Kiyofumi Kusaka sees opportunity for the Japanese IT company despite slower growth in Southeast Asia and India
Having served as president of NEC Thailand and NEC Corporation (Thailand) between 2001 and 2006, his second Asian stint, which started in Singapore in June this year, is a breeze, he told us in a recent interview.
Not only is it much easier to find talent with, for example, Cisco certification in Singapore—several hundred certified professionals compared to 30 in a Thai population of about 60 million then—getting to customer sites in the tiny island-state is less of an effort.
The veteran, who spent 20 years in the IT systems development and systems integration (SI) business of NEC, shared NEC Asia's services push, the company's proposition for Singapore's standard operating environment (SOE) project for schools as well as his outlook for NEC's corporate health in the region.
Q: What are your short- and long-term goals for NEC Asia?
Kusaka: I want to make NEC Asia one of the most advanced and established companies in this region. NEC has four [regional offices]—I want NEC Asia to be the fastest growing and biggest.
Currently, NEC Asia [does] develop original solutions and deliver them to Asean countries. In the future, we can expand to outside of Asean…to Australia also. It means we're not [just importing] products from Japan, we [provide] additional value—develop some applications or integrate several solutions—to the customers. We can take the lead to expand NEC's global business, not rely on hardware and software which NEC exports [from Japan].
How big is the SI business for NEC Asia?
Currently we are doing [mainly] systems integration, but we have to expand our business in systems outsourcing. Expansion will come from not only system integration, but [also] the systems services field.
In emerging countries—[we focus on] mainly hardware, but in more [mature] countries, it becomes more of a solutions business. So in Singapore, sure, we have to shift to service from systems integration, but like in Thailand or Malaysia, [it would] probably be systems integration as the main core. Indonesia, Vietnam or India, [NEC's] main portfolio should be hardware. There should be a mixture.
How big is the services component today?
If we talk about NEC's Singapore operations, 10 percent of our total revenue is systems hardware, only 10 to 15 percent is services-related. But I believe that this part can be expanded to more than 50 percent.
I understand that NEC Asia is a member of the Ednovate@SG consortium led by SingTel bidding for the SOE Schools project. What does NEC bring to the consortium, and how confident are you of winning the approval of the Ministry of Education?
For many years, we have been building good relations with the Ministry of Education (MOE). We think we understand the requirements of the customer. Solutions business normally starts from understanding the customers' situation and requirements.
We can [implement initiatives from] other countries…we do a lot of business globally. It means we can refer to…[projects in] the United States, Europe or Japan.
We want to propose more advanced concepts to the Singapore government. And of course, in some hardware [aspects], we also pay much attention to eco-friendly, energy saving [products]. We're also thinking how we can carry out advanced concepts with minimum energy expense. That will be the combination—some hardware that can minimize energy consumption and some advanced concepts.
Can you share some of these advanced concepts?
[There are] several components. We are saying that the school management system, which is a necessary component, [is one in] which individual schools have to manage more efficiently. SOE 2 will use next-generation networks, it means [faster] broadband. And broadband in Japan is more advanced. So the advanced solutions which are already available in Japan could be [recommended] to the Singapore government.
What are some of these newer technologies that the Japanese schools or education system is using, and how can they be applied to the Singapore system?
An example is security. Fortunately or unfortunately, Japanese schools pay much attention to [physical] security, especially the private schools. Even parents want to monitor where their children are—if they've arrived or left school. [Students' whereabouts] can be monitored by the latest technology. This is now getting common in Japan.
Parents that want to monitor children outside of the home do so with RFID?
Yes, it's a combination of mobile phone technology and RFID technology.
NEC launched the Eco Center at the NEC Technology Expo 2008 earlier this month, and this is part of the NEC's green initiative, the Real IT project. Can you share more details about NEC's green strategy, and why the project was developed?
The Japanese government is strongly promoting eco-friendliness. From the enterprise market point of view, CSR (corporate social responsibility) is one of the key practices. If companies cannot comply with the requirements for CSR, [they] are asked to withdraw from the market.
The Japanese market pays a lot of attention to CSR, and eco-friendliness is one of the big [areas] under that. It means if companies consume a lot of energy and [produce a high level of carbon emissions], they [are not sustainable].
We have to develop systems that have better performance but minimize energy consumption.
What are the key components of NEC's Real IT project?
Our first product is the Eco Center. At the same time we are delivering thin clients—this has been launched more than a year ago. The small boxes consume very little energy. The central system—using this type of technology—can achieve 50 percent energy savings. [PCs on the other hand can achieve] roughly 20 percent savings.
Would thin clients be on your recommendation list to MOE for the SOE Schools project?
Yes. This is [in line] with the customer's requirement also.
NEC already has customer adoption for its thin clients. Is that mainly in the financial services sector?
No, not only in that sector—we have some [customers in the] manufacturing sector as well.
One [aspect of thin clients] is to save energy, but another is security. [Users] cannot take out the information by USB [drives]…or via printouts.
Other than the Eco Center, what other green products and systems is NEC developing?
This is the middle range model. We haven't launched the low-end Eco Center, so in the future low-end or high-end servers will [be available]. Storage systems also consume a lot of energy, so we can apply similar technology for a future product.
What is your outlook for NEC Asia in 2009, in view of the current economic climate?
Worldwide, I think there should be an impact [from the financial meltdown]…not only our industry but also automobile, financial, and even insurance. It is very clear recession will happen. Emerging countries like China or India [will see] their growth rate reduced. But the point is, there is still growth.
NEC Asia's market is Asean and India. As far as this area [is concerned], I'm not so pessimistic. The growth rate will drop, but still I believe we can grow. In emerging countries, there is a lot of buying of communication [products such as] mobile phones and…backbone systems. NEC is quite good at backbone systems.
Last month, when I checked India and Indonesia, the subscribers were increasing and mobile operators [were still] investing. Emerging countries are still hungry for the latest technologies. Only 10 to 15 percent can enjoy this sort of product and services—the majority still don't have it.
Also, some governments, for example, India, [are affected] by security problems so many government customers pay [a great deal of] attention to security-related technologies. [Business from this sector] will remain quite steady.
Financial and enterprise markets will be reduced, but I believe we can [keep] this damage to the minimum. As I mentioned, if NEC Asia tries to expand the business into new areas like the services field, we can achieve a certain level of growth in the future.
Yes, it's a crisis but viewed from another angle, [it can be seen as] chance.