Mon, Feb 04, 2002 page18

• Exploring the China market

  Derek Williams, executive vice president of Oracle Corp's Asia-Pacific division, sat down with 'Taipei Times' staff reporter Dan Nystedt to discuss the software business in 'Greater China' and prospects for the industry in Taiwan

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  Taipei Times: What kind of business is Oracle doing in "Greater China," how has it been impacted by the downturn?

  Derek Williams: I guess there are some common threads whether it's Taiwan, Hong Kong or China and that is that we've always done a lot of business with governments and government agencies. We've always done a lot of business in telecommunications, both fixed-line, mobiles and most recently, value-added services. We've also done a lot of business in the financial services and that would be a common thread really ... if you asked which three industries are we very strong in, in the three geographies, it would be those three. That would be one common thread.

  

  Oracle's Derek Williams spoke with the Taipei Times about using experience gained in Taiwan to explore the China market.

  PHOTO: CHEN CHENG-CHANG, TAIPEI TIMES

  I think the second common thread as far as Taiwan and China is concerned, and obviously Taiwan is showing leadership here, is the whole area of manufacturing: ERP (enterprise resource planning software -- consolidating all information within a company and making it useful for planning), and supply chain (software). Taiwan has a much more sophisticated set of manufacturing companies and much more sophisticated supply chains.

  So, a lot of what we do here in Taiwan, we and our customers learn about what you can do and then apply a lot of that principle and thinking to organizations in China and also Taiwan companies operating in China. Increasingly, we're seeing an organization work with us here in Taiwan, go across to China and continue to use our technology as a common technology -- often, in fact, still holding their major systems center here in Taiwan.

  TT: How have companies been affected by the global slowdown?

  Williams: I would say Hong Kong has been affected the most, and that is quite interesting because leading up to Sept. 11, Hong Kong was actually holding up quite well, even with the IT slowdown in the United States. But post-Sept. 11, Hong Kong really has had a very tough time. Whereas Taiwan had already seen in many industries a slowdown over a more progressive period of time. It wasn't the IT slowdown in the US as much as some of the issues which were affecting Taiwan itself, both in terms of ... obviously the introduction of the new government and that settling down and the introduction of some of the issues associated with stock market-falling pressures, had already affected some of the development here, therefore we have not seen the same dramatic slowdown we saw in Hong Kong in Taiwan.

  Now of course China is really the total opposite. There was no slowdown associated with the IT recession in the US, there was no slowdown associated with Sept. 11, and basically the market is still showing very dynamic growth. For us, basically, China is a market where we have been growing at 100 percent per annum. We have seen very good historic growth and one would hope that it may be able to continue and I think it can.

  TT: Is Oracle seeing a significant return on its investment in China?

  Williams: Yes. I think one of the reasons why we have seen a good return on our investment in China is we were a very early entrant. We entered China in 1990 and became a wholly owned foreign enterprise in 1991. That was a very early for a wholly owned foreign enterprise in the IT sector. And consequently, I think we have learned how we can be trusted: we have met our commitments, we have delivered on our promises and therefore I think our business is a very, very strong business. I think it's very interesting that CAAC (China Aircraft and Airports Corp), had to make a decision of who did they feel would be the company they could trust to put in all of the new financial systems into the airlines, all of the new airports, the whole of that developing industry: they chose us. Which I think for us was a big landmark for us in our business in China and that contract was struck probably 5 years ago now or 4 years ago now and is fully implemented and totally signed off. So now our business in China shows good return on investment and all of our profitability in China is plowed back into the business to develop the business. So, we do see enormous opportunities in China.

  TT: What impact is WTO entry having on growth in China?

  Williams: Of all the business drivers in China, the first clearly is WTO. WTO means the financial services sector is going through a transformation process. It means there are all sorts of opportunities in financial services, in securities, in capital markets. Also, what WTO is doing is driving local companies to become more productive, therefore they're bringing in ERP systems which they may not have done before, so we're seeing a lot of opportunity.

  Telecommunications, just the sheer growth of the mobile communications market is an enormous opportunity in the telco sector. We're seeing people like Railcom, which is basically the Ministry of Railways, setting up a telephone company, utilizing the fiber and cable which they've laid along the whole of the tracks, so telecommunications is another enormous growth sector. Yet, we've not even seen the start of the urban digitalization of Beijing for the [2008] Olympics. There's going to be a complete restructuring of Beijing. And at the moment there's a lot of work to be done there with the graphical systems, graphical information systems, where are the gas pipes, and that's yet to start. Then there's the whole issue of the environmental controls which will then be brought forward as a result of the Olympics, there's a lot of budget being put aside for that. I could just go on and on. It's not "is there opportunity?" I think there is enormous opportunity. But any software company has to be prepared to focus. You can't do everything. You've got to be able to focus, you've got to use your core competencies, you have to use strong partnership relationships -- 92 percent of our business in China is worked through our partners, they're very important to us. The local Chinese partners who understand the market and who understand how to best use our software in their environment. The opportunities are very, very significant. But you go there, you have to be prepared to be patient, you've got to be trusted and I'd say for most software companies that would take six, seven or eight years. You can't just expect ... some software companies from the US they will fly in one day, they will try to do some business and then fly out a week later. Then they wonder, "well we don't seem to have gotten much business" -- well you won't get much business that way. You've got to be prepared to essentially be a local company.

  TT: Is that what you meant about learning from Taiwan and applying principles to China?

  Williams: Yes, particularly in the manufacturing beat. The manufacturing sector, the supply chain, Taiwan shows great leadership through (David Lee, managing director of Oracle Taiwan Inc) and his team here in the implementation in those sort of systems on the mainland in China. Great leadership.

  TT: Do you shift a lot of your Taiwanese employees over to China?

  Williams: Yes, there is a certain number of people who do that and there will probably be more in the future. We also have a business in Taiwan which is keeping us pretty busy as well. There are over 250 users of our applications software here in Taiwan. So we are really the market leader in applications. Probably in most countries in the world, SAP would be the market leader and we would be No. 2, but here in Taiwan, I think we could categorically say we are No. 1.

  TT: In Taiwan companies are very conservative on upgrading to new technology. How do you overcome that and what are Oracle's top selling products in Taiwan and Greater China?

  Williams: I think the big advantage that small and medium-sized enterprises here in Taiwan have is the ability to work across borders, both in terms of in Hong Kong and what is offered there, and in particular in mainland China. So maybe the advantage here is that you can bring automation in to the 1,037,000 small and medium-sized enterprises here in Taiwan. But because of the growth opportunities associated with China, you could be faced with not having to lay any people off because you have that growth. I think the issue comes when you don't have growth and you bring in automation, that can replace people. But if you have growth, you can bring in automation and you do not have to replace people. That's a fundamental difference.

  TT: Is it easy to convince companies here of that?

  Williams: I think all of the companies here that I would put in the category of being visionary and you don't have to be a big company or a small company to be a visionary, you have to be a leader. There will be a leader in all segments. They already see it, they get it, and what happens is that by their leadership in the respective industry they're in, they'll pull through the rest of the organizations in their particular industry. That's what I see tends to happen right across the world.

  TT: Is there any different selling strategy you would use in China or Taiwan versus the US or the UK?

  Williams: Well, I guess its all about maturity of markets and the market coverage that you have. I mean, if you take the UK or the US, clearly these are markets Oracle has been operating in for -- well as far as the US is concerned since 1978 and the UK since the early 80s. What is does mean there is that you have a maturity of market and a maturity of customer. You also have market coverage which is pretty well sorted out in terms of what's the best way to cover the market. The difference in many of our developing countries in the Asia-Pacific, is that we're still in the early stages of market coverage. I mean if you just take the sheer size of China, for example. We have still only limited market coverage, either the geography, or through industries, or just the sheer size of the number of organizations. It's early days, and therefore the only differences I guess with what we use is we might be using a market coverage model in a developing country whereas we might be using a much more developed way of doing to business in a country which is fully developed.
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