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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 add-ons 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 booked-up 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-person-part-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 full-screen 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.

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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.

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Figure 5

Work Stations for SUN Ray Enterprise System

Gobi 7 Portable Thin Client Naturetech 747 Unix

For SUN Ray by Accutech 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.

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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 2006-2007. 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

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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):

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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.

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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)

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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

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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

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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.

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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).

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Table A

Performance of Top 500 SMEs in Singapore

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 Freq % Whole sale (WS) 36121 26.04 Retail (RT) 19959 14.39 Transportation (TS) 9258 6.67 Accommodation (AS) 249 0.18 Food and Beverage (FB) 4476 3.23 Information and Communication (IC) 5733 4.13 Finance and Insurance (FI) 8440 6.08 Real Estate and Business (RB) 31159 22.46 Community, Social, and Personal Services (CSP) 23310 16.81

BUSINESS CLASSIFICATION Total No of Companies

Total No of

Employees

Total Section Turnover SGD '000

Company with Highest

Turnover SGD '000

SME Sales Rank of

Company with

Highest Turnover

Wholesale 194 5,417 5,993,972 $ 79,582.00 1 Manufacturing 90 9,483 2,184,644 $ 73,486.00 6 Construction 59 3,936 1,358,714 $ 50,072.00 53 Services 57 2,053 7,242,259 $ 65,022.00 18 Communication, Transport, & Storage 46 1,458 1,124,054 $ 64,304.00 19 Retail 19 742 571,544 $ 73,224.00 7 Property 13 335 476,818 $ 66,577.00 16 Finance 15 398 367,900 $ 54,780.00 41 Holdings 4 20 108,618 $ 52,911.00 47 Hotel/Food Establishments 3 452 57,225 $ 28,271.00 175 TOTAL SME 500 COMPANIES 500 24,294 13,485,749

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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 real-estate and rentals:

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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):

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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:

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Table C Uses of Internet

Use Proportion of Companies

Internet

Broadband Internet Access

Narrowband Internet

1 For Sending or receiving mails 95.0% 90.4% 80.4%2 For Information search 90.7% 87.6% 73.8%

3 For obtaining information from government organizations (e.g. for web sites of via e-mail) 70.0% 68.8% 48.9%

4 For downloading or requesting government forms 67.5% 66.3% 48.3%

5 For completing government forms online or sending completed government forms 60.5% 60.1% 39.7%

6 For banking and financial services 44.2% 45.8% 25.9%

7 For making online payments to government organizations 42.0% 42.5% 27.8%

8 For placing orders for goods/ services 35.3% 36.4% 22.2%9 For receiving orders for goods/ services 33.8% 34.8% 20.7%

10 For marketing/ promotion activities 32.8% 33.9% 18.2%11 As a platform to deliver contents/ services 30.8% 30.8% 18.2%12 For monitoring purposes 28.9% 30.3% 15.1%13 For payment of goods/ services 26.8% 27.7% 16.2%14 Other communications (e.g. instant messaging) 24.2% 26.6% 8.0%

15 For Finding information about employment opportunities (recruitment and search) 24.1% 25.7% 10.5%

16 For telephoning over the phone (VOIP) 21.1% 22.7% 6.5%17 For access collaborative tools (e.g. file sharing) 20.7% 22.3% 7.6%18 For telecommuting/remote access 17.0% 18.3% 5.8%19 For formal education or training activities 12.8% 13.5% 6.7%20 Video-conferencing 10.9% 11.8% 4.0%21 Video-streaming 9.7% 10.2% 4.1%22 For rich media creations 9.2% 9.8% 4.8%23 Internet Data Centre (IDC) services 0.5% 9.3% 3.9%24 Blogging 7.8% 8.2% 2.7%

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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

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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):

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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:

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Figure 19 Usage of IT Security Measures by SMEs

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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

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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

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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 entry-level 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.

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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.

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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 24-hour basis. Various add-on functions such as web access have turned SWISSVAULT into a worldwide success story for individuals as well as large corporations.

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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.

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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.

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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.

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Figure 21

A Schematic Representation of SteelClaws

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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 multi-currency 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.

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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 on- site 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 ).

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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

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Optional Data Centre Backup

Source: Zara Technology

The hardware at the client’s site will cost an additional $30, 600. It includes the cost of a SUN Ultra 40 M2 Work station with Solaris 10 and warranty, 4 GB Memory, set-up for up to 10 users (SUN Ray II, Monitor, Keyboard, Smart card, warranty, and SUN Ray software), router, installation cable, etc. Additional, set-up for users will be charged S$ 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.

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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 set-up 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

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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-in-four 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

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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 on-demand 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 full-fledged 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

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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, mid-market 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 break-even 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.

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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.

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Table 1 A Comparison of 2008 Accounting Software

(Source: Top Ten Reviews)

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 1 A Comparison of 2008 Accounting Software (Contd.)

57

Table : 2A A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForceMicrosoftDynamics

SAP Business

One Peach Tree

Financials General Ledger Yes Yes Yes Yes Yes Yes Yes Cash Management Yes Yes Yes Yes Yes Yes Yes Accounts Payable Yes Yes Yes Yes Yes Yes Yes Accounts Receivable Yes Yes Yes Yes Yes Yes Yes Fixed Assets No No No No Yes No Yes Invoice preparation Yes Yes Yes Yes Yes Yes Yes

Credit Card account handling Yes Yes Yes No Yes No Yes

Online Bill Pay No Yes Yes No No No No Manufacturing Engineering No No No No No No No Bills of Materials Yes No No No No No Yes Scheduling Yes Yes No No Yes No Yes Capacity Yes Yes Yes No No No Yes Workflow Management No Yes No No No No No Quality Control No No No No No No No Cost Management Yes Yes Yes Yes Yes Yes Yes Manufacturing Process No No No No No No No Manufacturing Projects No No No No Yes Yes Yes Manufacturing Flow No No No No No No Yes

Color

Legend

Meaning

Available as Add on

Available in 2nd half of 08 in the product

58

Table 2B A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForceMicrosoftDynamics

SAP Business

One Peach Tree

Supply Chain Inventory Yes Yes Yes Yes Yes Yes Yes Management Order entry Yes Yes Yes Yes Yes Yes Yes Purchasing Yes Yes Yes Yes Yes Yes Yes Product Configurator No No No No No No No Supply Chain Planning No Yes No No No No Yes Supplier Scheduling No No No No No No No Inspection of Goods No No No No No No No Claim Processing No Yes Yes Yes Yes Yes Yes Commission Calculation No Yes Yes No No No Yes Real-Time Order Status Yes No Yes No No No Yes Project Management Costing Yes No Yes No Yes Yes Yes Billing Yes No No No No Yes Yes Time and Expense Yes Yes Yes No No No Yes Activity management Yes Yes Yes No Yes Yes Yes Human Resource Human Resources No Yes Yes Yes Yes Yes Yes Pay Roll No Yes Yes Yes Yes Yes Yes Training No No No No No No No Time and Attendance No Yes Yes No No Yes Yes Benefits No Yes No No No Yes Yes CRM Sales and Marketing Comm. No No No No Yes No Yes Service No Yes No Yes No Yes No Customer Contact Yes Yes No Yes Yes Yes Yes Call Center Support No Yes Yes Yes Yes Yes Yes On-Line Knowledge Base Yes No Yes No No Yes Yes

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Table 2B

A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForceMicrosoftDynamics

SAP Business

One Peach Tree

Data Warehousing Database at Customer Site Yes Yes No No Yes Yes Yes

Online Database at Company Site Yes No Yes Yes No No No

Database Backup Online Yes Yes Yes Yes No No Yes

Color Legend

Meaning Available in Add on

Available only in professional pack and above

Available in 2nd half of 08 in the product

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

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Table 2C A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForce Microsoft Dynamics

SAP Business

One Peach Tree

Basic Package Price dependent on Users Yes Yes Yes Yes Yes Yes Yes

Frequency of Pricing Monthly Per User Once Yearly Monthly Per

User Did not divulge Per User Once

Price for Basic Package $65 First User

FREE 100Mb Storage $199.95 $1,200 $10 $4,250 $1,200

Number of Users Permitted Unlimited Five

One full user and 5

limited users Any number

Any number Five

Users > 5

$20 for each additional user

$35 for each additional 100Mb Storage

Licenses need to be purchased

$50 per month per

user Above value

holds

Above value holds

$50 per year for

each extra user

Charge for Updates No No No No No No No

Charge for Upgrades No $499 - $1000

Difference between current

software and

upgrade charged No No

Difference between current

software and

upgrade charged

Difference between current

software and upgrade

charged Updates Frequency Based on bug fixes Monthly Monthly No Updates Monthly Monthly Quarterly Automatic Updating Yes Yes No No Updates Yes No No

Other Methods

Software downloaded

from website

Software sent to

customers by mail

Software downloaded

from website

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Table 2D A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForce MicrosoftDynamics

SAP Business

One Peach Tree

Training Online Knowledge Base Yes Yes Yes Yes Yes No Yes

Online Chat No Yes Yes Yes Yes No Yes Web seminars No No Yes No Yes No Yes Web learning No No Yes No Yes No Yes

On-Line Course Books No No No No No Yes Yes

DVD ROMS No No No No No No No CD ROMS No Yes No No Yes No Yes

In-Person Training Yes Yes Yes Yes (third Party) Yes Yes Yes

In-Person training Cost Yes $60-$180

$200-$700

Did not Divulge

Did not Divulge

Did not Divulge

Did not Divulge

Certified Consultants ● North America No Yes Yes Yes Yes Yes Yes ● Europe No No No No Yes Yes No ● Asia No No No No Yes Yes No ● Middle-East No No No No Yes Yes No ● Africa No No No No Yes No No

Color

Legend

Meaning

Available in 2nd half of 08 in the product

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Table 2E A Comparison of ERP Software Targeted for SMEs

Core Functionality SteelClaws Quickbook

NetSuite Small Business SalesForce

MicrosoftDynamics

SAP Business One

Peach Tree

Supervisor access of business emails Yes Yes No Yes Yes No yes Manage Business documents(Catalogs) Yes No No Yes Yes No yes Online B2B customer connection Yes Yes Yes Yes Yes No yes Adoption(# of Customers) North America 0 50000+ 20000+ 35000+ 2000+ 5000+ 10000+ Europe 0 0 0 0 3000+ 1000+ 0 Asia 500 0 0 0 1000+ 500+ 0 Middle-East 0 0 0 0 500+ 1500+ 0 Africa 0 0 0 0 700+ 0 0

Cost of Implementation $20K-$100K

$35K- $150K $5K-$50K

$50K-$200K

$50000-$75000

$20K-$100K

Country of Origin Singapore US US US US Germany US Internet Based? Yes No Yes Yes No No No If not then Operating System Vista N/A Yes N/A N/A Yes Yes Yes XP N/A Yes N/A N/A Yes Yes Yes NT N/A No N/A N/A Yes Yes Yes Win2000 N/A Yes N/A N/A Yes Yes Yes UNIX N/A No N/A N/A No No No Database Server Windows N/A Yes N/A N/A Yes Yes Yes UNIX N/A Yes N/A N/A Yes No Yes

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Table 2F

A Comparison of ERP Software Targeted for SMEs

Add-on Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForceMicrosoft Dynamics

SAP Business

One Peach Tree

PayRoll Services Name QB Payroll Sol.

PT Payroll Service

Cost $99 per year $45 per month

Checks, Forms and Supplies Name

QB Checks Forms and supplies Online Service

Cost

$38.99 - $71.99 one time buy

Depends on Order

Payment Solutions Name MSB Financials PT Payments

Cost $250.00 $50 per month BillPay Service Name Service

Cost

$15.95 per month (20 payments) and $6.95 for each additional payment

Online Back Up Name Service

Cost $20 per quarter

Web Accounting Name QB Merchant Services

MS Accounting PT Web Acct.

Cost $50 per year $199.00 $150 per year Time slips Name Timeslips Cost $500 per year

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Table 2F A Comparison of ERP Software Targeted for SMEs

Add-on Functionality SteelClaws Quickbook

NetSuite Small

Business SalesForceMicrosoftDynamics

SAP Business

One Peach Tree

Web Tools Name MS Office

PT Website Tools

Cost $500 $198 per year

Forecastes Name MS Forecaster

Cost $55,000 Third Party Add-ons 0 200+ 0 0 0 0 350+

Table 3 Key Indicators of Industry Groups by Number of Employees, 2005

EMPLOYMENT SIZE

ESTABLISH-MENTS

EMPLOYMENT

OPERATING RECEIPTS

OPERATING EXPENDITURE

OPERATING SURPLUS

VALUE ADDED

TOTAL

PROPRIET-ORS/

PARTNERS OTHERS TOTAL

COST OF PURCHASES

SOLD RENUMERA-

TION OTHERS NUMBER 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

100 Persons & Above 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

Retail Trade 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

100 Persons & Above 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

Food and Beverages 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

100 Persons & Above 41 9,251 5 9,246 866,195 803,309 219,547 228,624 355,139 110,487 341,511

66

Table 3 Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)

EMPLOYMENT SIZE ESTABLISH-

MENTS

GROSS RECEIPTS OPERATING EXPENDITURE

OPERATING SURPLUS

VALUE ADDED

EMPLOY-MENT

TOTAL OPERATING RECEIPTS

OTHER RECIEPTS TOTAL RENUMERA-

TION OTHERS

NUMBER 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

100 Persons & Above 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

Transportation and Storage 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

67

Table 3 Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)

EMPLOYMENT SIZE

ESTABLISH-MENTS

EMPLOY-MENT

GROSS RECEIPTS OPERATING EXPENDITURE

OPERATING SURPLUS

VALUE ADDED

TOTAL

OPERATING RECEIPTS

OTHER RECIEPTS TOTAL

COST OF PURCHASES

SOLD RENUMERA-

TION OTHERS NUMBER THOUSAND DOLLARS

Accommodation All categories 249 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

Less than 10 Persons 87 452 100,332 96,951 3,382 87,213 8,695 9,426 69,092 23,899 34,809

10 - 99 Persons 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

Financial and Insurance-Related 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

10 - 99 Persons 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

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

Real Estate and Business

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

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 5,599,383

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

Community, Social and Personal

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

10 - 99 Persons 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

100 - 199 Persons 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

200 Persons & Above 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

68

Table 4 Key Indicators of Industry Groups by Size of Operating Receipts, 2005

SIZE OF OPERATING RECEIPTS

ESTABLISH-MENTS

EMPLOYMENT

OPERATING RECEIPTS

OPERATING EXPENDITURE

OPERATING SURPLUS

VALUE ADDED TOTAL

PROPRIE-TORS/

PARTNERS OTHER S TOTAL

COST OF PURCHASES

SOLD RENUMERA-

TION OTHERS

NUMBER 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

Retail Trade

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 $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

$5,000,000 & Above 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

Food and Beverages

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 $200,000 752 2,828 666 2,161 83,411 87,056 33,498 12,163 41,395 -1,189 12,135

$200, 000 - $999,999 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

$5,000,000 & Above 69 10,538 7 10,531 1,086,132 998,780 297,861 273,483 427,436 141,603 418,717

Table 4 Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)

SIZE OF

OPERATING RECEIPTS

ESTABLISH-MENTS

EMPLOY-MENT

GROSS RECEIPTS OPERATING EXPENDITURE OPERATING SURPLUS

VALUE ADDED

TOTAL OPERATING RECEIPTS

OTHER RECEIPTS TOTAL RENUMERA-

TION OTHERS

NUMBER 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

Transportation and Storage 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

$5,000,000 & Above 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

Table 4 Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)

SIZE OF OPERATING RECEIPTS

ESTABLISH-MENTS

EMPLOY-MENT

GROSS RECEIPTS OPERATING EXPENDITURE

OPERATING SURPLUS VALUE ADDED

TOTAL

OPERATING RECEIPTS

OTHER RECEIPTS TOTAL

COST OF PURCHASES

SOLD RENUMERA-

TION OTHERS NUMBER 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 2,861,939

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

$200,000 - $999,999 2,999 27,565 1,512,962 1,501,904 11,058 1,493,647 547,761 380,698 565,188 47,533 441,193

$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

Financial and Insurance-Related

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

$5,000,000 & Above 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

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 19,676,667

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

Community, Social and Personal

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 $50,000 8,238 11,048 730,663 113,389 617,274 577,538 4,315 180,419 392,804 58,565 241,786

$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

$5,000,000 & Above 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