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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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MARCH 4, 2003 SPECIAL REPORT: EMERGING TECH MARKETS South Korea: Tech's Test Market [Page 2 of 2]
After improving their operational efficiency over the past several years, Korean conglomerates, or chaebol, are also beginning to place greater emphasis on better customer service. This trend is particularly notable among phone companies. "With the telecom market reaching saturation and competition among rivals remaining fierce, telcos are locked in a race to keep their customers," says Park Jyung Hwa, an IBM Korea marketing executive. They're spending particularly on customer-relations-management software and systems. Korean research company Knowledge Research Group forecasts a 30% rise in CRM software spending this year after a 75% jump last year. IDC expects an 11% increase in overall software demand in Korea this year, to about $2 billion. BANKS LEAD THE WAY. The country's digital-or-die mentality has also been fueling a spending spree in servers and data-storage devices. Hewlett-Packard (HPQ ), which is the largest technology multinational operating in Korea, reaped an increase in sales of about 10%, to $1.34 billion, last year. Given the economic uncertainties, HP is reducing its growth projection to 5% to 6% this year. "But we expect a recovery in the latter half of this year," says HP Korea CEO Choi Joon Keun. "With broadcasters, banks, and manufacturers all expanding their storage capacities, that sector is still recording the fastest growth in our hardware business." Banks, which have gone through a period of deregulation and consolidation, are in the forefront of a drive to improve efficiency as well as to adopt next-generation technology that will support their efforts to sell insurance and securities. Banks are also aiming to boost their profits and return on equity by cutting down on lending to riskychaebol in favor of retail customers. That change has led to greater investment in systems aimed at offering the kind of customer service that can compete with such retail banking giants as Citibank (C ) and HSBC (HBC ). Local companies are likely to become even more competitive vs. U.S. outfits in years to come: South Korea's IT output, the bulk of it for export, accounted for 15.5% of gross domestic product in 2002 and is estimated to hit 17% by 2005 and 20% by 2010, according to the Korea Information Society Development Institute (KISDI) and Samsung Economic Research Institute. "FULL CONVERGENCE." Lee Inn Chan, an executive director at state-funded KISDI, expects Korea's entrepreneurial zeal, unleashed after the Asian economic crisis, to create many tech startups that will roll out innovative online products. Already, education-related content providers and online gaming companies are making handsome profits in the $1.1 billion market for online content. "I have no doubt Korea will be one of the first places witnessing the full convergence of fixed-line and mobile communications," Lee says. That could spell opportunity for U.S. tech outfits with promising new applications and experience in providing technology services. South Korea's growing tech market, top-of-the-line infrastructure, and population of consumers ready to embrace high-speed services makes it a country well worth jumping into.
 By Moon Ihlwan in Seoul, with Amey Stone in New York Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | MARCH |
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