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Non-Traditional
Foreign Investment
By Michael Alan Hamlin
August 9, 1999
Most of us probably think of traditional
manufacturing capacity and exports of semiconductors and garments
when we think of foreign investment. But two companies — debis
IT Services and TelePhilippines — present interesting examples
of non-traditional investment into the Philippines. You should know
before reading further that my firm has recently done work for both
these companies, and so I have an obvious interest in saying good
things about them. Hopefully, you'll agree that they are worth writing
about if you choose to read on.
debis — that's not a typo by
the way — represents an innovative approach to outsourcing
information technology services. The company was previously the
IT department of Temic Telefunken Microelectronics here in the Philippines.
debis and Temic are both members of the DaimlerChrysler group. Temic
manufactures automotive subassemblies like antiskid systems that
are exported to manufacturing facilities around the world.
By spinning off its IT department
to debis, Temic lowered the direct cost of its IT overhead. Because
debis is now a separate company, it must build revenues and profits
by selling its services to other firms. So the spin-off provides
DamlerChrysler another revenue source, as well as overall lower
IT costs for the group. Note that debis is independently managed,
and DamlerChrysler companies are not obligated to outsource IT services
to the company. It has to earn the business. I assume this is to
help the client avoid "big company disease" and the inefficiencies
generally associated with sprawling conglomerates. The company expects
to earn around US$50 million in its first year.
Now the really interesting thing
about debis is the nature of its customer relationships. Take Temic
Radio Frequency Technology (TRF-T), for instance. This company manufactures
car radios in the Philippines. Its parent, Temic Telefunken High
Frequency Technology, is headquartered in Germany, but 70 percent
of its IT system users are located here in the Philippines.
As a result, the company — which
does only administrative and design work in Germany — realized
that it made little sense to maintain its IT infrastructure in Germany.
So TRF-T contracted with debis to operate its IT system, including
maintaining the server. When the 30 percent of users who work in
Germany log onto the system, they are logging onto a system physically
located in the Philippines, rather than the other way around.
Very advanced systems are running
on the TRF-T server, including SAP's R/3 enterprise software (I
must again disclose that SAP is a client of my firm.) that integrates
business processes, including finance, materials management, and
purchasing, for instance. So the heart of the company's operations
is run in the Philippines and maintained by another company.
ISIS Plc, a research company with
operations in the Philippines but based in London, has contracted
with debis to provide "desktop services," which includes
both hardware and software work necessary to maintain the company's
network, and to keep it responsive to users. Note that ISIS itself
represents another instance of non-traditional foreign investment
in the Philippines.
debis' biggest challenge now is expanding
business relationships outside the Temic group and DaimlerChrysler,
and it's success at doing this will ultimately be the chief determining
factor of the company's success or failure. A key initiative in
growing the company's business is the provision of IT services to
companies outside the Philippines, particularly in the area of software
development and configuration.
That's beginning to happen, according
to general manager for sales Jochen Joseph Oetzel. Recently debis
began work for a German chemical company configuring SAP R/3 to
its particular requirements. Obviously, this kind of knowledge export
provides a high-value return to debis and the Philippines as well.
An indirect advantage is that it promotes Filipino knowledge workers
to the global marketplace. With so many companies desperately looking
for knowledge workers — 300,000 jobs have gone unfilled in
the U.S. this year despite increased visa quotas — the export
of high-tech knowledge represents a huge — and profitable —
opportunity for the Philippines.
Aside from the importance of attracting
value-added non-traditional investment that contributes to economic
growth, the example of debis is in fact interesting because of the
value-added opportunities it presents for Filipino knowledge workers.
According to Ces Jose, who is the company's managing director, as
an independent firm debis has much more leeway in making investments
in people than in the past. As a result, the company is creating
jobs while reducing turnover dramatically.
Ms. Jose says that part of the increased
investment goes to salaries, but discounts the importance of salary
as a contributing factor to reduced turnover despite the competition
locally and internationally for Filipino knowledge workers and IT
experts. Instead, training, the opportunity for travel, and "constantly
looking for interesting projects," account for the boost in
employee loyalty.
Of the three, the importance of looking
for interesting or challenging projects is of particular interest
to me, and hopefully will be to many of you as well, who like me,
are always on the lookout for great people that love their work.
One of the best ways to attract achievers is to give them challenging
work that allows them to distinguish themselves.
Let's go briefly to TelePhilippines,
which is a joint venture between TelePerformance, headquartered
in Paris, and a group of Filipino entrepreneurs. The parent is principally
a multinational telemarketing company, although it also provides
other direct marketing services. It has offices in 25 countries
in Europe, America, and Asia. For me, TelePhilippines is an excellent
example of how coopetition works. While we have done some work for
TelePhilippines, we also compete for direct marketing business.
Many local and multinational firms
outsource their telemarketing initiatives to TelePhilippines. Clients
include a broad range of industries, from hotels to consumer products
companies. Because the firm employs very advanced IT systems, it
provides clients a daily perspective of their marketing initiatives,
which makes it possible to continually revise and tweak programs
for maximum return.
These two non-traditional firms demonstrate
the increasing importance knowledge industries to foreign investment
and economic growth. That contribution is camouflaged frequently
because it is much more difficult for economists to value investments
in "applied knowledge." But over the next twenty-five
years, it will be these non-traditional initiatives — I believe
— that will prove to be the Philippines' most important engines
of growth.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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