Computerworld Hong Kong: SMEs make up 98% of HK firms -- wired or not?I was quoted in this article....
|Apr 10, 2005|
|Computerworld Hong Kong|
Despite its flagship property developers and iconic bank buildings, Hong Kong's business climate is dominated by SMEs. Small and medium enterprises (defined by the Hong Kong Productivity Council as firms with less than 50 employees for non-manufacturers) make up 98 percent of Hong Kong firms. These enterprises-from Mongkok noodle shops to small publishing groups in Quarry Bay-are the heart, soul and spine of Hong Kong business.
But how IT-savvy is a typical Hong Kong SME? Are they evaluating the merits of competing SCM and CRM products? Or are they simply jamming another roll of thin waxy paper into their dust-covered fax machines?
"One of the characteristics of Hong Kong SMEs is their vulnerability," said Sin Chung Kai, Hong Kong's legislative councillor for IT. "Some turn out to be successful. Some vanish."
HK SMEs: wired or not?
According to Sin, a 2004 Hong Kong government survey on IT usage and penetration in the business sector showed that while 50 percent of businesses had an Internet connection, the adoption level of e-business was even lower. "For example," said Sin, "only 12 percent had ordered or purchased goods/services via electronic means and 1.3 percent had sold goods/services via electronic means."
Sin added that about eight percent of businesses had used wireless and mobile devices, suggesting that the government needed to "step up its efforts in promoting IT, such as wireless technology and applications to SMEs."
"We have the Trade Development Council to help market development, while the Productivity Council [is] helping SMEs with productivity," said Sin. "But I also think the government should do more in helping SMEs to deploy IT to streamline their businesses."
"I believe the key technology issue for SMEs is not 'what's the hottest technology?', but whether they use or emphasize the use of technology at all," said Charles Mok, former president and ex-officio member of the HK Information Technology Federation (HKITF). "Local SMEs do tend to be more 'short-sighted'-you could say that there are relatively few 'must-use' incentives for them as far as using IT is concerned," said Mok. "However, many of them are now beginning to face a situation where they are becoming not as competitive as they should be, or need to be, in the changing marketplace."
Mok added that "one of the HKITF's projects in recent years has been to assist SMEs in the travel sector to better understand the issues preventing them from further IT adoption."
Hong Kong ranked third
"Compared to some of the other countries in the Asia/Pacific region, Hong Kong is more technologically mature," said Lau Tong Yen, senior analyst, Asia/Pacific SMB Research for research firm IDC. She said exposure to new technology helps distinguish Hong Kong SMEs from other regional ventures (IDC prefers the identical term "SMB" and uses a different metric: any HK firm with fewer than 500 employees qualifies).
"After implementing the necessary infrastructure, SMBs tend to look for solutions to help them to simplify their operations and processes," said Lau. "Such solutions will be mostly in software (ERM, CRM, BI) and services such as outsourcing."
"SMBs require solutions that cater to their specific needs and requirements based on industry [and] company size as well as their current level of technology adoption," said Lau. "Every single SMB has their own unique characteristics."
Lau ranked HKSAR SMEs third in terms of computerization within Asia/Pacific, slightly behind Australia and Singapore. "However," noted Lau, "some SMBs (especially the smaller-sized ones) need to seriously consider how they can use technology to further boost their productivity."
"GCIO? What GCIO?," declared Bryan Wong, senior software engineer for Alltronics Tech Manufacturing. "Frankly I don't know much about the GCIO and what [he] is doing to help HK SMEs."
Wong, who heads the IT department of Alltronics (an electronics manufacturing company with production plants in Shenzhen), was speaking generally about the Hong Kong's government role-or lack of it-in helping support his SME's IT efforts. "Up until today we have received zero assistance from the government in the area of IT," said Wong.
Wong had specific suggestions. "The most flexible way to help SMEs better utilize IT is to provide funding for training," he said. Wong acknowledged that the existing SME fund provides reimbursement for training but said it isn't IT-friendly: "The existing scheme a wide range of subjects and has a fairly small cap per organization."
"The typical SME IT shop is a small operation of several staff-in our case two in Hong Kong, four in China," explained Wong. "However, that doesn't mean that we face fewer issues than that of any large organization. Out of the two or three IT HK staff, there has to be a network engineer, system administrator, desktop support specialist, info security specialist, project lead, system analyst, software engineer, etc-basically these people have to possess a broad set of skills to be able to manage the IT operation."
How then do IT managers at HK SMEs cope with technical problems? "Support mostly comes from vendors," said Wong. But this type of support is limited. "We purchase a service from a vendor for an actual need," he said. "For example, we spend HK$30,000 a month for a couple of leased lines, so if we report problems related to the stability of those lines, the vendor will help. And as these support people are technically savvy, if I have a question about Linux or a firewall or VoIP, I may ask those types of questions while I have them on the line."
This sort of ad hoc approach has its limitations. "If it's a simple question, they may be give you a quick answer and won't charge you," said Wong, "but that's a favor. Anything more means you'll probably have to make a formal support arrangement."
"Other than that, it's basically [researching problems via] the World Wide Web, and good luck with finding the info you need," he said. "Whatever we do, we do it on our own or with the assistance of a systems integrator or software vendor."
Wong also suggested the implementation of a mentorship scheme. "Within a large organization, project managers or senior managers serve as mentors," he said. "To provide the same opportunity for people in small IT shops, a program that matches mentors with mentees would be ideal."
"Those of us who work in Hong Kong SMEs need support-someone to call," urged Wong. "The boss gives you one task, and you go figure it out-you go out on your 'adventure'. But I think it's helpful to find time to plan, figure out IT policies...most of the time we sit in the office dealing with daily chores and don't have time to look at new technologies."
Wong added that an annual conference of CIOs and IT managers-a knowledge-sharing summit-would be a great asset for the hardworking tech-managers who keep Hong Kong SMEs vibrant.
Lau from IDC said that "limited budgets have always remained a top concern for [Hong Kong] SMBs." Bottom lines are critical, but vendors argue that factors other than cost also come into play.
"[Hong Kong's] SMBs are characterized by lean staff resources, cost sensitivity, lack of IT knowledge and support, and strong focus on short-term results and delivery," said Raymond Choi, sales and marketing director, commercial accounts and SMB, HP Hong Kong.
"The challenge for Hong Kong SMEs comes when business is picking up and they want to be able to grow, but may not able to invest in a solution," said Lee Boon Lee, COO, SAP North Asia and president, SAP Hong Kong & Taiwan. "Price is important, but having a roadmap is important as well."
"As Hong Kong's business community is very diverse-spanning everything from family-owned Chinese enterprises to the branch offices of multinationals-SMEs are advised to keep a close eye on the latest industry trends," said Arics Poon, managing director, Oracle South China and Hong Kong.
"We understand that the issue of IT adoption among Hong Kong SMEs is not mainly a cost issue, but a lack of management expertise and IT skills," said Patrick Poon, executive, global mid-market business, IBM China/Hong Kong. "[The] SME market is an important strategy for us and we are committed to partnering with them."
IBM's Poon said his firm believed "the majority of HK enterprises are SMEs who are exploring some forms of transformation for sustaining business success," adding that "our key focus this year is to help SMEs reap growth opportunities through a series of initiatives including aggressive educational and marketing programs [and] tailored services and solutions."
One of IBM's cost strategies, according to Poon, is to offer "flexible financing terms that eliminate the upfront cost of IT system deployment." And the IBM executive pledged that his firm would conduct a research study who findings would results in "an advocacy program to engage the government, industry associations, trade bodies and other stakeholders to work together to support SMEs to innovate and grow as part of China."
"Many SMBs in Hong Kong may be simple service offices that need to communicate and collaborate with larger manufacturing bases on the mainland," said HP's Choi, meaning that "software, hardware and services that enable workers/partners located in Hong Kong and China to work together on the same project effectively is very important." Choi added that his firm offers "end-to-end solutions that package hardware, software and services to meet customized needs" and further offers consulting services for Hong Kong's SMEs.
"With many SMEs having mainland operations they should also consider more closely integrating their IT systems in HK and China," declared Oracle's Poon. "An Internet-based IT infrastructure with fully automated functions and single integrated database can help enterprises significantly lower their operational costs and make more informed business decisions."
Join the club
Choi added that his firm hosts an "SMB Club, within which [SMEs] can share experiences, learn from each other, and find support, business partners and clients," declaring that "the enthusiastic response to the HP SMB club is an excellent indication of general IT receptiveness among local SMBs. Choi insisted that there are "many local SMBs making use of IT to boost their bottom-line/productivity" and said that HP publishes reference cases each month at http://www.hp.com.hk/smb/success.
Choi said that while the government currently offers a "slew of financial assistance schemes to SMBs, they need to devote more resources to educating SMBs to understand how IT can integrate and assist their business." Choi suggested the government consider "regular seminars and workshops that deliver detailed case studies of SMBs that have successfully adopted IT in their business; comprehensive how-to sessions that cover different aspects of IT deployment such as security and hardware selection; and financing arrangements that maximize value and delivery."
"Limited budgets are a key constraint on many Hong Kong SMEs," said Oracle's Poon, adding that "lack of expertise and unforeseeable investment returns can hinder their investment decisions." Poon recommended that SMEs "identify a trustworthy IT partner that can provide a wide range of services, support and training to meet their practical needs," and said that "the emergence of Linux and open source software can also provide a much wider choice for SMEs, allowing them to choose low-cost commodity hardware which can lower their investment costs and minimize the risks involved in new IT implementations."
"Supply chain management, financial management, collaboration and communication applications are the key enterprise solutions being embraced by local SMEs," said Poon. "To ensure better results," concluded Poon, "HK SMEs could conduct periodic reviews on the performance of their IT infrastructure."
Sophistication through integration
Lee said that 60 percent of SAP's current global revenue comes from SMEs. As far as the Hong Kong variety: "The majority have what we call infrastructure investments, but are not sophisticated in using an integrated solution. Many use piecemeal solutions, such as simple accounting systems. Excel-for a lot of people, that's their CRM."
Lee lauded what he termed the "control and accountability of an integrated system," adding that his firm's strengths are "business applications and integration. Integrated applications cause users to be more alert and focus more on the business-get them thinking how to structure their reports. The owner of the biz has a better feel for accountability-that's one of the intangible factors, along with the branding.
When approaching a Hong Kong SME, said Lee, "the customer always tells us they are a very small company, so price is a critical criterion. Also, speed of deployment is essential, so long training periods are out of the question."
The SAP chief said that his firm's branding was important to their Hong Kong customers. "We've been in business a long time, and we give them [Hong Kong SME customers] a roadmap so they can start small but have a clear path to follow."
"We aim to see our SME business grow three- to four-fold over the next 12-18 months," said Lee.