Optimistic mood in IT industry


  • Business
  • Wednesday, 01 Jan 2003

OUR CEO OUTLOOK 2003 today features the Malaysia-based CEOs of three of the largest IT corporations – Datuk Wong Siew Hai of Intel Corp, Khatijah Shah of SAP, and T.F. CHONG of Hewlett-Packard (HP). 

The three CEOs are looking forward to 2003 as they expect a pickup in the world economy will boost spending on IT. 

Wong has spent virtually his entire career with Intel, apart from a short stint with Dell. He joined Intel as a quality assurance engineer in 1976. 

As the economy returns to normalcy, Khatijah is steering SAP Malaysia to new heights as the company continues to help local businesses survive, re-engineer and grow through the effective use of technology.  

A 20-year veteran in the IT business, she joined IBM as an engineer in 1978 upon graduating from the then Institute Teknologi Mara with a degree in computer science. It was here that she cut her teeth on the industry.  

And to widen her experience, this mother of two boys moved over to Oracle Corp, which was more software-oriented. 

Chong has been in the IT business for nearly 20 years, starting with Philips. He was a pioneer with Compaq when it began operations in Malaysia in 1993.  

He was managing director of Compaq Malaysia and took over at HP when it acquired Compaq in one of the largest mergers in US corporate history. 

Datuk Wong Siew Hai

Datuk Wong Siew Hai 

Vice-President and General Manager 

(Assembly Test & Manufacturing) 

Intel Corp 

 

The year 2003 looks like a year of uncertainty for the world economy. In your view, what are the challenges and prospects for Malaysia’s economy? 

From an information and communications technology (ICT) perspective, we believe there are tremendous opportunities in Malaysia as the country continues to encourage the use of information and communication technology in homes, schools, businesses and government. We laud the government’s initiatives to drive the knowledge-based economy and bridge the digital divide in an effort to accelerate Malaysia’s economic growth and global competitiveness. 

In realising this, we believe technology and education are the main drivers in building the foundation of a k-economy by complementing on each other’s expertise. 

This collaboration will benefit Malaysia because it will create a new breed of knowledge workers that are more responsive to the industry and help fuel the technology industry. 

Intel has a lot to offer in support of Malaysia’s k-economy vision by virtue of our leadership position in the industry. We have the right vision, leading edge technologies and products, and committed employees to take advantage of the opportunities. We remain fully committed to helping to build the nation's knowledge economy. 

From a manufacturing perspective, Malaysia has shown foresight in setting up industrial zones with a strong emphasis on the manufacturing sector. 

The government has been very co-operative and is taking a proactive stance in facilitating and expanding the manufacturing sector. Other factors such as socio-political stability, availability of world-class infrastructure, trained and easily trainable manpower, and efficient economic management are important for multinational corporations (MNCs) like Intel. 

In today’s increasing globalisation trend, the challenge is to make Malaysia more competitive for the global market – not just in terms of price, but also quality, reliability and value add – to influence and sustain investors’ trust and confidence. 

Despite the difficult times, Intel continues to invest. In fact, we have invested more than US$2bil in establishing our operations and base here including our assembly and test manufacturing facilities in Penang and Kulim that employ about 8,000 employees. This strategy of investing in research and development (R&D) and manufacturing technology and also focusing on controlling discretionary spending has enabled Intel to grow stronger during these challenging times. We look forward to continued growth of our operations in Malaysia and globally. 

 

The government (in the budget in September) has projected a growth rate of between 6% and 6.5% for the national economy in 2003. Do you feel that this growth rate can be achieved? 

The budget was indeed fair and comprehensive.The content tabled also supports the nation’s growth towards its vision of becoming a fully developed nation by 2020. Intel appreciates the Malaysian government’s commitment to drive spending in all aspects of the economy including the areas of ICT. 

Although all these factors will contribute towards stimulating very positive growth for Malaysia’s economy, the projected growth rate is somewhat dependant on the world economy and how fast the corporate/private companies recover, especially in the electronics sector. 

 

What do you see are the challenges and opportunities for your company in 2003? 

IDC predicts the personal computer (PC) market will bounce back with shipments of desktops, notebooks and servers based around PC architectures to rise 8.3% in 2003 to 147.5 million units, and to rise up to 11% to 163.8 million units in 2004. 

The rise in shipments, IDC said, will derive in part from the growing popularity of wireless networks and improved notebook technology trends all the major companies are trying to latch on to. This is indeed positive for Intel and it will be just in time for the release of Intel’s Banias processor, a brand new, energy-efficient notebook chip. 

Intel is especially optimistic of the convergence of computing and communications and process technology integration. Internet traffic continues to grow and provide new opportunities for silicon technologies such as Intel's Banias technology that will allow wireless access to the Internet. 

The chip industry will continue to be highly competitive. Although the industry is currently experiencing one of its worst downturns ever, we continue to move our technology forward and invest heavily in manufacturing technology. Our focus will be on exquisite customer experience, technology leadership, competitive cost and superior volume output. 

Through continued strong execution and innovation, Intel intends to stay one generation ahead of the competition in all aspects of our business. By staying one generation ahead, Intel believes it can continue to gain market segment share, remain profitable and continue our technology investment. 

 

We have seen China's economy powering ahead with successively high growth rates. China is also the favoured destination for foreign direct investments. Do you see China’s emergence as an economic powerhouse providing opportunities for Malaysian companies or do you see China as a competitor? 

China has a huge domestic market opportunity and that is by far the most compelling reason for companies to set up operations there. Labour cost is also relatively low and this provides a competitive advantage for labour-intensive companies to compete at world-class level. 

China presents both an opportunity and competition to Malaysia as an investment site of choice. 

Malaysia in particular has strong and proven economic fundamentals, sound monetary policies, excellent infrastructure as well as stable political environment, all of which are advantages to companies investing and wanting to invest here. W e need to look at niches that Malaysia and our talented workforce can contribute to. We must move our workforce up the value chain that is to move from input-driven to one that is knowledge-driven with emphasis on science and technology. 

In order to support this k-based economy initiative, Malaysia needs to have a human resource master plan that adequately addresses the needs of the industry especially in areas of science, engineering, and ICT. 

Intel is playing a pivotal role in establishing Malaysia as a centre for high-technology manufacturing. 

Over the last 30 years, while maintaining very strong manufacturing competencies, we have trained and up-skilled our workforce and moved into design and development. 

We have already established design centres in Penang which are designing state-of-the-art microprocessors and network processors for the world market. Intel remains optimistic of the long-term growth prospects for the electronics manufacturing sector in Malaysia. 

We are confident that the government, its policies and its effective and efficient implementation of those policies will continue to ensure that Malaysia is attractive as an investment site of choice. It is time for all of us to get out of our comfort zone and make a difference in everything that we do, especially in strategic focus areas. 

 

Next year is the start of the Asean Free Trade Area (Afta), under which tariffs on a wide range of products will be drastically reduced. How will your company be affected by the implementation of Afta? 

There is no direct impact from Afta on Intel. But the reduced tariffs on imported products will bring about competition to many local manufacturers in Malaysia. It will open up the trade market and will encourage increased intra-regional activities among countries especially in the Asean region. 

It is, therefore, important for local manufacturers to raise the bar and increase their manufacturing efficiencies, quality and lowering their costs to compete at world-class level.  

All in all, Afta will be beneficial in making Asean’s manufacturing sectors more competitive in the world market. 

 

Do you expect your company to do better or worse in 2003 compared with 2002? 

Despite the economic uncertainties, we believe that 2003 will be a promising year for Intel. We are poised for any business upturn in the ICT industry with our strategic investment in manufacturing capacity, workforce development and the line-up of our new products. Combined with our solid execution, we remain optimistic about next year. 

Khatijah Shah Mohamed 

Khatijah Shah Mohamed

Managing Director 

SAP Malaysia 

Our departure from traditional recovery approaches has proven time and again to be right as our government, under the stewardship of Dr Mahathir, has repeatedly come first under fire, and then held in awe for its accomplishments. 

In fact, the International Monetary Fund (IMF) has again publicly commended the Malaysian government for adopting prudent economic policies to weather the global slowdown. In a report in The Star (Dec 12, 2002), the IMF also said: 'The country is poised to benefit from the global recovery.' We’re also seeing global enthusiasm for out Financial Sector Masterplan that includes the liberalisation of interest rates, which should help enhance competitiveness in the financial system. 

The main challenge, we believe, is to ensure that local businesses do not slow down in their progress towards becoming truly enabled players in the global economy. Malaysia already has the key technology and infrastructure to support the nation’s progress towards k-economy. 

 

Do you feel that the government projected growth rate of between 6% and 6.5% for 2003 can be achieved? 

We aren’t ready to place an exact figure on this, of course, as it may be too early for us to accurately gauge this growth. While we understand that the government is projecting growth of 6% to 6.5% for next year, this is going to depend on increased private investment and a general improvement in the global economy. 

If these factors play out as we expect them to, then we fully expect Malaysia to register a very healthy growth percentage for next year, which may even exceed our expectations. After all, we have the foundation and we have already put in place infrastructure, talent and policies for success. 

 

Challenges and opportunities for your company in 2003? 

Our corporate culture has always included innovation with a strong focus on being aware of market needs, growth and transitions, while balancing this watchfulness with prudent risk-taking. 

This is once again proving itself to be a tremendous advantage for us as we’ve seen in the customer relationship management (CRM) market where we not only took market share during a global slowdown, but we grew from a negligent position to controlling over 18% of the global CRM market! This, according to Frost & Sullivan, places SAP as the second largest CRM provider in the world, a scant three years after we entered this market. This alone speaks volumes about our commitment to continuous innovation, growth and customer satisfaction. 

So, we’re going to continue working on educating local businesses, especially small- and medium-sized business (SMBs), on the need for them to improve operating efficiencies, streamline costs, and explore new opportunities to remain competitive and grow. 

Many of our 15,000 customers around the world are SMBs – including in Malaysia – and we’re looking to grow and expand our footprint in that market here. 

Our primary challenge in this regard is to reach out and share with the marketplace the need to engage in e-business to transform their businesses. 

 

Do you see China’s emergence as an economic powerhouse providing opportunities for Malaysian companies or do you see it as a competitor? 

I’m very positive about China’s continuing growth as it will become an engine of growth for Asia, replacing Japan which has had some challenges in recent times. A strong regional economy like China’s will also spur intra-regional trade with Malaysia, leading to benefits for our economy. What’s more, while we see a lot of trade and investment opportunities moving to China, it’s increasingly clear that Malaysian businesses have a valuable opportunity there as well. 

Malaysia and China can, therefore, complement each other through enhanced regional supply chains. And we’re seeing this happening already as our exports to China have doubled from 2.7% to more than 5% over the last seven years. 

We can effectively counter any threat by improving our labour and process efficiencies, product quality as well as technical and management skills through the effective use of world-class and proven technology solutions like ERP, SCM and CRM. 

It is in these areas that we can leverage on our extensive experience and capabilities to grow and take a dominant position. Our multicultural and highly skilled workforce offer China-based industries valuable professional services and consulting resources as well as allowing our manufacturing concerns to move up the value chain. 

After all, in international markets, price is only one of many factors, with product and knowledge features, quality, brand values and efficient marketing and distribution channels being ever more important. 

 

Do you expect your company to do better or worse in 2003 versus 2002? 

Barring any unforeseen circumstances, I believe that SAP, with the help of our loyal customers and our continued focus on innovation and integration, will turn in a respectable performance in 2003. During the height of the global economic crisis, we saw some of our markets struggling but nonetheless they came through in the end. 

Our continuing growth in the SCM and CRM markets as well as our continuing focus on the growing SMB marketplace is also bound to contribute favourable to us next year. With the global economies recovering I believe that our outlook is very positive indeed. 

T.F. Chong

MD of HP Malaysia on the IT industry's prospects 

T.F. CHONG 

Managing Director 

HP Malaysia 

 

Challenges and prospects for Malaysia’s economy. 

For HP, we see in 2003 a year filled with challenges, and also opportunity to grow and prosper. Malaysia is on a path of economic recovery, and there are many positive indicators to support this. 

In a recent report, the International Monetary Fund commended the Malaysian government’s prudent economic policies, which has enabled the country to weather the global slowdown, and said the country is poised to benefit from the global recovery. 

Meanwhile, the Malaysian Institute of Economic Research (Mier) expects the gross domestic product (GDP) to expand by 5.4% in the fourth quarter and by 5.7% in 2003. 

As part of the business community in this country, we feel excited about the way things are going. However, we need to enhance our resilience to meet the challenging times in the next 12 months. The world economy is not likely to improve but Malaysia’s proven ability to be creative and innovative will see us through. 

Through creativity, innovation and resilience we survived the economic downturn of the mid 1990s. In fact, we did more than survive: Malaysia became the role model for other countries. What we need is to be more competitive. To do so, we must constantly find new ways of doing things better and at a lower cost. This is our biggest challenge. 

 

Do you feel the government’s projection of a 6%–6.5% growth rate can be achieved? 

As I mentioned, there are many positive and encouraging indicators that Malaysia will be able to achieve a higher growth rate. We understand from media reports that the government is reviewing Malaysia’s economic stimulus strategy in view of the gloomy outlook for the world economy next year. 

The government also took pre-emptive action to soften the impact from a slowdown in the US economy two years ago. With the private sector as the engine of growth to further fuel the economy and the government’s effective measures, we believe we can achieve our growth rate. 

 

Challenges and opportunities for HP in 2003. 

We remain hopeful and upbeat about what Malaysia’s economy can bring for us and the industry as a whole in 2003. We will continue to tap into every possible market, and we have equipped ourselves with the necessary ‘weapons’ in terms of upgrading and improving our products, services and solutions to meet the toughest challenges ahead. 

With strong focus on services and support, and the right strategy in place, we strive to continue being the leading IT services organisation in Malaysia. HP Services’ mandate is to design, build and manage end-to-end IT services and solutions with measurable business value. We aim to deliver just that. 

Combining the forces of HP Services and Compaq Global Services into one powerful team, I believe HP will be able to provide Malaysian customers with comprehensive services and support. 

Customer satisfaction will continue to be our main source of aspiration and our No. 1 priority. The commitment of the HP Services management team to implement Total Customer Experience has no doubt given us the edge over our competitors in providing quality yet efficient services and support to our valued customers. 

For that effort, we have triumphed over global and local competitors to win the inaugural Computerworld Malaysia Readers’ Choice Award 2002 for the category of Services and Support. We thank our customers for believing in our brand and the staff for their contribution to make HP a preferred IT company. 

For next year, we see tremendous potential for growth in the small- and medium-sized business (SMB) market because this sector is still largely under-served. Malaysian SMBs are beginning to appreciate the value of information and communications technology (ICT) to their organisations and HP, as an active player in the local ICT industry, will continue to tap this market. 

HP aims to provide all the necessary assistance to Malaysian SMBs in their efforts to seriously adopt an e-business model. One way you can look at it is that e-business enablement is the fastest way smaller businesses can close the gap with multinational corporations and other large corporations who had invested earlier. 

HP will also explore the opportunities offered by the biotechnology and life sciences, as we have established our leadership in high-performance computing. We believe that ICT, biotechnology and life sciences will be the next big thing in the country – as reflected in the BioValley project and related research and development activities. 

Moving forward, for mobility computing and wireless communications, we’ve witnessed how things have progressed so far, so fast. Just look around at the growing number of consumer accessible hotspots. This represents yet another opportunity for us to tap. 

In support of this, we plan to offer more sophisticated untethered personal access devices like handhelds, hybrid devices and Tablet PCs to join in the wireless party line. We want to give customers the total experience in mobile and wireless computing and communications. 

Do you see China’s emergence as an economic powerhouse providing opportunities for Malaysian companies or do you see China as a competitor? 

Today, China is the buzzword and everyone wants a share of the action. As a global IT player, HP too has a presence in China. In Malaysia, HP would like to see China not as a competitor but as a partner. We can tap from each other. In other words, we look at co-existence and how we can complement each other to benefit the company globally without sacrificing HP’s interest in one country for the benefit of another. 

 

Do you expect HP Malaysia to do better or worse in 2003 compared with 2002? 

Early last month, the ICT industry celebrated the report released by IDC that the worst is now over for the world ICT industry, and the industry will expect a worldwide growth of 5.8% in 2003. Furthermore, Pikom, the Association of the Computer and Multimedia Industry in Malaysia, has expressed their optimism that local ICT spending will grow about 10% next year, with a total trade of at least RM8bil. 

With that, I strongly believe 2003 will see HP better positioned than ever in the marketplace due to our firm commitment to customers’ successes, our understanding of customers’ businesses and needs, and our ability to provide them with state-of-the-art products, services and solutions that allow them to address the toughest IT challenges in lowering the total cost of ownership, improving profitability and sustaining customer loyalty. 

We see a continuing revival of the sector, picking up from the global industry trend. There continues to be a cautious increase in ICT spending by the government and among corporate and retail businesses as the level of technology adoption increases. For that, we should give a big ‘thank you’ to our government for giving so much emphasis to the local ICT industry development and helping to sustain an ongoing healthy momentum for the industry. 

The continued growth in the telecommunications market and SMBs, as well as educational sector, continues to be the catalyst for us to perform even better. 

 

For previous CEO Outlook news click here

 

 


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