2. Camarines Sur: ICT promotion in a Province

Transcription

1 CY2006-No.1 (February 10, 2006) JETRO Monthly Philippine IT Industry Update Report 2006 No. 1 Table of Contents 1. INTRODUCTION CAMARINES SUR: ICT PROMOTION IN A PROVINCE CAMARINES SUR IT PARK CAMARINES SUR JAPANESE LANGUAGE LEARNING CENTER SUPPORT FROM JAPANESE COMPANIES, KEY TO THE SUCCESS OF CAMARINES SUR INITIATIVES AOTS SEMINAR ON JAVA/J2EE INTRODUCTION OF COMPANIES FUJITSU TEN SOLUTIONS PHILIPPINES (FTSPI) HEADSTRONG MANILA GLOBAL DELIVERY CENTER (MGDC) TRINITY SOFTWARE PHILIPPINES (TSP) WESERV THE PHILIPPINE IT INDUSTRY IN NUMBERS (2005, PART 4) SIZE OF PHILIPPINE SOFTWARE INDUSTRY FORECASTED GROWTH OF IT AND IT-ENABLED SERVICES INDUSTRY IN THE PHILIPPINES Introduction The Philippine IT and IT-enabled services industry is, by and large, centered in Metro Manila, in the central part of Luzon island. However, there are also a growing number of American and feature four software development and system operations maintenance service companies already engaged in providing services to Japan market or interested in future business with Japan. Recently announced survey data on the software industry, and projected growth rates for ICT service industry are discussed in the last section. 2. Camarines Sur: ICT promotion in a Province After Metro Manila, one of the areas where IT and IT-enabled services industries have made remarkable inroads is Cebu City in the Central Visayas, where there are already 12 call centers, as well as software development companies such as NEC Telecoms Software, Canon, NCR, Lexmark that have established their presence. DTI and BPA/P have also identified nine other provinces and regions that are considered the next likely ICT hubs. The nine are: Camarines Sur in southern Luzon, Pangasinan Province in central Luzon, Baguio City in northern Luzon, Iloilo City in Panay Island and province of Leyte in the Visayas, Davao City which is the largest city in Mindanao island, along with General Santos city, Cagayan de Oro city in the north, and Zamboanga cityin the west. (Refer to Map) European companies who are selecting cities and areas in the provinces whose human resources are not yet utilized, and where the business environment is more economical. This is in the light of the intensifying competition over human resources, and the increasing labor and office space rental costs in the metropolis. In this issue, we will report about IT industry promotion in the province of Camarines Sur, one of the nine new potential ICT hubs identified by Department of Trade and Industry (DTI) and the Business Processing Association of the Philippines (BPA/P). We are also featuring training on Jave/J2EE which were supported by the Association for Overseas Technical Scholarship (AOTS). In the company introduction section, we Baguio Pangasinan Iloilo Camarines Sur Cebu Leyte Cagayan de Oro Davao General Santos Zamboanga Copyright 2006 JETRO Manila Center Page 1/11

2 A delegation of 16 members composed of representatives from the member companies of the Japanese Chamber of Commerce and Industry in Manila, the Japanese Embassy, JETRO Manila Center, among others, visited the province of Camarines Sur on January 27, Under the strong leadership of their 37year old governor, Luis Raymund F. Villafuerte, Jr. (in picture), the province has been implementing strongly Japanese market oriented development promotion strategies in their current major industries agriculture and fisheries as well as newly focused industries for future ICT and tourism. In a country where there is a strong preference and affinity for U.S. and Europe, because of the desire to utilize its peoples English language skills, Camarines Sur is noteworthy in its strong interest in expanding business ties with Japan. The Japanese delegation is welcomed at the airport by Gov. Villafuerte, provincial officers, and children from the community (January 27, 2006) 2.1. Camarines Sur IT Park Camarines Sur Provincial Capitol Complex is located in the capital town of Pili, reachable by 40 minutes flight from Manila to Naga airport, and then ten minutes car ride from the Naga airport. The 5 ha. IT Park operated by the local government of Camarines Sur is located inside the Provincial Capitol Complex. Table 1:Basic Information about Camarines Sur IT Park Location Pili, Camarines Sur, Bicol Region, Land Area Size 5 ha. Total Floor Approx. 5,000 SQM Operated by Provincial Government of Camarines Sur PEZA May 27, 2005 Registration Communication Infrastructure E1(2Mbps) X 2 (Can easily upgrade to 10Mbps) Emergency 750KVA Backup Generator Power Supply Major Facilities Call Center(500 seats) (Including those Animation Production Offices that are under Software Development Offices construction / in IT Based Educational Facilities and plan) Rooms & Labs (16) Remote Learning via Satellite Online Library Business Center Conference Halls& Auditoriums Administration Office Residential Areas Fast-food & Recreation Center According to Gov. LRay Villafuerte, IT Park locators would enjoy the following additional incentives given by the local government of Camarines Sur on top of all incentives granted by PEZA. Free training provided by the provincial government Japanese Language (More detail to be reported in the latter part of this report.) English Proficiency Training for Call Center Agents Animation Training(2D and 3D) Basic Computer Training Call Center Agent Training Free office rental to IT park locators(6 months to 1 year) Preferential leasing rate The governor offered the free use of the training facilities in the IT park for companies which are considering locating to the IT park or hiring from Camarines Sur when they want to evaluate the Copyright 2006 JETRO Manila Center Page 2/11

3 capabilities of human resources available in the province. Companies should just send their instructor/trainer and conduct Table 2:IT Graduates from Bicol Region School No. of Year Graduates , ,244 training, then evaluate the human resource or gather other information necessary for making investment or recruiting decision. There are 6 universities and 32 colleges that offer IT courses within Camarines Sur. Over 3,000 graduated from IT courses as a total of Bicol Region in (See Table 2) It is worth a special mention that Ateneo de Naga University in Naga City of Camarines Sur offers 4 year Animation Course. Ateneo de Naga students are regular awardees of Short 2.2. Camarines Sur Japanese Language Learning Center Camarines Sur government s industry promotion and development policy is unique because it is highly Japanese market oriented, lead strongly by the governor himself. The Japanese Language Learning Center established in February, 2005, run by the local government tells how serious they are about tapping Japanese market. Three Japanese nationals, all of whom are certified Japanese language teachers are sent to this training center from AKI Foundation, headquartered in Quezon City, Metro Manila. Under the scholarship program of the local government, qualified participants who passed the interview screening can enjoy the training for free of charge. Animation contest held annually during e-services Philippines. In the Animation Training Facility in the IT Park, 30 trainees were working on the free hand drawing for 2D animation on the first day of 6 month Animation Training. Three trainers from Manila based animation company Woodpecker Studio were conducting the training and workshop. 3D animation training will follow the 2D animation training. Camarines Sur IT Park plans to prepare 500 seats for call center operations. Of which, 90 seats are ready for occupation as of January, graduates, according to the teachers. Mr. Akitsugu Orui, CEO of AKI Foundation (left end) and Japanese teachers sent from the foundation to Camarines Sur Japanese Language Learning Center The Japanese delegates witnessed the first graduation ceremony of Camarines Sur Japanese Language Learning Center. 97 graduates received the certificate from governor one by one. Presence of the Japanese delegates boosted the morale of The first graduation ceremony of the Japanese Language Study mission members being briefed by Gov. Villafuerte (left end) while visiting the office spaces, in Camarines Sur IT Park, being prepared for software development companies. Learning Center was held on January 27, 2006 with the presence of Japanese study missions from Manila. Nihongo Level 3 and Level 4 course graduates, 13 and 84, respectively, received the certificates from the governor. All of them had taken the JLPT exam conducted in Manila in December 2005 and are waiting for the results expected to be announced in March, Among the graduates are 24 people with IT related diplomas such as BS Computer Science, BS Information Technology and BS Electronics and Communications Engineering. Background of Copyright 2006 JETRO Manila Center Page 3/11

4 other graduates varies widely. Some are nursing students who want to study Japanese language in preparation for the opening of Japanese market for nurses and caregivers. Others are from tourism industry who wish to attend to Japanese tourists in Japanese language, for example. The center expects to expand the number of graduates to 320 in objective viewpoint, it might take some time before Japanese companies will see the province as an attractive investment location, because the province s development has just started. However, seeing the intense enthusiasm of the governor and his constituents for working with Japan, there is no doubt that all of the mission members from Manila now have the strong desire to extend their cooperation to the province. Some executives from Japanese software development companies expressed their honest opinion that Japanese proficiency level we really need in doing business with Japan is Level 2. Frankly, level 3 is not sufficient. If the learning center 3. AOTS Seminar on Java/J2EE Seminars on Java/J2EE were held from mid-january until mid-february, at the PhilNITS training facilities in Manila and could produce level 2 graduates, we will be very much interested Cebu. At both locations, a total of 40 young Filipino to hire. It may be true. However, Japanese language training initiative at such a large scale undertaken by a local government cannot be found anywhere else in the Philippines. This is a very programmers completed the 10-day training sponsored by AOTS. 1 In Manila, 35 individuals applied for the 25 slots, requiring the organizers to re-schedule training for the remaining unique program at its very early stage, bearing fruits slowly. applicants in the next seminar from February 27 onwards. This There would be a very high chance of making a big difference in the future if this program could sustain for long term. is a clear indication of the high level of interest of Philippine software companies in acquiring Java/J2EE skills. The seminar was planned and implemented by Tokyo-based AcrossGate 2.3. Support from Japanese Companies, Key to the Success of Camarines Sur Initiatives What left the strongest impression on the delegation were the Global Software Inc. (President: Mr. Kazuaki Miyoshi) under the AOTS support scheme. This was their second implementation of the seminar, the first being in October strong desire and the active pursuit of the young and energetic governor and his group to strengthen their partnership with Japan. The message of the governor, that The key to the success of our efforts is the achievement of a Win-Win scenario for both locators and their client companies, and the province of Camarines Sur; and our provincial government will provide full support in every way possible to achieve this was well-received by the Table 1:Java/J2EE Seminar Contents Course Title Introduction to Java Object-Oriented Programming with Eclipse Introduction to J2EE Application Development with Eclipse and Tomcat Learning Practical J2EE Application Development with Struts Comprehension Test (PhilNITS-FE Afternoon Examination (Java) ) Days delegation. Whether these industry promotion policies of the province will prove successful or not will depend on how many Japanese companies will know of the efforts of the province and the keen interest of its governor to partnership with Japan. The establishment of actual businesses, no matter how small, and a growing track record of success stories, will be crucial. From an Using Eclipse, Tomcat, Struts which are widely used open source environments in Japan, the seminar devotes 70% of the time to hands-on training to acquire practical development skills using these technologies. The seminar was conducted by one main instructor and one assistant instructor, allowing them to give high level of attention and care to the questions of participants. 1 Manila: January 16 to 27, 2006; Cebu: January 30 to February 10, Copyright 2006 JETRO Manila Center Page 4/11

5 The textbooks used were English translations of textbooks developed in Japan that are widely used in training Japanese engineers. Participants also learned specific techniques in tends to be loose or more tolerant about time and schedules, so I think that the Philippines and Japan, have to come up with a rule that both sides will find acceptable dealing with garbled characters arising from the use of double-byte character sets something that they cannot experience in English system development. The contents of the seminar were designed with an awareness of the knowledge and skills needed in dealing with development projects for Japan. Also, aside from skills related to Java, time was also set aside for thinking about and discussing the differences between Japan and the Philippines with regard to culture, practices, language, process and quality awareness. The instructor presented various virtual situations to the participants, and ask the them how they would deal with the matter, why, and how the matter would usually be dealt with in Japan, and why giving both the instructor and the participants the opportunity to exchange ideas among themselves. This method helped the participants achieve a deeper understanding of the matters discussed. The contents of the seminar were composed of theory and case studies, and aimed to remove the gap between the IT industry culture and practices of the Philippines and Japan, and contribute to the smooth implementation of projects for Japan. Mr. Yozo Watanabe of Across Gate, the main instructor, shared his observations and impressions after the seminar: There is absolutely no problem with the capability of Filipino engineers to learn new technology. A common trait of many of the participants is that they like doing further research or investigations, and have a positive attitude to learning new technology. While the participants come from various companies, there is a natural exchange of information and desire to help one another. I was able to confirm their capability to work effectively as a team. In doing business between Japan and the Philippines, attention should be paid to differences in culture and practices, more than differences in technology. For example, the Philippines Top: Manila seminar participants with main instructor Mr. Watanabe (front row, extreme left) and the assistant instructor Mr. Alex Macainag (rear row, extreme left) Bottom: Manila seminar participants serious in their study 4. Introduction of Companies 4.1. Fujitsu Ten Solutions Philippines (FTSPI) FTSPI was established in 1999 with 80% equity participation of Fujitsu Ten (based in Kobe City, Hyogo Prefecture) and 20% from Fujitsu Ten Philippines (based in Laguna). As of January 2006, the company had 238 employees (of which 5 are Japanese), and is engaged mainly in the development of software and hardware for car audio, embedded software for automobile control equipment, simulators for developing electronic control equipment, as well as development of software development Top: Car audio sold in Japan market Bottom: Localized car audio FTSPI was involved in developing both products Copyright 2006 JETRO Manila Center Page 5/11

6 tools. The company is the only overseas software development team of the Fujitsu Ten Group, and has shown steady growth and expansion of its number of employees and revenue since its establishment. While it was created initially for its cost reduction benefits, the company is now acknowledged as a valuable source human resource in the light of serious shortage of embedded software development engineers in Japan. for administration of FTSPI is the person who is leading the administrative functions of the growing organization. She gives due consideration to a variety of company needs such as in-house training and education with curricula adjusted to career levels; creation of a labor management council; a monthly company newsletter; sports events, lecture series on behavioral and inspirational topics by inviting well-known personalities providing opportunities for human resource development, labor The FTSPI workplace has adopted many of the practices in manufacturing such as signs for 6S Promotion, QC Circle management, smooth communications and keeping employee motivation and morale. activities, with large boards indicating the status of projects undertaken by various Mr. Ikezoe also talked about the company s future: While our departments. The activities are presently limited to developing products according company president, Mr. Akira Ikezoe (at right in the picture) says: By to the specifications we get from our mother company, in the future, we aim to become capable of recommending to Japan the products developed independently in the Philippines. Prior to combining Japan s coming to the Philippines, Mr. Ikezoe himself had a not very good emphasis on discipline and the Filipino culture of working with dynamism, energy and fun as if the balance and synergy of yin and yang we can create a power as a team that can achieve things which cannot be done by Japanese alone, or image of the country, thinking of it as a far off country, a dangerous place that he would not like to visit. He was pleasantly surprised however that it takes only a four hour flight to get to the Philippines from Japan, and that it is easy to get used to living here. Filipinos alone Headstrong Manila Global Delivery Center (MGDC) FTSPI originally started as a team for embedded software development and in 2005, the hardware design department established was newly established. In addition, from April 2006, FTSPI will absorb the 35 employees that used to work inside Fujitsu Ten Philippines, developing business applications for production management and personnel management, among others. With this, the organization will have a variety of skills that will be able to work on a broad range: hardware, embedded software, business applications software, design support tools, and others. It is expected that the company will have more than 300 employees within Headstrong (formerly James Martine & Company) is an IT Consulting Service Company headquartered in Fairfax, VA., in the U.S.A. Established in 1987, Headstrong MGDC provides application software development service, application management and maintenance service for major ERP and/or CRM solutions such as SAP, Oracle and Siebel and e-learning and technical communications services focused in ISVs. In the area of application development and application management services, MGDC has strong track record and expertise in domains such as financial, retail/manufacturing and technology services industries. MGDC s market has predominantly been U.S. and Europe in the past years. For the future, however, Ms. Gloria L. Joven (at left in picture), assistant vice president MGDC is very keen on exploring Japanese market and it is Copyright 2006 JETRO Manila Center Page 6/11

7 closely coordinating with Headstrong s Tokyo office to pursue this strategic direction. Headstrong MGDC has achieved ISO9001:2000 in December 2003 and CMMI Level 3 in April 2004 and it is targeting to achieve CMMI Level 5 in Having a parent company that stresses the importance of process and methodology in providing consultation services, the business culture at MGDC is also highly process oriented and well organized. When MGDC is engaged in application outsourcing services, they provide not Photo: Management Meeting at Headstrong MGDC only the operation, management and maintenance of the application systems but also, in many cases, process improvement consultation and advisory services as well Trinity Software Philippines (TSP) TSP was established in November 2003 as the offshore development team for the main product of its mother company Such high value added consulting service of Headstrong SWaN, 2 the ERP package for small and medium scale MGDC is supported by a pool of well experienced application and technology consultants. At MGDC, 13% of the resource pool has more than 10 years of professional experience and 34% has enterprises called New RRR (Triple R). As of February 2006, it has 8 employees (of which 7 are software development engineers) under its vice president, Mr. Takeo Yamamoto. that of 6 to 9 years. Further, the company mandates that all employees must undergo at least ten days of training/education each year. Headstrong has always emphasized human resource development. As of January 2006, there are about 300 employees at MGDC and it plans to expand to 1,000 employees by the end of When necessary, Headstrong MGDC can flexibly utilize the resources of two other Headstrong global delivery centers located in India. One is in Noida with 500 headcount resource pool and another in Bangalore with 500. This There are three reasons why the company chose the Philippines for its offshore operations. First is the use of English as official language. For many of the Japanese employees of the company are fluent in English, all communication at TSP is conducted in English, with no need for Nihongo. Aside from this, all registration and other procedural requirements of government as well as business contracts, all written in English, can be understood directly by Japanese key decision makers without is a significant competitive advantage for many software service need for an interpreter. The second is the company s companies in the Philippines very often face the challenge of resource pool scalability compared to India and China. assessment that the long-term foreign exchange risks are low. They assessed that considering the long term trend of foreign exchange rate between Yen and Peso, increase in rental and other costs due to domestic inflation in Peso will not be a cost increases when computed in Japanese Yen. The third is the 2 SWaN: joint venture company that provides total solutions for Japan s small and medium scale businesses, centered on its main ERP product New RRR (New Triple R) ; established in 2001 by three companies Woodland Corp., NTT East Corp., and Canon System Solutions (Former Sumitomo Metal System Solutions) Copyright 2006 JETRO Manila Center Page 7/11

8 high technical skill level and work ethic of Filipinos. A little more than two years since its establishment, the company was able to achieve cost reductions as they expected. The company plans to expand the capacity in the Philippines. At the same time, it plans to increase the opportunities for Japanese and Filipino members to interact in person by directly meeting each other, in order to further improve mutual understanding and Mr. Yamamoto was a former JICA Overseas Cooperation achieve a smoother operation of its projects. Volunteer, and was stationed for three years as a Systems Engineer in the water district of Baguio in northern Luzon. He believes that the software manpower resource of the Philippines has high potentials, and that engineers are able to show excellent 4.4. WeServ WeServ was established in 1993 as the application software development and support subsidiary of Fujitsu Philippines ability when guided properly. Seen from Japanese eyes, (established 1975). At present, it has 400 employees with a Filipinos are considered weak with regard to completeness in delivering their work, but this is not a problem for this company because they have prepared the appropriate support on the Japan side. From the company s experience, they feel that while the legal framework is well established, there are many problems with regard to its implementation and appropriate management. For Mr. Yamamoto, he feels that in order to mix of regular and contract employees. The company established offices abroad: the US in 1998, England in 2001, and Japan in 2002 creating a global enterprise for the Philippines IT human resources. According to its president and CEO Mr. Norio Uehara, 30% of its current sales comes from export to Japan, with the remaining 70% for export mainly to North America. improve the attractiveness of the Philippines as an offshore outsourcing location, I would like to see improvements in Philippine s capability to implement laws and rules. In order for the Philippines and Japan to achieve a Win-Win business relationship, TSP management believes it is important for Japanese to be aware of some weaknesses Philippine may have and to accept and adopt the social values and norms such as the highest priority afforded to the family, without forcing Japanese styles or methods of doing things. For the division in charge of software development targeting Japan, the company implements a Japanese language course divided into Beginner, Middle and High Levels conducted in 4-month cycles. The company also conducts a Japanese language proficiency evaluation, which combines the Japanese Language Proficiency Test (JLPT) that tests reading and writing skills, and the company s own test for speaking skills. On the other hand, the company does not focus on Nihongo proficiency alone. Believing that its business geared towards English speaking countries is a way for its Filipino software engineers to leverage both their English skills, and technical capabilities, the company has been promoting a global business strategy. With the high degree of attention given to the CMMI preparation process from its North American business market, the company is preparing for Level 5 appraisal during autumn to end of WeServ is currently CMMI Level 3. Photo: Mr. Takeo Yamamoto (second from right, standing) and the software development engineers. After his experience working in North America and Asia, Mr. Uehara was assigned to WeServ some six years ago. He gives Copyright 2006 JETRO Manila Center Page 8/11

9 a high rating for Philippine manpower based on the point that work is completed through teamwork. He also observes that there is a tendency for engineers sent to work abroad on-site to exert even greater efforts and achieve greater productivity, compared to when they were working on offshore projects in the Philippines. 5. The Philippine IT Industry in Numbers (2005, Part 4) 5.1. Size of Philippine Software Industry 3 In the annual survey conducted among its 76 member companies of the Philippines Software Industry Association (PSIA) in November 2005, with valid responses from 40 companies, the expected sales for 2005 was P9.3 billion (approximately Y19.4 billion), with total employment of 10,596. For Mr. Uehara, the important point for successful offshore work, and global cooperation, is not just achieving a lower cost. He believes that this view must be reconsidered, and to pursue not just those merits that can be achieved on the short-term, but According to PSIA, they estimate that these figures from the survey represent approximately 85% of the total Philippine software industry. Growth from the previous year was 37% for sales, and 50% for employment. (Figure 1) to form a strategic approach based on a long-term Win-Win scenario. Mr. Uehara also said that his goal is to make WeServ number one in the ASEAN region, as an Offshore Development Center of the Fujitsu Group. Picture: from left, Ms. Ivy Francisco, Executive Assistant; Mr. Noriaki Komori, Manager for Japan Business; Mr. Norio Uehara, President; and Mr. Jun D. Lasco, Director for Japan Business. Figure 1: Sales and Employment of Philippine Software Industry Association (PSIA) member companies (Surveyed in November 2005) Figure 2: Sources of Revenue of PSIA Members Source: The data in this section are based on the results from the surveys conducted by the Philippine Software Industry Association (PSIA) among its members in November 2004 and November Copyright 2006 JETRO Manila Center Page 9/11

10 Revenue from the software development service accounts for 90% of responded PSIA members total revenue. (Figure 2) Comparing export sales to domestic market sales, 95% of industry enjoyed in the past several years. On the other hand, back office services segment is expected to grow at high rate from now on. software development service sales is for export, showing the great dependence of the Philippine software industry on exports. (Figure 3) Figure 4: Forecasted Growth of the Philippines IT /ITES Industry (in $1 billion) (Source: BOI/CICT) Figure 3: Percentage of Export Revenue for PSIA Member Companies 5.2. Forecasted Growth of IT and IT-enabled Services Industry in the Philippines On January 12, 2006, there was a briefing session about the largest IT service exhibition in the Philippines the 6 th e-services Philippines In this session, the IT and IT-enabled services industry growth forecasts conducted jointly by the Philippine Business Processing Association (BPA/P), the Board of Investments (BOI), and the Commission on Information and Communication Technology (CICT) were presented. The segments included in the forecast are call centers, back office services, medical/legal and other transcription, animation, software development and engineering design. For 2005, the combined industry sales amounted to $2.49 billion, an increase of 137% compared to the previous year s $1.05 billion. (Figure 4) Since 2000, call centers and contact centers have led the growth of IT and IT enabled services industry in the Philippines. In the coming years, the growth of call center industry is expected to slow down to about 50% from over 100% growth per year the 4 For information on e-services Philippines 2006 refer to 2005 Series Report No. 4 Copyright 2006 JETRO Manila Center Page 10/11

11 Useful Philippine Investment Information available on the Internet (In Japanese) 1) Philippine Investment Manual (Investment Priorities Plan) prepared by the Board of Investments (BOI) 2) Flowchart for registration of business in the Philippines. Summarizes the procedures for PEZA and BOI registration in order to avail of various investment incentives, as well as the registration at the Securities and Exchange Commission (SEC), which is required for all types of business establishment except for single proprietorships. 3) Investment Guide to the Philippines: concise introduction especially to industries where foreign investment participation is encouraged (semiconductor parts, office equipment and information communication equipment, automotive parts, furniture and garments, IT services, BOI, engineering, animation, contact centers and others). 4) Documents required for business registration (SEC, PEZA, BOI) 5) Country / Region Information and Data of JETRO - Philippines Copyright 2006 JETRO Manila Center Page 11/11