To celebrate its 30th Anniversary, SAP is presenting the Asian Leadership Series comprised of interviews with captains of industry speaking on key business issues for the 21st Century. Each interview highlights one of three themes -- vision, innovation or experience -- concepts that have driven SAP's success over the past three decades. Lee Kum Kee Hero Honda Tenaga Nasional Berhad Quanta Computer Singapore Airlines Legend Computer LG Chem

30 Years of SAP 1972 • SAP is founded as "Systems Analysis & Program Development" in Mannheim, Germany • Number of employees at year end: 9 • Total revenues: DM 620,000 • SAP R/1 solutions launched 1974 • Two local companies -- Rothhandle and Knoll -- select the newly developed SAP Financial Accounting (RF) System 1976 • SAP organizes as a limited liability corporation with the name of "Systems, Applications and Products in Data Processing" 1977 • SAP moves its headquarters from Mannheim to Walldorf 1979 • SAP R/2 solutions launched • Total revenues: DM 4 Million 1980 • 50 of the 100 largest industrial companies in Germany are SAP clients 1982 • SAP revenues increase to DM 24 million for the year and more than 250 companies in Germany, Austria and Switzerland are using SAP-developed programs 1985 • Headquarters in Walldorf expand by 10,000 square meters • Sales increased by another 45% • SAP system is used throughout Europe as well as South Africa, Kuwait, Trinidad, Canada and the United States • The first headquarters in the United States is established in Wayne, Pennsylvania 1988 • Subscribed capital stock increases from DM 5 Million to DM 60 Million, company goes public (Frankfurt and Stuttgart) • SAP gains its 1000th Customer, Dow Chemical 1989 • SAP stock is traded on the Zurich stock exchange • 1st SAPPHIRE Conference • 1st Stockholder Meeting • Established Asia Pacific presence with offices in Australia and Singapore. • Number of employees: Over 1000 • SAP enters Russian market and begins development of a Russian version of the R/2 system 1992 • SAP enters Hong Kong market • SAP R/3 solutions launched • Revenue increases to DM 831 million of which almost 50% derives from international operations 1993 • Customer base grows to 3,500 companies • SAP introduces an R/3 version for the Japanese market 1995 • Customer base grows to 6,000 • SAP share included in the German stock index (DAX) 1996 • SAP R/3 Release 3.1 is Internet-enabled 1997 • SAP begins developing industry-specific solutions 1998 • Company is listed on the New York Stock Exchange • Company launches new solutions for Business Information Warehouse, Business-to-Business Procurement and Supply Chain Management. 1999 • SAP delivers mySAP.com • SAP receives "Best Managed Companies" Award by Industry Week 2000 • Named "Most Successful Company Over the Long-term in the 90's" (Jury of 40 CEO's: Wiesbaden 3/10/2000) 2001 • SAP acquires Top Tier and forms SAP Portals • Revenues for SAP in 2001 top EUR 7.3 Billion 2002 • SAP acquires TopManage Software Solutions for its SMB offering • SAP customer base grows to 18,000 • SAP has over 27,800 employees • SAP celebrates its 30th Anniversary! Q1: What do you look for when choosing your management team? A1: The first thing is virtue. Then I expect all the team to put the company first -- this is a priority. They also need to be quick at learning. We are an IT company and the technology and environment is changing fast. We must also learn from other companies' failures and from the successes of the likes of Microsoft and Hewlett-Packard. All our executives have proven themselves by first being successful in a particular business segment. Q2: How would you describe your management style? A2: In the beginning when Legend was smaller, I was a hands-on manager. Now we are so much bigger, so I delegate. I make sure each manager is the right person for the job with the right kind of goals to aim at. Then all managers are given the chance to succeed. And if successful, I make sure the rewards are appropriate. Q3: Do you have a personal philosophy? A3: To always be credible. With Legend's success it's all too easy to lose sight of things. Basically, my philosophy is to keep my feet on the ground and don't get unrealistic.

In this interview, Liu Chuan Zhi, chairman of China's largest PC manufacturer, Legend Group, Ltd., speaks about the importance of his company's vision.



China's Legend Becoming a Legend in Its Own Time
In 1997 a local Chinese computer company stunned the global IT industry when it became the largest manufacturer of personal computers in China. Then just three years later it assumed the leadership position in the Asia-Pacific region (excluding Japan) ­ outselling U.S. PC giants such as Compaq, Dell, IBM and Hewlett-Packard in the process. That company, Beijing-based Legend Group, has not only maintained its number one position since, but has gone on to surge ahead of all domestic and foreign competitors. In 2001 Legend shipped 2.86 million PCs, giving it a dominant 27.5 percent share of the China market, which in turn accounts for 11.9 percent market share in Asia-Pacific.

Now the company is looking well beyond PCs. Through alliances, acquisitions and its own investment, Legend is aggressively extending its business into servers, software, cell phones, PDAs, Internet services and IT services. As a result, it is well on the way to creating its own legend in the industry. Yet the company started from the humblest of beginnings. In 1984 a group of researchers from the Chinese Academy of Sciences procured funding from the Academy to launch a business as a distributor of foreign PCs. "We didn't know anything about marketing," admits Liu Chuan Zhi, chairman of Legend, who also headed up the original founders. "So we had to learn quickly how to promote sales."

But the ex-researchers did understand that to succeed in China, PCs needed to be able to deal with the Chinese language. In 1985 the founders put their computer science backgrounds to good use by producing an add-in card that made it possible to process Chinese characters on a PC. By 1990 Legend had learned enough about the personal computer business to gamble on launching its own brand of PCs. Despite some struggles along the way, it has never looked back. In 2001, the company garnered record revenues of US$2.47 billion, with profits of $131.5 million, a 43 percent rise over the previous year. And this took place during a period of stagnant or negative growth in the worldwide PC industry, in general.

At the core of Legend's success is its vision of "Becoming the best over the long-term." This vision has helped the company build up a reputation of credibility and trustworthiness based on its commitment to the long-term. Liu tells how Legend paid back a loan in the mid-1990s that had become due, even though it meant taking a big hit in currency exchange losses. But the company was later able to raise another loan easily on the strength of that decision and its enhanced reputation. "When we commit to something, we always carry through on it," says Liu.

Market Savvy
Legend has also demonstrated that it understands the market better than its competitors. "We are always looking for ways to improve our business and products," says Liu. "So we came up with the idea of 'one-touch Internet access' for our PCs." Before Legend introduced the "one touch service," users who wanted to get onto the Internet had to make a trip to a government telecommunications office, fill out a special application form, then wait for approval. Then there was the question of finding an ISP, buying a modem, installing the appropriate software and completing the set-up procedure. "What we have done is to take care of all that for our customers," says Liu. "Now they just hit a key, and they are online." Such is the success of this service, that AOL Time Warner, the U.S. Internet and entertainment giant, has sought out Legend as a partner to create Internet services for Chinese users.

Another innovation is a computer designed especially for China's senior citizens. The low-cost PC comes without a keyboard. Instead, elderly users can use their fingers to write directly on the screen, or simply touch icons and menus to control the computer.

Competing Against the Best
Success has not come without some twists and turns along the way, of course. When the Chinese government eliminated import licenses and cut tariffs on PCs early in the last decade, Legend had a hard time competing with U.S. vendors like IBM, Compaq, HP and others, which threatened to eliminate the local competition with their superior resources and greater experience. But Legend used its deeper knowledge of the domestic market to survive the onslaught. By carefully managing inventories and account receivables, and tailoring its products to local needs, "the Chinese tortoise eventually won the race against the American hares," says Liu.

Legend also faced tough competition from certain domestic competitors, which were actually part of government agencies. This special relationship meant these state-sponsored companies received favorable treatment when it came to such things as purchasing components from overseas with foreign currencies. While they were charged three RMB for each U.S. dollar used in a purchase, Legend faced an exchange rate of eight to one.

"At that time, our only goal was to survive!" says Liu. "But while we faced huge costs, those state-owned companies lacked leaders who would take responsibility for decisions. As owners of Legend, we had to take full responsibility for everything we did. This helped us become a stronger company."

Liu, 57, married with two grown-up children, founded Legend when he was 40. "Some people think that's old," he says. "But given the Cultural Revolution earlier, I had no chance to become an entrepreneur. So I never thought of myself as being anything but young when the chance came with Legend."

Where Legend clearly outpaces all its competitors is in distribution. The company has helped established a chain of certified 1+1 PC specialty stores targeting consumers and young people. The chain now numbers 570 outlets in 300 cities. As well as selling Legend products, the stores provide advice on PCs and other digital products. At the same time, Legend boasts some 3,000 distributors active in 600 cities throughout China. "That's something foreign companies will find very difficult to match," says Liu.

Now that Legend sits atop the China market, what's next? "It's not enough to focus only on the local market, though the current slowdown in IT markets abroad may force us to do so for several more years," says Liu. "Still, we must now begin to consider moving into international markets." And for the skeptics who don't believe Legend can duplicate its success outside China, they need to recall that the company's vision, "Becoming the best over the long-term," has already helped Legend succeed against high odds and some of the best competitors in the world.

ERP Brings Results
In 1997 when Legend became the top PC manufacturer in China and Asia-Pacific (excluding Japan), the company decided it was time to implement a leading edge enterprise resource planning (ERP) system, having outgrown its various legacy systems that had served it well enough during its early years. "We had two fundamental goals for ERP, one being modest, one aiming high," says Liu. "At the very least, we wanted the new system to speed up our financial reporting and give us accurate figures in a timely fashion. The loftier goal was to integrate all our business processes."

After looking at what was available on the market, Legend chose SAP as its partner and began implementation of SAP's ERP system in 1998. Now, several years after implementation, Legend is delighted with the results. "It used to take over 200 accountants one month to complete our Group financial reporting," says Liu. "And even then, the figures were not always accurate. Now it takes two days with just 10 people to produce an accurate report."

Dramatic improvements in other areas are also apparent. Inventory had a turnover period of 72 days under the old system. Using ERP, Legend has slashed this to just 20 days. Similarly, turnover of receivables has been cut from 28 days to 18 days, while annual expenses have been cut overall by 10 percent.

"ERP has played an important role in our development," says Liu. "It has helped turn the company into an integrated enterprise and given management a system to work with."

In upcoming issues of the SAP 30th Anniversary Leadership Interview series, we learn how experience, innovation and vision are driving other major Asian corporations to become leaders in their fields.



Print Design by Step Design Consultants Ltd.
FAX: +852 2543 4269
www.step.com.hk