Shifting Base to Singapore

There is good news for the Indian IT industry, specially the tier 2 players.

The small and medium enterprise (SME) driven Singapore market is headed towards

a major boom in the e-business application sector. A recent Frost & Sullivan

report for Nasscom suggests that despite the adverse economic climate, the total

e-business application software market in the country is expected to grow by

25.7% in 2002–up from $91.9 mn in 2001 to $115.5 mn.

The trigger for this growth, the report suggests, has been the emergence of

new application areas like CRM, collaborative commerce and e-commerce; ERP and

SCM showing just single digit growth rate. Major initiatives taken up by the

government for the island have also facilitated the growth of e-business in the

country.

According to the report, by the end of 2005 the total revenue for the

e-business applications market would more than double to $232.6 mn. A compounded

annual growth rate (CAGR) of 21.9% over the forecast period–2001 through 2008–is

also expected. Talking about the market trends, the reports says that as the

enterprises have already achieved a high degree of automation for strategic

business processes, the Singapore market will be driven by the replacement

demand for mature applications in the future. The report also predicts marked

convergence towards solution suites. What this means is that while integrated

vendors will gain further foothold in the market, the SME market will most

likely form a substantial part of the second wave of e-commerce investment.

E-business trend



"The e-commerce application market in Singapore is expected to grow at

a steady pace with a larger percentage of enterprises rolling out their Internet

strategies," says Frost & Sullivan’s industry manager for e-business

Alok Shende. Considering the likely pressure of globalization on the top and

bottom lines of companies across verticals, the marketing consulting company

expects the share of e-commerce software to rise from 13.4% to 14.7% of the

total enterprise application market in 2008. While enterprise portals, as an

enterprise application, are still in the development phase, the marketing

consulting firm expects rapid penetration of the same in coming years. According

to the report, what will really trigger off the growth of the e-business

application market is the growing awareness of the Internet among the general

population and companies’ willingness to invest substantially in new

technology. "This will have a spill-over effect on e-business as a

whole," asserts Shende.

ERP: The ERP applications market is varied and ranges across all types

of industries and enterprises. Initially, customers tended to be large

organizations, typically MNCs. However, in the last two to three years, this

trend has been changing rapidly as the top-tier market faces increasing

saturation in Singapore. Vendors are focusing their efforts to tap the SME

segment, where demand is growing. The mid- and bottom-tier segment provides the

highest potential for long-term growth in the ERP software market in Singapore.

SCM: Large companies lead the way in the adoption of SCM strategies in

this region. On the other hand, not many local companies (SMEs) have embarked on

implementation of SCM applications. This could be due to the high costs of

implementation, long deployment time, as well as the resources required to

implement and maintain the same. The demand for SCM solutions is primarily from

verticals such as healthcare, electronics/high technology, hospitality,

shipping, manufacturing, consumer-packaged groups, and retail.

BI: The Business Intelligence (BI) market is still in its development

stage in the Singapore market. Competition in many industries such as telecom,

banking and finance, as well as services sector are forcing companies to look

for new ways to be profitable in the changing global marketplace. Increasing

numbers of customers in this region are looking at using BI tools and analytical

software to shorten development cycles, overhaul supply chains, improve customer

retention, and strengthen decision-making processes.

EP: Enterprise Portals (EPs) are the latest technology trend that is

gradually gaining momentum in the Singapore region. Some early adopters of this

technology in the market are banking/finance, telecom and government sectors.

E-commerce: In the E-commerce software market, large-sized

enterprises, and MNCs have been the prime drivers of demand. The SME market is

likely to form a substantial part of the second wave of e-commerce investment.

Companies in this tier have broadened investments in e-commerce applications, as

they have extended channels and adapted business models. However, Frost &

Sullivan make a projection that in many of these smaller companies, e-commerce

will not be seen as a strategic operation, at least while its benefits remain

relatively unknown.

CRM: In 2001, the spending on CRM technologies was reduced to a great

extent and sectors such as telecom and financial are wary of making further

investments. Companies of all sizes, but particularly large- and medium-sized

companies as well as industry verticals such as banking and financial

institutions as well as hospitality are driving demand for CRM and service

support technologies in this region.

C-commerce: The C-commerce software market in Singapore is still

evolving. There has been slow uptake in the demand for these solutions in the

market. Leaving aside a few verticals, the majority of the companies are still

evaluating the benefits that c-commerce solutions can deliver. Some of the

verticals that have been the early adopters of this technology are

manufacturing, high-tech, finance, and telecom service industries.

Opportunity for India



"Singapore with its well-built infocom infrastructure, a compact and

infocom savvy population and highly skilled workforce, is an excellent testing

bed for new services and applications," says Sunil Mehta, vice

president-research, Nasscom. Indian IT companies can use the Singapore market as

a springboard for their expansion into the Asia Pacific market. Also hardware

players in Singapore are looking at expanding their services since their margins

are getting squeezed. Indian IT services vendors have a great opportunity of

partnering with these players and offering integrated services to the Singapore

market.

While Indian companies are known for high quality and low cost execution,

albeit in the lower end of the enterprise IT systems, Singapore also presents an

opportunity for the Indian IT companies to move into the higher margin eBusiness

consulting and implementation business. According to Nasscom, India’s software

exports to the Asia-Pacific region will touch $770 mn this fiscal year, and

increase to $6-7 bn by 2008, of which Singapore will constitute $60 mn.

Singapore’s annual investment in India now stands at over $1 bn a year.

Singapore has also recently opened The India Centre in Singapore, which is aimed

at developing a hub to aggregate Indian Companies and showcase the Indian

competencies to the rest of the world. On the initiative front, both the

countries have already signed the ICT Memorandum of Understanding to promote

closer co-operation and exchange of information as well as to foster business

partnerships. Following this a task force for information and communications

technology has also been set up. Singapore was also the focus country at ICT

India 2002.

Talking about the market strategy needed for Indian companies to enter the

fast growing e-business market, Shende suggests that it should be driven around

two points–first, around the market segment and second, around the application

segment.

Also, the Indian SME companies can target the SME market through joint

ventures with local partners thereby reducing the entry cost and ensuring a

captive customer base. No wonder then that TCS has its Asia Pacific operations

based out of Singapore. Beside TCS, Mphasis BFL, Mindtree Consulting, Megasoft,

Infrasoft Technologies, ICICI Infotech Services and Bhari Information Technology

are the other Indian companies that have already entered the market.

SHUBHENDU PARTH in New Delhi