zara technology: go to market strategy - University at Buffalo School ...

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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usiness 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 addons
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 bookedup
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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unning 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-personpart-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 fullscreen
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.
13

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.
14

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.
15

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
16

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):
17

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.
18

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)
19

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
20

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.
Country
Singapore
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
21

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.
22

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).
23

Table A
Performance of Top 500 SMEs in Singapore
Total No
of
Employees
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
Total Section
Turnover
SGD '000
Distribution of Business Types in 2005
Company with
Highest
Turnover
SGD '000
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
SME Sales
Rank of
Company
with
Highest
Turnover
BUSINESS CLASSIFICATION
Total No of
Companies
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
24

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 realestate
and rentals:
25

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):
26

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:
27

Table C
Uses of Internet
Use Proportion of Companies
Broadband
Internet Narrowband
Internet Access Internet
1 For Sending or receiving mails 95.0% 90.4% 80.4%
2 For Information search
For obtaining information from government
90.7% 87.6% 73.8%
3 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
For making online payments to government
44.2% 45.8% 25.9%
7 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)
For Finding information about employment
24.2% 26.6% 8.0%
15 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%
28

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
29

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):
30

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:
31

Figure 19
Usage of IT Security Measures by SMEs
32

Management Style of SMEs in Singapore 1
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
33

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
Up to 50% support
3. Subsidy on registration of Web domain name
Projects which can benefit other members
of the industry
Up to 70% support for all participants
(including SMEs)
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
B. SPRING Singapore
SMEs can apply for a Local Enterprise Technical Assistance Scheme
(LETAS) grant to help defray up to 50% of external consultancy cost.
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
34

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 entrylevel
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.
35

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.
36

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 24hour
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.
39

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.
40

Figure 21
A Schematic Representation of SteelClaws
41

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 multicurrency
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.
43

Market Entry Plans
The designated system administrator is free to perform functions raging
from adding new tax rates to exporting all database data.
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 ).
44

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 $30, 600. It includes
the cost of a SUN Ultra 40 M2 Work station with Solaris 10 and warranty, 4 GB
Memory, set-up for up to 10 users (SUN Ray II, Monitor, Keyboard, Smart card,
warranty, and SUN Ray software), router, installation cable, etc. Additional, setup
for users will be charged S$ 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.
46

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 setup
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
47

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-infour
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
48

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 ondemand
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 fullfledged
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
49

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, midmarket
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 breakeven
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.
50

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)
52

Table 1
A Comparison of 2008 Accounting Software (Contd.)
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 : 2A
A Comparison of ERP Software Targeted for SMEs
Core
Functionality SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
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
Credit Card account
Yes Yes Yes Yes Yes Yes Yes
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
57

Table 2B
A Comparison of ERP Software Targeted for SMEs
Core
Functionality SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
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
Project
Real-Time Order Status Yes No Yes No No No Yes
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
58

Table 2B
A Comparison of ERP Software Targeted for SMEs
Core
Functionality SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Data Warehousing Database at Customer Site
Online Database at Company
Yes Yes No No Yes Yes Yes
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
59

Table 2C
A Comparison of ERP Software Targeted for SMEs
Core
Functionality
Price dependent on
SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
SAP
Business
One
Peach
Tree
Basic Package Users Yes Yes Yes Yes Yes Yes Yes
Monthly Per Did not
Frequency of Pricing Monthly Per User Once Yearly User divulge Per User Once
$65 First User
Price for Basic Package FREE 100Mb Storage $199.95 $1,200 $10 $4,250 $1,200
Number of Users
One full
user and 5
limited
Any
Permitted Unlimited Five users Any number
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
Difference
between
current
software
and
upgrade
charged No No
Difference
between
current
software
and
upgrade
charged
Difference
between
current
software
and upgrade
charged
Charge for Upgrades No
$499 -
$1000
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
60

Table 2D
A Comparison of ERP Software Targeted for SMEs
Core
Functionality SteelClaws Quickbook
Training
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
SAP
Business
One
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
On-Line Course
No No Yes No Yes No Yes
Books No No No No No Yes Yes
DVD ROMS No No No No No No No
CD ROMS No Yes No No
Yes (third
Yes No Yes
In-Person Training Yes Yes Yes Party) Yes Yes Yes
In-Person training
Cost Yes $60-$180
$200-
$700
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
Peach
Tree
Did not
Divulge
61

Table 2E
A Comparison of ERP Software Targeted for SMEs
Core Functionality SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
SAP
Business
One
Supervisor access of business emails
Manage Business
Yes Yes No Yes Yes No yes
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
Peach
Tree
62

Table 2F
A Comparison of ERP Software Targeted for SMEs
NetSuite
SAP
Add-on Functionality SteelClaws Quickbook
Small
Business SalesForce
Microsoft
Dynamics
Business
One
Peach
Tree
QB Payroll
PT Payroll
PayRoll Services Name
Sol.
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
MSB
Depends on
Order
Payment Solutions Name
Financials PT Payments
Cost $250.00 $50 per month
BillPay Service Name Service
$15.95 per
month (20
payments) and
$6.95 for each
additional
Cost
payment
Online Back Up Name Service
$20 per
Cost
quarter
QB Merchant
MS
Web Accounting Name
Services
Accounting PT Web Acct.
Cost $50 per year $199.00 $150 per year
Time slips Name Timeslips
Cost $500 per year
63

Table 2F
A Comparison of ERP Software Targeted for SMEs
Add-on Functionality SteelClaws Quickbook
NetSuite
Small
Business SalesForce
Microsoft
Dynamics
MS
Office
SAP
Business
One
Peach
Tree
PT Website
Tools
Web Tools Name
Cost $500 $198 per year
Forecastes Name
MS
Forecaster
Cost $55,000
Third Party Add-ons 0 200+ 0 0 0 0 350+
64

Whole-Sale Trade
EMPLOYMENT SIZE
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005
ESTABLISH-
MENTS
TOTAL
EMPLOYMENT
PROPRIET-
ORS/
OPERATING
PARTNERS OTHERS RECEIPTS TOTAL
OPERATING EXPENDITURE
COST OF
PURCHASES
SOLD
NUMBER THOUSAND DOLLARS
RENUMERA-
TION OTHERS
OPERATING
SURPLUS
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
Retail Trade
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
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
Food and Beverages
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
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
VALUE
ADDED

EMPLOYMENT SIZE
Information and Communication
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)
ESTABLISH-
MENTS
EMPLOY-
MENT
TOTAL
GROSS RECEIPTS OPERATING EXPENDITURE
OPERATING
RECEIPTS
OTHER
RECIEPTS
TOTAL
RENUMERA-
TION
NUMBER THOUSAND DOLLARS
OTHERS
OPERATING
SURPLUS
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
66
VALUE
ADDED

EMPLOYMENT SIZE
Accommodation
Table 3
Key Indicators of Industry Groups by Number of Employees, 2005 (Contd.)
ESTABLISH-
MENTS
EMPLOY-
MENT
TOTAL
GROSS RECEIPTS OPERATING EXPENDITURE
OPERATING
RECEIPTS
OTHER
RECIEPTS TOTAL
COST OF
PURCHASES
SOLD
NUMBER THOUSAND DOLLARS
RENUMERA-
TION OTHERS
OPERATING
SURPLUS
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
Real Estate and
Business
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
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
VALUE
ADDED
67

Whole-Sale Trade
Retail Trade
Food and Beverages
SIZE OF OPERATING
RECEIPTS
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005
ESTABLIS
H-MENTS
TOTAL
EMPLOYMENT
PROPRIE-
TORS/
OPERATING
PARTNERS OTHER S RECEIPTS TOTAL
OPERATING EXPENDITURE
COST OF
PURCHASES
SOLD
RENUMERA-
TION OTHERS
NUMBER THOUSAND DOLLARS
OPERATING
SURPLUS
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
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
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
VALUE
ADDED
68

SIZE OF
OPERATING
RECEIPTS
Information and Communication
Transportation and
Storage
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)
ESTABLISH-
MENTS
EMPLOY-
MENT
TOTAL
GROSS RECEIPTS OPERATING EXPENDITURE
OPERATING
RECEIPTS
OTHER
RECEIPTS
TOTAL
RENUMERA-
TION
NUMBER THOUSAND DOLLARS
OTHERS
OPERATING
SURPLUS
VALUE
ADDED
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
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

SIZE OF OPERATING
RECEIPTS
Accommodation/Food and Beverage
Table 4
Key Indicators of Industry Groups by Size of Operating Receipts, 2005 (Contd.)
ESTABLISH-
MENTS
EMPLOY-
MENT
TOTAL
GROSS RECEIPTS OPERATING EXPENDITURE
OPERATING
RECEIPTS
OTHER
RECEIPTS TOTAL
COST OF
PURCHASES
SOLD
NUMBER THOUSAND DOLLARS
RENUMERA-
TION OTHERS
OPERATING
SURPLUS VALUE ADDED
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
Real Estate and Business
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
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