will be lower.
3. Server with Data and SC located at Data Center
The configuration will be essentially similar to the one shown in Figure 22
with the exception that there will be no server on the client premises. The client
will install SunRays with the keyboard, mouse, monitors and the other relevant
licenses and per user access. Zara will replace or maintain the SunRays should it
fail during the warranty period. Both SC and data will be maintained at a Data
Center. The client will need to install a switch for other equipment and router
which will manage the follow of traffic between the site of the client and the
server stationed at the Data Center. Zara will protect the system from virus and
spam and will continuously upgrade SC at the Data Center. This configuration
will require wider bandwidth as each SunRays needs about 300k. Users will be
able to access productivity tools on-line.
46
The Trojan Horse Opportunity
With the expansion of manufacturing base in Asian, particularly those in India and
China, western manufacturers are increasingly viewing them as attractive prospects for
selling their tools, machine parts, and components. On several occasions, these MNCs have
expressed frustration in their inability to efficiently serve these markets. Given uncertainty in
size of the demand, lack of familiarity with the market, capital investment required, and
geographical dispersion of potential customers in China and India, they are unwilling to setup their own warehouses in these countries and assume significant financial risk. However,
there is increasing concern among these MNCs that unless the emerging Asian market is
tapped early on, Japanese and European businesses which already benefit due to their
proximity to the Asian markets will capture it.
Francis recognized that many MNCs appoint distributors in Singapore who maintain
inventory of their offerings because it’s a major distribution hub for the region. He wondered
what if, SC hosts the localized e-catalogs of the MNCs while pricing and availability of stock
comes from the Singapore distributors. Thus, without maintaining physical inventory in
China and India, thousands of line items could be offered to potential distributors or resellers
in the two markets. Distributors and resellers in China and India could connect the SC
created e-catalog it to their websites and offer to sell the listed items to their customers. The
e-catalogs catalogs will show prices (which could be easily converted in local currency) and
inventory. The local distributors/resellers in China and India could place the order with the
Singapore based distributor via Internet for direct delivery or through them. As the local
distributors of MNCs in China and India expand their domestic business and experience the
benefits of SC, they could become good prospects for adopting SC. He called this his Trojan
Horse strategy. He added:
We have been serving SMEs for almost a decade. Most SMEs are very individualistic
and believe that their situation is unique and very different from every one else while
the contrary is true. They operate on thin margins and have been burnt in the past by
snake oil salesmen who are quick to promise but fail to deliver. But, once they can
see that you mean business and are able to help them make money, they are willing to
pay. They know that to make money you have to spend money. If one can show them
that they are trustworthy and have helped solve “their” problems, they are willing to
open their wallet. Many value-added-resellers just want price and inventory
information from the supply chain so that they can deliver to their own customers
quickly. They don't have time to call around just to hear the person on the other line
say “Its not a problem”, only to have him turn around to find supply himself from
other sources.
In SME markets, personal recommendations matter. Since, SMEs are themselves not
well versed in IT and do not have their own IT staff, they frequently rely on the
recommendation of their friends or associates. One of our biggest clients came to us
because we were recommended to him by his golfing buddy. It also helped because
Chris studied in England and is Caucasian. You won’t believe it, but some
Singaporean trust non-Chinese more than Chinese when they look for an IT
47
consultant. One of our clients actually told it to my face as we became more friendly
during the project work.
We know that our enterprise system fits the needs of the small companies ignored by
big boys like, SAS, Oracle, and Microsoft. We have developed it working very
closely with SMEs. Unlike them who wrote their codes working in a backroom, we
developed our system and added modules in response to the request from SMEs. We
have developed new modules, modified functionalities, and added features based
upon reactions and requests from real users. Our challenge is to get inside an
organization and show them how easy it is to implement and how simple it is to
operate. Once they see how our system can free them to engage in profit making
activities, free from the drudgery of data management, they swear by our system.
Imagine, you are sitting in Beijing and talking with a prospective client. You can go
to internet and tell the client how quickly you can put the desired items in the hands
of FedEx for delivery. You can determine the status of an item being assembled, cash
balance in the bank, and the amount owed by the customer.
If done right, when the local distributors of MNCs in China and India learn how SC
is being employed to serve them, they will themselves become interested in it. As they
expand, even the manufacturers themselves may push them to adopt SC to better
integrate entire network and achieve system-wide efficiency.
The Changing Competitive Environment
Most large businesses have already made significant investments in corporate
applications such as enterprise resource planning (ERP). And with the top end of the
market becoming increasingly saturated as a result, IT vendors are turning their focus to
SMEs. Unlike Xerox which initially ignored the emergence of the table top copiers to
meet the needs of SMEs and lost the business to Japanese, no one in IT industry wants to
repeat the same mistake. According to Forrester Research analyst Ray Wang , the SME
market has increasingly become the most strategic space for enterprise software makers.
IBM projects the size of this market to be $400bn a year.”
Success in capturing SME market will require offering industry specific solutions
and reducing the total cost of IT services to SMEs. This need to reduce cost has fueled
growth of business model where software is offered as a service (SaaS) via internet
instead of the traditional, more expensive business model where ERP software is installed
at individual customer site. Gartner has predicted that the global SaaS market will grow
to US$19.3 billion by 2011, tripling from US$6.3 billion in 2006. “I would say one-infour companies we talk to definitely want software-as-a-service. And I think that will only
grow,” said Scott McMahon, partner with San Francisco-based Business One SAP
solutions partner Apollo Consulting LLC. They had a lot of doors shut due to the fact
that Apollo did not have a hosted option.
Gartner states that by 2010 almost one-third of all new software purchased in
Asia Pacific will be delivered via SaaS. Singapore-based research firm Springboard
48
Research has predicted that the SaaS-based CRM market in Asia, excluding Japan, will
grow at a CAGR of 61 per cent between 2006 and 2010 - from US$69 million to US$460
million. The study reported that CRM forms the largest segment of SaaS software
spending in Asia, with a 45 per cent market share. Other major SaaS-based software
types include ERP, collaboration and human resource applications. The Springboard
study identified Australia, Singapore, Hong Kong, Korea, India and China as key SaaS
CRM markets in Asia Pacific. Australia accounts for 35 per cent of SaaS-based CRM
sales in the region.
Early to recognize the likely impact of SaaS, in 2006 Oracle rolled out an ondemand version of Siebel, CRM on Demand, to meet customer and competitive demands.
SAP AG (SAP) quickly followed with the launch of Business by Design (“BBD”) in
September, 2007 as their entry into SaaS for the SMEs. Not to be outdone, in December,
2007 Microsoft released both partner and company hosted SaaS versions of their
Dynamics. Even IBM has jumped into the SaaS bandwagon by offering hardware and
software configured to facilitate delivery of SaaS. IBM has used a series of acquisitions
to support its push into the small business market. Recently it announced the purchase of
Net Integrations Technologies, a 60-person company in Toronto, whose software will sit
at the heart of the new small business server. Other acquisitions have included Web
Dialogs, a web conferencing concern, whose software is to be embedded in the new SaaS
initiative. Most of industries Titans are already in SaaS market with some or other form
of ERP/CRM type software to serve SMEs.
The most significant entry in the market has been that of Business by Design
(“BBD”) by SAP in September, 2007. Developed with an investment of almost $400
million, BBD is being offered on-demand only - as a service (SaaS). It is being
positioned as a complete solution for companies with 100-500 employees. BBD is being
targeted towards companies who are now using a variety of disconnected point solutions
and could benefit from an integrated solution. SAP will charge US $149 per month per
user with a minimum of 25 users. Group pricing for efficiency users, those needing
limited access to the software (such as for self-service entering of time and expenses, and
purchase confirmations), will be at $54 per month for a set of five users. The intent being
that once the users get hooked to the “mini”, SAP will be able to convert them to a fullfledged user of BBD at full price. SAP will initially host the software and plans to
transfer that responsibility to partners in the future. So far, fewer than 100 companies
have tested the product. Speaking as one of the first wave of 20 live customers, Compass
Pharma Services CEO Kevin Flanagan commented: “It’s clear that SAP really took the
time to understand how smaller businesses think and operate. We now plan to spend less
than 25 percent of our original IT budget.”
Industry mavens have questioned the viability of SAP’s pricing for BBD.
According to MGI Research, “BBD is neither cheap nor easy. At $125/user for a
minimum of 25 users, that works out to $135,000 for three years. Most organizations
will need to license 50+ users. Even at $135,000 many SMB's [SMEs] will find they can
purchase applications that are “good enough” at the same or lower cost (even when you
include hardware, implementation, etc.”
Furthermore, “The SMB market is
49
fundamentally different than SAP's core business. SMB customers are a) very price
sensitive; b) have few, if any, tech resources; c) are not tech savvy. This is the exact
opposite of SAP’s traditional sweet spot – large sophisticated enterprise customers with
competent, well-staffed IT organizations. The corporate genetics of SAP are counter to
what makes a successful SMB software vendor”.
Oracle’s CEO Ellison said he believes SAP has taken a misstep with Business By
Design—particularly in its approach to the mid-market. “We see the problem in that
because we have looked at going down-market,” Ellison said. “We have looked very
closely at it, and we think its’ very hard to make money because there is no synergy. To
go down-market you need a new product and new product development teams. You
spend a lot of money developing a whole new product for the low end. But you also need
an all-new sales force because we don’t call on those customers. We don’t call on small
businesses, and its’ very expensive to call on small businesses. It’s very expensive to do
ERP implementations in small businesses. The cost of sales is high. The cost of
implementation is high. There are virtually no synergies in sales, marketing, and product
development and support."
Leo Apotheker, SAP’s president of global customer solutions and operations said,
“We are extending our ecosystem and indirect channel by touching partners we have not
touched before. Our ultimate model will be predominantly led by partners.” SAP will
need a vast network of partners and resellers to reach small-business customers. If end
users can download and deploy BBDD by themselves, some resellers might hesitate to
promote it. Furthermore, “the traditional profit margin for the channel simply doesn’t
exist with SAP Business By Design: the on-demand, model-driven, SOA-based
underpinnings of SAP Business By Design eliminate enormous amounts of complexity
from the implementation and integration processes, complexity that typically translates
into big profits for channel partners”. This poses further challenges for SAP. Without
the integration and implementation revenues, SAP’s channel partners will need to make
up the shortfall in volume — all while selling a business solution directly to the CEO.
Therein lays the multi-billion-dollar question: Where will the volume-oriented, midmarket CEO-savvy, reseller partners come from? According to Stuart Lauchlan of
MyCustomer.com, “Getting to volume is not guaranteed, and it’s expensive too. High
customer acquisition costs have been the bane of SaaS providers, particularly during the
early years. Over the last six quarters, salesforce.com has spent between 49.7 percent
and 51.1 percent of revenue on sales and marketing.” Channel partners will need to
invest huge resources to gain expertise and familiarity with BBD only to find huge breakeven number to recover it. According to Michael Speyer of Forrester, “The consulting
skills required for successful SaaS project delivery are also different, with the emphasis
on business change management and not on technical implementation”. Most SMEs
lack middle management, with nothing between CEO and the rest and are used to
working in a particular, routine manner. Channel partners, lacking in organizational
change skills, may find it very difficult to convince the employees to change their ways
causing serious problems is successful implementation of BBD.
50
DECISIONS
Francis and Chris sat down to refine Zara’s go-to-market strategy for SteelClaws.
Since they started developing SC, IT giants have announced major thrust in their market.
With their presence, ERP market for SMEs will be tough and extremely competitive. “Is
it all over for us,” mused Chris?” “We certainly do not have the resources of SAP,
ORACLE, Microsoft, NetSuite, or SalesFoce. Unlike others we have only one product,
SteelClaws. We will live or die with SteelClaws. We need to do something radically
different.” “But what,” asked Francis? “While we would not mind being industry leader,
we will be very happy with a 1% of the Singapore market.” It will translate into annual
revenue of S$14,784,000 for Zara. “My dilemma is on which segment(s) we should focus
on? Should we focus on one segment but go across multiple geographical regions? If
yes, which geographical markets we should go after? Will we be better of focusing on
multiple customer segments but concentrating on one geographical region? How should
we position ourselves in the market? What should be our message? What must we do to
succeed”. They were not wedded to the proposed pricing structure and are willing to
explore alternative pricing strategy. An important issue for them was distribution. They
did not want System Integrators (SIs) who basically play the role of “box shifters” in the
market place. They wanted partners who could add value to SC and accelerate adoption
of SC. Who could they be? Zara needed a marketing plan to benefit from the
opportunities present in the market.
51
Table 1
A Comparison of 2008 Accounting Software
(Source: Top Ten Reviews)
52
Table 1
A Comparison of 2008 Accounting Software (Contd.)
53
Table 1
A Comparison of 2008 Accounting Software (Contd.)
54
Table 1
A Comparison of 2008 Accounting Software (Contd.)
55
Table 1
A Comparison of 2008 Accounting Software (Contd.)
56
Table : 2A
A Comparison of ERP Software Targeted for SMEs
Core
Functionality
Financials
Manufacturing
General Ledger
Cash Management
Accounts Payable
Accounts Receivable
Fixed Assets
Invoice preparation
Credit Card account
handling
Online Bill Pay
Engineering
Bills of Materials
Scheduling
Capacity
Workflow Management
Quality Control
Cost Management
Manufacturing Process
Manufacturing Projects
Manufacturing Flow
SteelClaws
Quickbook
NetSuite
Small
Business
SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
No
Yes
No
No
No
Yes
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
Yes
No
No
No
No
No
No
No
No
No
Yes
No
Yes
No
Yes
No
No
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Color
Legend
Available Available in 2nd
as Add
half of 08 in the
product
Meaning on
57
Table 2B
A Comparison of ERP Software Targeted for SMEs
Core
Functionality
Supply Chain
Management
Project
Management
Human Resource
CRM
SteelClaws
Quickbook
NetSuite
Small
Business
Inventory
Order entry
Purchasing
Product Configurator
Supply Chain Planning
Supplier Scheduling
Inspection of Goods
Claim Processing
Commission Calculation
Real-Time Order Status
Yes
Yes
Yes
No
No
No
No
No
No
Yes
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
No
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Costing
Billing
Time and Expense
Activity management
Human Resources
Pay Roll
Training
Time and Attendance
Benefits
Sales and Marketing Comm.
Service
Customer Contact
Call Center Support
On-Line Knowledge Base
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
Yes
No
Yes
No
No
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
Yes
Yes
SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Yes
Yes
Yes
No
No
No
No
Yes
No
No
Yes
Yes
Yes
No
No
No
No
Yes
No
No
Yes
Yes
Yes
No
No
No
No
Yes
No
No
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
No
Yes
No
No
Yes
Yes
Yes
No
No
No
Yes
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
No
No
58
Table 2B
A Comparison of ERP Software Targeted for SMEs
Core
Functionality
Data Warehousing Database at Customer Site
Online Database at Company
Site
Database Backup Online
SteelClaws
Quickbook
NetSuite
Small
Business
SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
Color
Legend
Available only Available in 2nd
Available in in professional half of 08 in the
pack and above product
Meaning Add on
QuickBook
authorized
representatives
available at extra
cost
Knowledge base
available at extra
cost
Not a 24 hr call
center support
Extra Cost for
online data
backup
59
Table 2C
A Comparison of ERP Software Targeted for SMEs
SteelClaws
Quickbook
NetSuite
Small
Business
Yes
Yes
Yes
Frequency of Pricing
Monthly Per User
Once
Price for Basic Package
$65 First User
FREE 100Mb Storage
Core
Functionality
Basic Package
Price dependent on
Users
Number of Users
Permitted
Users > 5
Charge for Updates
Updates
Charge for Upgrades
Frequency
Automatic Updating
Other Methods
Unlimited
$20 for each additional
user
$35 for each additional
100Mb Storage
No
No
Based on bug fixes
Yes
SAP
Business
One
Peach
Tree
Yes
Yes
Per User
Once
$1,200
SalesForce
Microsoft
Dynamics
Yearly
Yes
Monthly Per
User
Yes
Did not
divulge
$199.95
$1,200
$10
$4,250
Five
One full
user and 5
limited
users
Any number
Any
number
Licenses
need to be
purchased
No
$50 per
month per
user
No
Above value
holds
No
Above
value
holds
No
$499 $1000
Monthly
Yes
Difference
between
current
software
and
upgrade
charged
Monthly
No
Software
downloaded
from
website
No
No Updates
No Updates
No
No
Monthly
Yes
Five
$50 per
year for
each extra
user
No
Difference
between
Difference
current
between
software
current
and
software
upgrade and upgrade
charged
charged
Monthly
Quarterly
No
No
Software
sent to
customers
by mail
Software
downloaded
from
website
60
Table 2D
A Comparison of ERP Software Targeted for SMEs
Core
Functionality
Training
Yes
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
No
No
No
No
No
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
$60-$180
Yes
$200$700
No
No
No
Yes (third
Party)
Did not
Divulge
Yes
Did not
Divulge
Yes
Did not
Divulge
Yes
Did not
Divulge
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
No
No
Yes
No
No
No
No
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
SteelClaws
Online Knowledge
Base
Online Chat
Web seminars
Web learning
On-Line Course
Books
DVD ROMS
CD ROMS
In-Person Training
In-Person training
Cost
Certified
Consultants
Quickbook
NetSuite
Small
Business
● North America
● Europe
● Asia
● Middle-East
● Africa
SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Color
Legend
Available in 2nd
half of 08 in the
Meaning product
61
Table 2E
A Comparison of ERP Software Targeted for SMEs
Core Functionality
Supervisor access of business emails
Manage Business
documents(Catalogs)
Online B2B customer connection
Adoption(# of Customers)
North America
Europe
Asia
Middle-East
Africa
Cost of Implementation
Country of Origin
Internet Based?
If not then Operating System
Database Server
SteelClaws
Quickbook
NetSuite
Small
Business
Yes
Yes
No
Yes
Yes
No
yes
Yes
Yes
0
0
500
0
0
No
No
Yes
Yes
35000+
0
0
0
0
SAP
Business
One
No
0
yes
yes
10000+
0
0
0
0
$50000$75000
$20K$100K
Germany
Yes
Yes
Yes
Yes
US
No
Yes
Yes
Yes
Yes
Peach
Tree
N/A
N/A
N/A
N/A
No
N/A
N/A
N/A
Yes
N/A
N/A
Yes
Yes
2000+
3000+
1000+
500+
700+
$50K$200K
US
No
Yes
Yes
Yes
Yes
N/A
No
N/A
N/A
No
No
No
N/A
Yes
N/A
N/A
N/A
Yes
N/A
N/A
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
50000+
20000+
0
0
0
0
0
0
0
0
$20K$100K
$35K$150K
US
US
Yes
N/A
No
Yes
Yes
N/A
Singapore
Yes
Vista
XP
NT
Win2000
UNIX
Windows
UNIX
SalesForce
Microsoft
Dynamics
N/A
$5K-$50K
US
Yes
No
5000+
1000+
500+
1500+
No
62
Table 2F
A Comparison of ERP Software Targeted for SMEs
Add-on Functionality
PayRoll Services
Checks, Forms and
Supplies
SteelClaws
Name
Cost
Name
Cost
Payment Solutions
Name
Cost
BillPay Service
Name
Online Back Up
Quickbook
NetSuite
Small
Business
SalesForce
Microsoft
Dynamics
QB Payroll
Sol.
$99 per year
QB Checks
Forms and
supplies
$38.99 $71.99 one
time buy
Online Service
Depends on
Order
MSB
Financials
$250.00
Time slips
PT Payments
$50 per month
Service
$15.95 per
month (20
payments) and
$6.95 for each
additional
payment
Cost
Name
Name
Cost
Name
Cost
Peach
Tree
PT Payroll
Service
$45 per month
Service
$20 per
quarter
Cost
Web Accounting
SAP
Business
One
QB Merchant
Services
$50 per year
MS
Accounting
$199.00
PT Web Acct.
$150 per year
Timeslips
$500 per year
63
Table 2F
A Comparison of ERP Software Targeted for SMEs
Add-on Functionality
SteelClaws
Web Tools
Name
Cost
Forecastes
Name
Cost
Third Party Add-ons
Quickbook
0 200+
NetSuite
Small
Business
0
SalesForce
Microsoft
Dynamics
MS
Office
$500
MS
Forecaster
$55,000
0
0
SAP
Business
One
Peach
Tree
PT Website
Tools
$198 per year
0 350+
64
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005
ESTABLISHMENTS
EMPLOYMENT SIZE
TOTAL
EMPLOYMENT
PROPRIETORS/
PARTNERS
OTHERS
OPERATING
RECEIPTS
NUMBER
TOTAL
OPERATING EXPENDITURE
COST OF
PURCHASES
RENUMERASOLD
TION
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
THOUSAND DOLLARS
Whole-Sale Trade
All Categories
36,121
213,971
13,145
200,835
836,805,510
819,844,601
780,338,471
11,451,033
28,055,096
18,389,036
30,015,379
Less Than 5 Persons
25,619
40,141
10,717
29,427
56,299,359
55,133,179
51,274,181
1,160,667
2,698,330
1,332,212
2,545,247
5 - 9 Persons
6,149
39,145
1,895
37,255
69,098,712
68,143,253
63,498,007
1,684,722
2,960,524
1,091,959
2,795,238
10 - 24 Persons
2,999
44,327
462
43,866
159,419,317
157,257,489
150,454,571
1,916,085
4,886,833
2,386,310
4,331,640
25 - 99 Persons
1,186
49,608
71
49,537
270,185,146
264,272,706
254,040,839
2,966,738
7,265,129
6,269,589
9,275,789
168
40,750
-
40,750
281,802,977
275,037,974
261,070,873
3,722,821
10,244,280
7,308,965
11,067,465
All Categories
19,959
105,446
14,880
90,564
36,173,889
34,498,131
23,520,526
2,223,453
8,754,152
1,949,544
4,234,830
Less Than 5 Persons
14,263
28,504
11,903
16,598
5,050,633
4,793,167
3,576,354
280,889
935,924
290,528
584,035
5 - 9 Person
3,804
23,617
2,391
21,227
5,446,093
5,154,668
3,809,460
441,558
903,649
316,781
775,048
10 - 24 Persons
1,414
19,604
482
19,122
7,379,707
7,127,208
5,340,565
492,196
1,294,448
297,378
804,464
25 - 99 Persons
399
17,604
99
17,505
6,990,821
6,706,741
4,813,861
490,071
1,402,809
362,741
860,107
79
16,117
5
16,112
11,306,635
10,716,348
5,980,286
518,739
4,217,323
682,115
1,211,176
All Categories
4,476
68,343
2,106
66,234
4,173,044
4,051,311
1,383,470
1,080,047
1,587,794
258,299
1,362,121
Less Than 5 Persons
1,545
4,280
1,029
3,250
416,988
395,874
179,203
56,490
160,181
30,754
89,582
5 - 9 Person
1,111
7,956
655
7,300
479,181
485,828
180,753
124,638
180,437
6,416
133,915
10 - 24 Persons
1,159
18,529
340
18,188
967,613
949,671
317,463
266,669
365,539
40,455
314,629
25 - 99 Persons
620
28,327
77
28,250
1,443,066
1,416,631
486,505
403,627
526,499
70,187
482,484
41
9,251
5
9,246
866,195
803,309
219,547
228,624
355,139
110,487
341,511
100 Persons & Above
Retail Trade
100 Persons & Above
Food and Beverages
100 Persons & Above
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)
GROSS RECEIPTS
EMPLOYMENT SIZE
EMPLOYMENT
ESTABLISHMENTS
TOTAL
OPERATING
RECEIPTS
OPERATING EXPENDITURE
OTHER
RECIEPTS
NUMBER
TOTAL
RENUMERATION
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
THOUSAND DOLLARS
Information and Communication
All Categories
5,733
54,985
25,212,598
23,196,998
2,015,600
20,495,343
3,593,032
16,902,310
4,115,297
7,809,441
Less than 5 Persons
4,442
7,584
1,698,900
1,595,217
103,683
1,580,048
338,254
1,241,794
125,646
465,995
5 - 9 Persons
814
4,635
850,126
827,884
22,243
797,455
234,044
563,411
73,689
308,541
10 - 24 Persons
221
3,215
959,987
931,774
28,213
899,519
177,309
722,210
60,833
240,539
25 - 99 Persons
175
8,355
2,500,843
2,184,647
316,196
2,041,408
501,931
1,539,477
322,624
827,579
81
31,196
19,202,741
17,657,476
1,545,365
15,176,913
2,341,495
12,835,418
3,532,505
5,966,786
All Categories
9,258
112,427
62,746,115
57,880,903
4,865,212
48,895,056
5,940,056
42,954,656
12,589,298
18,915,527
Less than 10 Persons
8,070
17,077
10,130,746
9,319,548
811,199
7,224,541
500,086
6,724,455
2,821,624
3,362,875
10 - 24 Persons
781
11,462
4,227,386
3,996,546
230,840
3,164,727
464,853
2,699,874
1,176,180
1,684,899
25 - 99 Persons
275
13,370
6,505,662
6,061,069
444,593
5,029,344
694,641
4,334,703
1,235,905
1,958,242
100 - 199 Persons
66
9,426
5,956,463
3,893,907
2,062,556
3,691,882
447,122
3,244,760
361,021
871,503
200 Persons & Above
66
61,092
35,925,858
34,609,833
1,316,025
29,784,562
3,833,698
25,950,864
6,994,568
11,038,008
100 Persons & Above
Transportation and Storage
66
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)
GROSS RECEIPTS
ESTABLISHMENTS
EMPLOYMENT SIZE
EMPLOYMENT
TOTAL
OPERATING
RECEIPTS
OTHER
RECIEPTS
NUMBER
OPERATING EXPENDITURE
COST OF
PURCHASES
RENUMERASOLD
TION
TOTAL
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
THOUSAND DOLLARS
Accommodation
All categories
249
Less than 10 Persons
10 - 99 Persons
25,712
2,875,137
2,602,097
273,040
2,111,656
256,030
724,262
1,131,365
735,102
1,499,818
87
452
100,332
96,951
3,382
87,213
8,695
9,426
69,092
23,899
34,809
104
2,567
285,935
251,908
34,027
193,452
9,519
65,427
118,506
74,388
143,488
100 - 199 Persons
16
2,104
235,971
194,543
41,427
157,298
13,551
57,444
86,303
56,301
116,888
200 Persons & Above
42
20,589
2,252,900
2,058,695
194,204
1,673,693
224,265
591,965
857,463
580,514
1,204,633
All categories
8,440
24,263
53,083,090
47,063,640
6,019,450
18,038,138
41,026
2,723,412
15,273,701
29,316,197
5,318,449
Less than 10 Persons
8,108
8,522
20,571,072
16,474,780
4,096,292
4,252,077
7,783
552,734
3,691,560
12,275,566
1,153,597
300
7,916
10,544,464
8,826,186
1,718,279
3,348,394
4,452
1,076,007
2,266,935
5,598,265
2,601,149
Financial and Insurance-Related
10 - 99 Persons
100 - 199 Persons
19
2,445
2,404,913
2,330,217
74,695
874,677
-
303,811
570,867
1,476,708
599,590
200 Persons & Above
13
5,350
19,562,641
19,432,457
130,184
9,563,990
28,790
790,860
8,744,339
9,965,658
964,113
All categories
31,159
225,641
61,084,334
48,224,371
12,839,963
42,611,281
3,723,472
10,137,524
28,750,285
8,909,331
19,676,667
Less than 10 Persons
28,301
56,337
22,743,887
18,475,220
4,268,667
15,368,999
1,490,371
1,956,416
11,922,211
3,747,846
5,997,954
5,599,383
Real Estate and
Business
10 - 99 Persons
2,578
67,446
17,248,642
14,114,725
3,133,917
12,486,478
872,894
3,354,198
8,256,386
2,122,044
100 - 199 Persons
136
18,805
2,972,698
2,635,975
336,723
2,524,767
166,808
908,718
1,449,240
307,587
1,234,731
200 Persons & Above
144
83,053
18,119,107
13018451
5,100,657
12,234,037
1,193,398
3,918,192
7,122,447
2,731,853
6,844,599
All categories
23,310
216,638
26,258,403
16,158,471
10,099,931
21,524,587
212,826
8,624,182
12,687,578
3,283,629
12,018,462
Less than 10 Persons
20,098
52,715
4,422,360
3,715,009
707,351
3,521,800
56,111
1,093,249
2,372,440
802,915
1,918,000
2,992
65,930
4,877,948
3,601,896
1,276,052
4,377,608
122,835
1,849,525
2,405,247
504,915
2,383,084
130
18,564
2,708,464
1,020,395
1,688,069
2,357,028
24,935
886,151
1,445,941
219,828
1,199,430
90
79,429
14,249,630
7,821,170
6,428,460
11,268,151
8,945
4,795,256
6,463,950
1,755,972
6,597,947
Community, Social and Personal
10 - 99 Persons
100 - 199 Persons
200 Persons & Above
67
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005
SIZE OF OPERATING
RECEIPTS
ESTABLIS
H-MENTS
TOTAL
EMPLOYMENT
PROPRIETORS/
PARTNERS
OTHER S
OPERATING
RECEIPTS
TOTAL
OPERATING EXPENDITURE
COST OF
PURCHASES
RENUMERASOLD
TION
NUMBER
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
THOUSAND DOLLARS
Whole-Sale Trade
All Categories
36,121
213,971
13,145
200,835
836,805,510
819,844,601
780,338,471
11,451,033
28,055,096
18,389,036
30,015,379
Less Than $50,000
4,471
4,194
2,744
1,451
88,962
148,770
46,491
26,305
75,974
-54,554
7,957
$50, 000 - $199,999
7,258
10,383
4,079
6,308
811,640
823,954
480,239
115,893
227,821
11,641
130,469
$200,000 - $999,999
11,450
31,487
4,378
27,113
5,580,963
5,382,409
3,787,041
724,206
871,161
259,270
996,820
$1,000,000 - $4,999,999
8234
49,912
1,729
48,183
18,755,464
18,277,765
14,104,551
1,932,349
2,240,865
724,786
2,684,892
$5,000,000 & Above
4708
117995
215
117780
811568482
795211704
761920149
8652280
24639276
17447892
26195241
19,959
105,446
14,880
90,564
36,173,889
34,498,131
23,520,526
2,223,453
8,754,152
1,949,544
4,234,830
Less Than $50,000
2,028
2,307
1,700
608
44,691
47594
23689
3261
20644
-2200
1,453
$50, 000 - $199,999
4,832
9,245
4,394
4,849
586,580
554,826
338,187
51,270
165,369
41,148
95,117
$200,000 - $999,999
9,507
32,947
7,814
25,130
4,518,585
4,288,269
2,887,269
435,386
965,614
268,907
720,236
$1,000,000 - $4,999,999
2,655
23,875
894
22,983
5,716,973
5,507,171
4,000,744
557,165
949,262
263,509
832,991
937
37,072
78
36,994
25,307,059
24,100,271
16,270,638
1,176,370
6,653,263
1,378,180
2,585,033
4,476
68,343
2,106
66,234
4,173,044
4,051,311
1,383,470
1,080,047
1,587,794
258,299
1,362,121
752
2,828
666
2,161
83,411
87,056
33,498
12,163
41,395
-1,189
12,135
2,918
26,923
1402
25,519
1,453,916
1,446,754
546,623
367,905
532,226
43,290
423,393
$1,000,000 - $1,999,999
429
11,969
16
11,953
597,493
570,522
181,860
157,737
230,925
36,837
197,602
$2,000,000 - $4,999,999
308
16,085
15
16,070
952,093
948,199
323,627
268,759
355,813
37,758
310,274
69
10,538
7
10,531
1,086,132
998,780
297,861
273,483
427,436
141,603
418,717
Retail Trade
All Categories
$5,000,000 & Above
Food and Beverages
All Categories
Less Than $200,000
$200, 000 - $999,999
$5,000,000 & Above
68
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)
SIZE OF
OPERATING
RECEIPTS
ESTABLISHMENTS
EMPLOYMENT
GROSS RECEIPTS
TOTAL
OPERATING
RECEIPTS
OPERATING EXPENDITURE
OTHER
RECEIPTS
NUMBER
TOTAL
RENUMERATION
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
THOUSAND DOLLARS
Information and Communication
All Categories
5,733
54,985
25,212,598
23,196,998
2,015,600
20,495,343
3,593,032
16,902,310
4,115,297
7,809,441
Less than $200,000
3,431
5,253
298,467
258,544
39,924
291,507
88,180
203,328
-22,945
65,897
$200,000 - $999,999
1,439
6,762
760,450
630,506
129,945
758,015
333,816
424,200
-4,200
330,585
$1,000,000 $4,999,999
591
6,331
1,381,259
1,193,815
187,443
118,606
397,357
791,249
195,487
595,801
$5,000,000 & Above
272
36,639
227,722,422
2,114,133
1,658,289
18,257,215
2,773,680
15,483,534
3,946,975
6,817,158
All Categories
9,258
112,427
62,746,115
57,880,903
4,865,212
48,895,056
5,940,399
42,954,656
12,589,298
18,915,527
Less than $50,000
2,420
2,769
72,309
71,732
577
59,648
13,721
45,927
15,726
33,882
$50,000 - $199,999
2,499
3,996
258,297
256,668
1,628
217,415
40,784
176,631
50,153
93,647
$200,000 - $999,999
2,667
12,012
1,759,862
1,309,222
450,640
1,149,683
385,144
764,539
259,641
658,887
$1,000,000 $4,999,999
1,008
13,221
2,639,164
2,429,699
209,465
2,265,674
536,378
1,729,297
346,156
925,485
584
80,439
58,016,484
53,812,582
4,202,902
45,202,635
4,964,373
40,238,262
11,917,621
17,203,626
Transportation and
Storage
$5,000,000 & Above
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)
GROSS RECEIPTS
SIZE OF OPERATING
RECEIPTS
ESTABLISHMENTS
EMPLOYMENT
TOTAL
OPERATING
RECEIPTS
OTHER
RECEIPTS
TOTAL
NUMBER
OPERATING EXPENDITURE
COST OF
PURCHASES
RENUMERASOLD
TION
OTHERS
OPERATING
SURPLUS
VALUE ADDED
THOUSAND DOLLARS
Accommodation/Food and Beverage
All Categories
4,725
94,055
7,102,186
6,775,141
327,045
6,162,967
1,639,500
1,804,309
2,719,158
993,401
Less than $50,000
102
264
4,200
3,965
235
3,462
785
706
1,971
507
1,225
$50,000 - $199,999
670
2,632
84,340
82,089
2,251
85,874
32,818
12,026
41,030
-1,247
12,039
441,193
$200,000 - $999,999
2,861,939
2,999
27,565
1,512,962
1,501,904
11,058
1,493,647
547,761
380,698
565,188
47,533
$1,000,000 - $4,999,999
818
29,939
1,750,571
1,717,616
32,956
1,655,086
511,807
473,637
669,643
119,314
602,333
$5,000,000 & Above
136
33,655
3,750,113
3,469,567
280,545
2,924,897
546,329
937,241
1,441,327
827,294
1,805,149
All Categories
8,440
24,263
53,083,090
47,063,640
6,019,450
18,038,138
41,026
2,723,412
15,273,701
29,316,197
5,318,449
Less than $1,000,000
6,801
8,028
2,327,510
1,324,593
1,002,916
1,144,331
695
331,171
812,467
223,595
274,770
$1,000,000 - $4,999,999
1,261
2,858
3,560,246
2,596,369
961,877
1,145,676
3,610
287,210
854,855
1,479,679
357,283
378
13,377
47,195,334
43,140,678
4,054,657
15,748,131
36,720
2,105,031
13,606,380
27,612,924
4,686,396
19,676,667
Financial and Insurance-Related
$5,000,000 & Above
Real Estate and Business
All Categories
31,159
225,641
61,084,334
48,244,371
12,839,963
42,611,281
3,723,472
10,137,524
28,750,285
8,909,331
Less than $50,000
7,529
7,139
280,031
167,447
112,584
297,016
623
77,271
219,121
-24,213
58,082
$50,000 - $199,999
10,020
17,935
1,408,050
1,168,082
239,968
1,050,817
2,797
341,516
706,504
143,749
503,931
$200,000 - $999,999
9,206
39,171
5,613,167
3,972,134
1,641,033
3,476,438
38,390
1,174,422
2,263,626
662,094
1,885,433
$1,000,000 - $4,999,999
3,165
46,575
7,840,369
6,471,962
1,368,407
6,574,825
203,456
2,122,390
4,248,979
712,658
2,916,394
$5,000,000 & Above
1,239
114,821
45,942,718
36,464,747
9,477,971
31,212,185
3,478,205
6,421,925
21,312,055
7,416,042
14,312,828
23,310
216,638
26,258,403
16,158,471
10,099,931
21,524,587
212,826
8,624,182
12,687,578
3,283,629
12,018,462
241,786
Community, Social and Personal
All Categories
Less than $50,000
8,238
11,048
730,663
113,389
617,274
577,538
4,315
180,419
392,804
58,565
$50,000 - $199,999
7,162
24,220
1,770,172
782,574
987,597
1,544,027
5,386
354,826
1,183,818
160,963
522,153
$200,000 - $999,999
6,553
61,362
4,101,800
2,982,353
1,119,447
3,423,056
47,552
1,540,266
1,835,239
530,232
2,093,803
$1,000,000 - $4,999,999
1,078
29,339
3,605,905
2,130,091
1,475,814
3,059,358
63,976
1,253,190
1,742,192
394,855
1,664,714
279
90,669
16,049,862
10,150,063
5,899,799
12,920,608
91,597
5,295,485
7,533,526
2,139,013
7,496,006
$5,000,000 & Above
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