Internet-Age Distributors More Sophisticated

SINGAPORE (04/25/2000) - The Internet age has not only revolutionized business processes, but also introduced a new distributor model.

Two such companies in Singapore are Asia Pathways Pte. Ltd. and eGlobal Technology Services Pte. Ltd. who term themselves "a hybrid incubator" and "e-business accelerator", respectively. They belong to a group of more sophisticated form of distributors, who provide quick-start services to foreign IT companies wishing to establish an Asia-Pacific presence.

They plan to also take a majority stake in the client's Asian operations, and staff the local outfit with their own people. Where it traditionally took companies over six months to a year to set up a direct operation, these businesses offer a setup time of one to two months.

Offering operational efficiency, these companies provide economies of scale by sharing back-office services between the various companies under their wing.

These services run the gamut of human resources, financial, contact center, marketing, and legal services. eGlobal, which started up in August last year, now has direct operations in 10 Asia-Pacific countries: Korea, China, Hong Kong, Taiwan, Thailand, Malaysia, Singapore, Australia, New Zealand and Indonesia.

Comprising ex-employees of a former software company, the structure of eGlobal is a logical surviving extension of the previous company, said Stanley Liao, chief operating officer, eGlobal Technology Services Asia-Pacific.

"It is basically the same slaves, but different masters. We used to carry many different kinds of software and products. This is a logical progression, and an extension of what we did," said Liao. With 115 staff currently, it plans to grow to 300 strong by year-end. eGlobal now represents 10 companies in Asia-Pacific, four of which are strategic partnerships. These joint ventures are termed the build-operate-transfer model, where eGlobal will build and operate the Asia-Pacific business, before eventually transferring the entire operation, including staff and processes to their client.

For eGlobal, a natural exit point where they transfer the local operations to the client, is "when it has achieved a sustainable operation, and the team can really continue business without affecting the transfer of control," said Liao.

The privately-owned Asia Pathways, with its 18-month old operation, is currently focused on the Singapore market. With 25 employees today, it plans to grow to over 60 in 12 months' time.

The company has also formed strategic partnerships with organizations such as Arthur Andersen, Cap Gemini, Deloitte & Touche, IBM, as well as co-operates with Singapore's National Science and Technology Board (NSTB) and the Singapore America Business Association (SABA) in California. Aside from setting up Asian operations, Asia Pathways might "take companies here and incubate them in the U.S.," said Hillman Lentz, president and chief executive officer of Asia Pathways.

There have traditionally been two ways for foreign IT companies to move to Asia, explained David Meale, vice president of U.S. operations, Asia Pathways.

"One is the setting up direct operations, which has high risk, and high returns. The alternative is indirect operations by hiring guys to build and manage the distribution -- which is low risk, low cost, low return, and little branding," said Meale.

Traditionally, when a company decides to enter a new market, research about the market, customers, and culture needs to be done, said Liao. In contrast, in the current Internet age, "organizations lose out when they take such a long time to establish themselves in the market," he said.

Liao explained that the relationships between traditional distributors and IT vendors tend to be "inherently unstable, because if the distributor is not doing well for the first six months, they may get cut off, and another distributor is appointed. Or if you do very well, they will displace you as the distributor, when they set up a local office."

"This creates an unwillingness by the distributor to co-operate a 100 percent.

They do not want to share customer information with the principal, for fear of losing direct contact with customers. This is not good for the principal, and it doesn't commit to building sustainable operations for the client in the end," said Liao.

There have also been companies which set up direct operations, but fizzle out subsequently.

"We've seen companies come and go. They start with a fancy, big splash, but cannot continue operations, because they cannot sustain themselves," said Liao.

"We saw a big need for such a new model, especially in a competitive environment, where time-to-market is of the essence," said Liao.

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