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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
JETRO Monthly Philippine IT Industry Report No. 7: Cebu Special Introduction
Cebu island is located some 600 km south of the
capital city of Manila, at the geographic center of the
Philippine archipelago. It has a fully equipped
international seaport, an international airport, and is
considered a major base of international and domestic
shipping, playing a major role as the gateway to central
and southern Philippines (Visayas and Mindanao
regions). Cebu City is the capital city of the Cebu
province, and is the second largest city in the
Philippines. According to the Cebu Investment
Promotion Center (CIPC) (www.cebuinvest.com), there
are some 300 foreign companies that have made direct
investments in Cebu, of which more than half are
Japanese companies. At the same time, Japan is the
said that Japanese companies play a major part in the
tourism resources such as beautiful coral reefs, and is
however, Cebu has been exerting much of its efforts, n
Communication Technology (ICT) industry. As part o
hosting an ICT trade show called “Cebu ICT 2005”
(www.cebuict2005.com: the site contains animation
“Cebu brand” as the ICT Hub in ASEAN region. Duri
exhibition and various conferences, it is expected that
this special edition featuring Cebu, we report our findi
Overview of the IT Service Industry in CebuEstimate of Industry Scale
The IT Service Industry in Cebu is still relative
small-scale, and because of its short history, it seem
that sales and export statistics for the IT service sect
alone are not yet readily available. Estimated numb
of employment in this industry segment may be helpful
giving us an idea about the size of the industry. T
results of a survey conducted by the Cebu Education
Foundation for Information Technology (Cedf-IT:to
Figure 1:Location of Japan, Philippines and Cebu
P 1
largest export destination for Cebu’s products. It can therefore be
economic development of Cebu. The island is blessed with rich
very familiar to the Japanese as a diving resort. In recent years,
ot only in tourism, but also in the promotion of the Information and
f these efforts, the Cebu Chamber of Commerce and Industry is
from 22 to 24 June 2005, at the Waterfront Hotel in Cebu City
features introducing Cebu). They aim to inform the world of the
ng the event, aside from the participation of local IT companies in
there will be many other participants from all over the world. In
ngs from our visit to the island in mid-March 2005.
ly
s
or
er
in
he
al
be
discussed in detail later) are helpful. According to this
survey, the total number of people employed by the
entire IT service industry in Cebu as of 2003 was
approximately 9,800. Breakdown is as follows:
Software Development Engineers 1,000; Engineering
Design 800; Others including call center agents 8,000.
Foreign Companies Entering Cebu
The core of Cebu’s IT service industry is made up of
foreign companies, which number relatively fewer.
JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
American and Japanese companies make up practically
all of the Cebu-based foreign IT companies which are
offshore service providers (Refer to Table 1; source:
CIPC). The Japanese companies based in Cebu
include software development service companies such
as ADTX Systems and N-Pax, which were featured in
our Report No. 4, together with NEC Telecom Software,
EPSON Software Development Center; engineering
design service companies such as Dash Engineering
(subsidiary of Mitsui Engineering & Shipbuilding Co.,
Ltd.), Tsuneishi Technical Services (Phils.) Inc.
(subsidiary of Tsuneishi Corporation); Booom!!
Interactive, a multimedia contents developer.
Table 1: Major Export Oriented IT Companies in Cebu
Cebu Based Filipino Companies in Software
Development
In the software development field, while foreign owned
companies are engaged in offshore development and
other export oriented activities, dominant majority of the
local Cebu companies are engaged mainly in supplying
the domestic market except for a few. According to an
IT Industry Survey conducted in 2004 through funding
from Germany, there are about 25 Filipino owned
software development companies in Cebu. Of these,
15 companies are members of the Cebu Software
Development Industry Association, Inc. which was
established in June 2004. The association’s mission is
to facilitate the creation and promotion of a globally
competitive and internationally-recognized software
development industry in Cebu, Philippines. According
to its founding president, Mr. Mike Jurado (President of
Primary Software), software companies in Cebu used to
have a strong rivalry with their competitors, with hardly
Cebu Data Population: Approximately 3.5 million Land Area: 5,000 square kilometers Languages: While English and Filipino are the official languages, Cebuano is more commonly used than Filipino. Currency: Philippine Peso (Php.)
(Php.1=JPY1.92 as of March 2005) Climate: Subtropical climate with temperature at 23-33 degrees Celsius all year. Annual rainfall is at 2,000 mm, with relatively little effect from typhoons compared to other regions. Exports: US$3.4 Billion(2003 Actual) Major Export Markets: Japan(17%), USA (13%), Hong Kong (6%) Major Export Products: Electronics (35%),
Electric Equipment (20%), Other Industrial Goods (19%), Furniture(10%)
Top 5 Export Companies for 2004: 1. Cebu Mitsumi, Inc. 2. Pentax Cebu Phils., Inc. 3. Lexmark International 4. Tsuneishi Heavy Industries (Cebu) Inc. 5. Teradyne Phils., Ltd.
Aside from these companies, since the latter half of
2004, call centers, many of them American, have also
come into the island. There are already 14 call centers
that have set up operations in Cebu, with another 8
companies presently making their evaluation of Cebu as
a prospective location.
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
Advantages of Cebu for Offshore IT Service any information exchange or communications within the
industry. With the set up of the organization however,
communication within the industry has become more
lively – a landmark change for Cebu’s software
development sector. Also, the background which led to
the establishment of the organization was increasing
incidence of low quality software development and
irresponsible abandonment of projects by freelance
programmers. Due to these, local user companies
developed a critical attitude towards the entire software
development industry, which the industry viewed with
alarm. Individual companies are able to deal with such
problems only on a limited scale, and the industry
realized that it must take action as an industry
association.
Advantages of Investing In Cebu
In 2002, upon the request of the Cebu Investment
Promotion Center (CIPC), the Japan Overseas
Development Corporation (JODC) conducted a study
designed to promote both local industry and Japanese
companies and their subsidiaries. An action plan was
also created. In the project report, the advantages of
investing in Cebu were listed, after hearings with
Japanese companies that have located in Cebu.
(1) Proximity to Japan and Southeast Asian countries
(2) Human resource advantages:
(a) Fewer labor disputes compared to other regions
in the Philippines
(b) Skilled laborers
(c) Excellent students and engineers
At present, member companies of the association are
engaged mainly in development and sales of their own
software, as well as system integration services
centered on such software products, with a minority
offering software development services. In terms of
size, almost all of the companies have only 20-30
employees, making it impossible for them to accept
large-scale development projects. However, because
these companies have been engaged in the
development of business application packages software,
they have attained certain levels in terms of business
process knowledge of domains they cover. As a general
rule, association accepts as members only those
companies that are based in Cebu and have Filipino
ownership at present, but plans to consider accepting
companies with foreign capitalization in the future.
(d) High CAD/CG design capabilities
(e) Relatively lower salaries (especially for IT
engineers) compared to Manila and other large
cities in China.
(3) Availability of principal infrastructure (airport, port,
electricity, water and sewage lines)
(4) Expectation for information and business exchanges
among Japanese companies concentrated in Cebu
area
(5) Rich natural environment and quality of life
(6) Good peace and order conditions for foreigners
Table 2: Average Monthly Salary for Selected IT Positions in Cebu
Position Monthly Salary
(in US $)
Software Engineer (Fresh Graduate) 250 - 280 Software Engineer (3 year experience) 320 - 450
Network Specialist / Administrator 400 - 600 Computer Technician 200 - 250 Graphic Designer 250 - 400 Call Centre Agent 210 - 250
Source: Cebu Investment Promotion Center (CIPC)
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
During our data gathering for this special in Cebu,
Japanese executives expressed opinions such as “level
of English language capability is higher than in Manila,”
and “there is a higher level of affinity between Japanese
and Filipinos.”
CIPC Managing Director Mr. Joel Mari S. Yu (center) with Center Manager Mr. Roberto A. Varquez (right), and Assistant Center Manager Mr. Alberto T. Gumarao (left).
Access from Japan and Living Environment
The Cebu International Airport is located in
Lapu-LapuCity, on Mactan Island, across the main island
of Cebu through the Mandaue-Mactan Bridge. There
are six direct flights weekly, operated by Philippine
Airlines to Cebu from Narita, with flying time of about
four hours. For flights through Manila, Japan Airlines
has two flights daily from Narita to Manila, and four
flights weekly from Nagoya to Manila. Philippine
Airlines operates seven flights weekly from Narita to
Manila; five flights weekly from Kansai International to
Manila; six flights weekly from Fukuoka to Manila (of
which four have stopovers in Okinawa). Northwest and
Thai Airways flights are also available. For transfers
through Manila, there are 21 daily Manila-Cebu flights
operated by three airline companies, with flying time of
approximately one hour.
With regard to the living environment, vehicular traffic
and air pollution is less compared to Manila. Numerous
beach resorts, golf courses (of which there are seven),
hotel-casinos, and other leisure facilities are accessible
by car within 30 minutes to one hour from the city. One
of the advantages of living and working in Cebu is that
one’s place of work, residence and leisure/resort areas
are very close to each other. Compared to the big cities
like Manila and Davao, Cebu enjoys good peace and
order conditions – a major point for foreign companies
which are always concerned about the safety of their
expatriate employees. Furthermore, prices of food,
house rent 1 among others, are 20% to 50% lower
compared to Manila, making it possible to enjoy lower
cost of living. Japanese comprise the largest group of
foreign visitors to Cebu at an annual total of more than
80,000 – resulting in the proliferation of good quality
Japanese restaurants (from casual drinking places to
more formal fine dining options). The Japanese
executives of the companies that cooperated with us
during this survey-visit, have generally given the passing
mark to the taste of Japanese restaurants in Cebu.
Asiatown IT Park (www.asiatownitpark.com)
Some twenty minutes by car from the Cebu International
Airport in Mactan, right across from the Waterfront Hotel,
is the Asiatown IT Park, which is accredited by the
Philippine Economic Zone Authority (PEZA). Locators
at IT Parks, as PEZA registered enterprises, enjoy
incentives such as exemption from corporate income
taxes for a certain period, among other incentives.2
1 According to CIPC, monthly condominium rent ranges from US$450 to US$625; with rental for executive houses at approximately US$570 to US$1,035 monthly. 2For an outline of the incentives, please refer to Report No.3 of this series. For details, refer to the JETRO Manila website under “Philippine Investment Policies” (in Japanese). http://www.jetro.go.jp/philippines/
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
The Asiatown IT Park website has a Japanese language
version which contains a virtual tour experience where
one is able to view the entire facility. Those who are
interested are encouraged to view the site.
Cost of Telecommunications Infrastructure
Broadband Internet: Within the Cenu city and inside
the industrial and IT parks, five companies – PLDT, the
biggest communications company, Globe Telecom,
Bayantel, PhilCom, Meridian – provide broadband
services using optic fiber and/or DSL. For your
reference, ADSL PLDT’s DSL service rates are shown in
the table below.
3 Php.1 = about JPY. 1.92 (March 2005)
Table 3:PLDT ADSL Service Rates
Bandwidth (Kbps) Package
Down
Stream
Up
Stream CIR
Monthly
Small Biz Lite 512 256 32 4,000
Small Biz Jr. 768 384 64 8,000 Small Biz Sr. 1,024 512 128 14,500 Power Packed 1.5 MB 1,536 640 196 25,000
Power Packed 2 MB 2,048 640 256 46,000
Power Packed 3 MB 3,008 640 384 80,000
Asiatown IT Park Basic Information Location: Lahug, Cebu City Land Area: 24 hectares Developer: Cebu Property Ventures and Development Corp. Owner: Cebu Holdings, Inc. (Ayala Group) Office Rental Rate: P375 per square meter/month3 Major Locators: • NEC Telecom Software (Software Development) • Epson Software Development Center (Software
Development) • Tsuneishi Technical Services (Engineering Design) • NCR(POS system development) • People Support (Call Center) • Globe Telecom (Teleommunications) Telecommunications Infrastructure: • Underground telecommunications system with
multi-server duct lines and fiber optic capability • High-speed Asynchronous Transfer Mode (ATM)
backbone • Digital Subscriber Line (DSL) technology-capable
telecommunications • High-speed point-to-point international and
domestic digital leased lines • Broadband switching capability enabling
high-speed, high-capacity and cost efficient transmission of voice, data and video (bandwidth of 64 kbps to 8 mbps)
• Satellite teleport for ultra high bandwidth network linkages
Source: PLDT
WiFi Hotspots: Airborne Access, a major wireless
hotspot provider in the Philippines, has installed 89 WiFi
hotspots all over the Philippines as of March 2005. Six
of these spots are in Cebu (Cafes within the Cebu
International Airport, among others). Hotspots may
also be accessed at the major hotels and shopping malls.
Flat rates for Airborne Access service is about 16,000
yen for 12 months, or about 1,333 yen monthly. Also, in
March 2005, PLDT announced a new service where by
inserting a cellular phone SIM card into the PCMCIA slot
of a notebook PC, internet service can be accessed
through its SMART cellular network via either GPRS4 or
EDGE5.
Cell Phones: Philippine cellular phones operate in the
GSM/GPRS standard. The conditions in Cebu with
regard to cellular phones are no different from that of
Manila. Cellular phone units are provided by 15 vendor
companies, such as Nokia, Sony-Ericsson, Motorola,
Panasonic, Samsung among others. Cellular phone
4 GPRS: General Packet Radio Services. Data transfer protocol using GSM cellular phone network. One of those technologies referred to as 2.5 generation. 5 EDGE: Enhanced Data GSM Environment. Post-GPRS technology. Considered as one of the 3rd generation technologies.
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
units sell at a range of from around 6,000 yen to 80,000
yen, but plans with higher monthly subscription rates
provide the cell phone units for free. For reference, we
provide below the rates for Smart Gold Regular Plans.
Table 4:SMART Gold Regular Plans (Partial)
Monthly Fee P800 P1200 P1800 P2500 P3500
Free Text 350 350 450 550 650
Free Minutes 100 210 350 500 750
Smart-Smart P5.50 P5.00 P4.50 P4.00 P3.50
Smart-nonSmart* P7.00 P6.50 P6.00 P5.50 P4.50 Text Free after Free SMS P1.00 P0.50 P0.50 P0.50 P0.50
IDD Rate $0.40 anytime, anywhere
Source: Smart
IT Human Resource Conditions in Cebu
There are eight universities in Cebu, 30 colleges,
producing some 20,000 graduates every year. All of
the eight universities have IT related courses. The
universities and colleges of Cebu graduate between
1,500 to 2,200 every year in the fields of computer
science, computer engineering, information technology
(IT). (2004 Cedf-IT Survey, Refer to Table 5). Cisco,
Microsoft, Oracle and other vendors have also set up
training centers. According to Cedf-IT, of the 2,200
graduates of IT-related courses, only 100 to 300 are
properly employed in jobs where they can utilize their
specialized education. This is of course not limited to
Cebu, and can be said of IT education in the Philippines
in general – the gap between the skill of graduates and
the needs of industry is a problem that has yet to be
resolved. The Cebu Educational Development
Foundation for Information Technology (Cedf-IT ) was
established in 2001 as a means to resolve this problem.
The following is a brief introduction to this organization.
Table 5: Transition in the Number of Graduates of IT-related Courses in Cebu Colleges and Universities
Source: Cedf-IT (2004 Data, result of responses from 18 colleges and universities)
The Cebu Educational Development Foundation for
Information Technology (Cedf-IT)
Cedf-IT is a non-profit organization that aims “to help
transform Cebu into a major ICT Software and
E-Services Hub in Southeast Asia” through cooperative
efforts with industry, government, the academe and
NGOs through proactive intervention in the ICT Human
Resource sector (especially in the university level).
During our visit to Cedf-IT in mid-March 2005,
Executive Director Bonifacio D. Belen was on a
benchmarking study tour, together with members of the
foundation, to Bangalore and Hyderabad in India. In
his absence, we met with the Program Coordinator, Mr.
Romil Jose R. Fernandez (left in photo), and Mr. Jose
Mari T. Bigornia (right in photo), president of the College
of
Technological
Science
Science-
Cebu.
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six major activity areas6 but the core is
ers Academy, a program designed to
vel of IT trainers and instructors, and the
ertification Standards & Examination. The
ademy is a two-year training program for
p://www.cedfit.org/activities.html
JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
teachers of IT-related courses in universities and
colleges. Training is conducted during weekends
(Saturdays and Sundays) and a portion of the units
earned during the training is recognized by three
universities in Cebu as credits towards masteral degrees.
The first group of 19 trainees is scheduled to graduate
this year. In the Professional Certification Standards
& Examination, five major certifications are identified:
C/C++, JAVA, Visual Basic, CAD operator, network
engineer, skill standards are set, and the respective
certification examinations are implemented for each.
Recently, in response to heightened need in the industry
for software project management capability, Cedf-IT, the
Philippine Computer Society, and the Project
Management Institute (PMI) Philippine Chapter have
agreed to join forces in the setting of Software Project
Management (Entry Level) Certification Standards, and
the development of Software Management Competency
Assessment (SPMCA).
When we asked about the collaboration with the
Philippine National IT Standards examinations
(PhilNITS) which issues an IT certification mutually
recognized by Japanese government as equivalent
certification as the Fundamental Information Technology
Engineer certification in Japan, we were told that there is
no specific cooperative relationship at present, but that
they wish to study that possibility for the future.
Currently, Cedf-IT has 17 corporate members, 27
members from academe, and 11 members from the
government agencies and offices. During our data
gathering in Cebu for this report, we heard very positive
comments on Cedf-IT activities over the past three years
from its member companies and from CIPC. Cedf-IT
will surely continue to play a major role in IT human
resource development in Cebu, and the foundation will
have a central role to play in the future of the IT industry
of Cebu.
IT Companies in Cebu ADTX Systems, Inc. Cebu Branch
(www.adtxsystems.com)
We visited Cebu Branch of ADTX Systems, which was
also introduced in Report No. 4 of this series. There
are 55 employees in Cebu branch (of which two are
Japanese) at present, and we were told that the branch
intends to hire some 40 people in 2005. The major
work being done in Cebu are outsourced software
development for business applications, storage-related
software development, and product verification services,
and 100% of its sales are exported to Japan.
The company’s head office is located in Alabang,
Metro Manila, with another branch office in Makati City.
ADTX established its own training center in April 2003,
located at its Makati branch office. Basic IT techniques
and knowledge equivalent to Fundamental IT Engineer
(FE) level of the Japan IT Standard Examinations are
taught to the company’s pre-employment trainees,
followed by latest technology related to software
development such as UML, XML, Java, J2EE,
presentation techniques, technical writing and other
business skills. Intensive Japanese language training
conducted by Japanese teachers is also a part of the
curriculum of this training center providing 5 month
intensive training prior to employment. With the major
success demonstrated at the training center in their
Makati branch, the company has decided to open a
similar center at the Cebu branch by May 2005. About
seventeen are expected to join the first batch, coming
from Cebu, the Visayas and Mindanao regions.
Recruitment activities were conducted in the major
universities and colleges in central and southern
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
Philippines. From a total of 700 applicants, only 19
qualified. The ADTX training center will also provide
training service for new recruits of other Japanese
companies.
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the company has 80 employees including 2 Japanese
systems engineers and has grown to become the largest
100% Filipino owned software development company in
Cebu. Of the company’s revenue, 60% comes from
outsourced software development for its overseas
edf-IT. According to the manager of the
ion, Mr. Jonathan F. Tse (left), “If Cebu
re able to produce better human resources,
beneficial for our company.” This is the
ADTX has been supporting Cedf-IT. The
also been active in making contributions to
gh the IT human resource development, by
pting four interns from the Center for
Technology and Enterprise (CITE)
.ph]. CITE is an organization supporting
aining and education for talented youths
me segments of the society. On the right
is Mr. Ramil Villanueva, Assistant Vice
Corporate Planning of ADTX Systems,
tware, Inc.
.com.ph)
ftware Inc. is a software development and
gration company established in 1999 in
ompany was founded by a team of young
preneurs composed of a business and
ented president and technically oriented IT
o had long experience in working for a
ompany engaged in offshore software
. After five years from the establishment,
clients, while 40% comes from the implementation of its
package products for the domestic market. Of the
Filipino software companies in Cebu Alliance has the
most experience in system development for Japanese
users.
In doing outsourced custom software development
services, fluctuations in both the number and the scale
of projects are inevitable. Flexibility in adjusting to
chancing human resource requirement is one of the
headaches of many companies engaged in this
business. At Alliance, in case of excess manpower
arising from such fluctuations, they are assigned to the
development of the in-house products, particularly to
application framework development. In 2003, the
company developed the Advanced Development
Design (ADD) framework, which created templates for
common functions related to finance and accounting,
resulting in improved development efficiency, speed,
and quality of product. Initially, this framework was
only in Java, but at present, the similar frameworks
have also been prepared in Visual Basic and C#.
Company president Mr. Robert J. Cheng (left) is also
the vice president of the Cebu Software Development
Industry Association, and the company is also a
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JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
member of Cedf-IT, and the design and software group
of the Cebu Japanese Chamber of Commerce and
Industry. This underscores the company’s active
involvement in communication with other companies in
the industry sector.
Mr. Sherwin Yu (right), Technical Director of Alliance,
said that member companies of the Cebu Software
Development Industry Association who want to enter in
the offshore development market of Japan are facing
barriers – first the language barrier, then the differences
in business practices related to software development.
Mr. Cheng also commented that local companies that
want to enter the Japanese market should first do
business with Japanese companies in the Philippines, in
order to get a feel for doing business with them. He
thinks that this is a more practical approach.
Asia Mobile Corp.
Asia Mobile is a new company established in 2004.
Information Systems department of Asia Technologies,
Inc. a watch parts assembly company in Mactan Export
Processing Zone (MEPZ) spun out and formed Asia
Mobile Corp. As of March 2005, they have seven
employees, providing engineering solutions which
combine contents development, software and hardware.
The company developed and implemented a process
engineering system called Real Time Output Monitoring
Line Balancing System. With this system process work
time at each process of a production line is monitored on
real time basis, and based on the data, balancing of
process work time can be easily implemented to
minimize work-in-process inventory. Asia Mobile also
delivered the DTI e-Text Project which uses cellular
phone SMS for inquiring application and processing
status at the Department of Trade and Industry (DTI), as
well as the RFID SHOP EXPRESS, a system that
monitors the material and parts inventory within the
factory using RFID technology.
Company president Mr. Bernard E. Villamore stated
“We recognize each company has its own unique IT
needs. Of the so many out-of-the-box solutions in the
market today, one gets so confused in selecting which
one would really be the perfect fit.” And Asia Mobile’s
answer to such situation is to provide customized
solutions addressing each company’s unique IT needs
in their business.
Epson Software Development Center Phils., Inc.
This is the Philippine base of the Epson Software
Development Center located in Matsumoto City, Nagano
Prefecture. Organizationally, the Center is a division of
Epson Precision Philippines, Inc. A year ago, in March
2004, the Center was established inside the Asiatown IT
Park, engaged mainly in the development of Epson
product related embedded software. As of March 2005,
the Center had 31 employees (of
which one is Japanese), with an
additional 20-30 employees
projected for hiring in 2005.
Mr. Ishida, the General Manager,
comparing to Manila, cited the
following advantages of operating
in Cebu:
(1) There are many universities a
because there are fewer com
engineers, is relatively easier to h
(2) Low living costs.
(3) Strong tendency for people to rem
P 9
nd colleges, and
petitors recruiting
ire new graduates.
ain in Cebu.
JETRO Manila Center Philippine IT Service Industry Update Report
No.7 (April 1, 2005)
(4) High level of English proficiency.7
The company hires mainly new graduates of the
University of the Philippines Cebu Campus, and the
University of San Carlos. Mr. Ishida observed those
schools’ curriculum in IT and engineering courses
seemed very practical and the new graduates can be
quickly deployable, even faster deployment than in
Japan (of fresh graduates from colleges in Japan) is
possible.
Mr. Ishida also experienced working in the company’s
development base in Shanghai for five years. To his
observation, compared to the strong individualistic
tendency of Chinese engineers, he finds Filipinos to be
more cooperative in achieving the team’s overall
objectives. Once they understand the objectives, he
also feels that Filipinos tend to have a high degree of
independence. Comparing to India, he finds that the
Philippines has advantages in terms of price, as well as
in proximity to Japan.
He advised that companies that outsource
development projects to offshore partners need to
secure capable bridge engineers, adhere to
standardized development processes, and document
clear specifications based on these processes. They
should also identify areas that are suitable to delegate
offshore, and have an understanding of Filipino
sensibility (such as the taboo on being reprimanded in
front of other people, among others).
On the other hand, companies that accept offshore
projects must keep the following in mind: select
development projects wherein the absence of equipment
(hardware) will not pose a problem (e.g. (middleware,
and others)) ; specialization to projects that require
comprehension of international standard specifications
written in English, having proper communication
infrastructure including TV conference system for
supporting timely communication with Japan, Japanese
language training, means to translate specifications
(through full time translators, or machine translation
software), among others.
E*Sprint Software, Inc. (www.esprint.com)
In Report No. 6, it was mentioned that COMPASS, a
workflow and project management software product,
won the 2nd place of the best product award in eServices
Philippines 2005. E*sprint Software is the Philippine
local market distributor of COMPASS, and is the
software development arm of Ng Khai Development
Corp. (established 1993), a Cebu-based company which
is engaged in the sale of hardware, software, and
network equipment. E*sprint’s main line of business is
software product development and system integrations,
and is engaged in providing accounting, banking, payroll
computation and other package solutions for the
domestic market. As of March 2005, it had 35
employees, of which 80% are involved in software
development work, while the remaining 20% are
engaged in implementation consulting work.
7 Under the Aquino administration in the early1990s,
Philippine education policy placed importance on the national language (Filipino, which is based on Tagalog. More than ten years later, the general opinion is that overall English language proficiency among Filipinos has gone down. In the case of Cebu, it is said that because of strong resistance to the Tagalog-based Filipino language, the decline in English proficiency has not been as marked as that in Manila.
In 2002, the company established a joint venture with
C-Pax of Japan (with head office in Nara) called N-Pax
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to do offshore development work for Japan. 8
Accountmate Philippines (established in 2000), another
member of the group, is engaged in upgrades and
customization development for American accounting
package vendors. E*Sprint, N-Pax, and Accountmate are
all located in the same building – a 2-story warehouse
converted to a spacious office.
Mr. Wilson Ng,
president of E*Sprint
and also representing
the five companies of
the Ng Khai Group (left
in the picture), was
awarded as Ernst &
Young Entrepreneur of the Year 2004 in February 2005.
He is managing two joint venture companies, one with
American and the other with Japanese, When asked if
he feels any difference dealing with American business
people and Japanese, Mr. Ng said “Japanese
companies take time in making decisions, but that is
because they have a long-term perspective. Once a
partnership is formed, I feel that they place great
importance in growing such a relationship. Even if
problems occur, in the process of jointly resolving the
problem, the relationship evolves into an even stronger
cooperative partnership.” (On the right in the picture is
Mr. Merlo Erediano, vice president of N-Pax.)
NEC Telecom Software Phils., Inc.
Philippine local subsidiary of NEC Communications
Systems (with head office in Minato-ku, Tokyo), which
started operations in Cebu in February 2002. Its main
business is telecommunications-related software
development. As of March 2005, it had 263 employees,
and plans to hire 90 more in 2005. Together with the
American company Lexmark, NEC Telecom Software is
one of Cebu’s largest software development companies.
Mr. Masaharu Kawasumi, company president, aside
from also being the president of the design and
software department (composed of seven IT related
member companies) of the Cebu Japanese Chamber of
Commerce and Industry, has a strong network with
CIPC, PhilNITS, and other government agencies in
Cebu. NEC Telecom Software is also a founding
member of Cedf-IT, and accepts IT course instructors as
interns, implementing training through exposure to
actual work onsite. It has also sent its engineers as
trainers for instructor training implemented by the newly
established IT training center – UP-ITTC9, a cooperative
effort of JICA and the University of the Philippines. The
company’s significant contribution is not limited to Cebu,
but extends to IT human resource development in the
Philippines.
During our
visit to the
company, we
saw many
students
touring the company premises. (See photo.)
When asked for advice to Japanese companies that
are considering offshore development in the Philippines,
Mr. Kawasumi said candidly “realistically speaking, it is
impossible to succeed in offshore projects if there is no
Japanese in the offshore service provider company in
the Philippine side.” Aside from differences in business
practices, there is a big difference in how you handle
8 The workflow project management software product, COMPASS, was developed by N-Pax. N-Pax was introduced in Report No. 6 of this series.
9 Refer to Report No. 2 of the series for information on UP-ITTC.
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changes in specifications particularly in the software
development sector. There is need for a Japanese
bridge engineer to make the necessary coordination and
adjustments. Due to limitations of space, we are not
able to share the enthusiastic comments made by Mr.
Kawasumi regarding the necessary human resource
development for Cebu software companies to succeed
in the Japanese offshore business, as well as
appropriate organizational structure in the Japan side
and Philippine side, systems and business models.
Primary Software Development Corp.
(www.primesoft.ph)
Mr. Mike Jurado, the president of Primary Software,
used to be a system administrator of an American
network management software company before he
established the company in 1993. As of March 2005,
the company has 14 employees, with plans to hire an
additional six within 2005.
The company’s core business centers on system
integration services in implementing Prime Software ™
Simplified ERP for Business – their original ERP product.
Their major clientele are in Cebu and Mindanao.
Because globally known large scale ERP solutions are
too expensive for the majority of Philippine companies,
Mr. Jurado saw this as his business opportunity,
adopting the motto “Filipino Product Priced for the
Filipinos” in offering his products and services to the
market. The company also offers consultation services
during the implementation of the above-mentioned ERP,
customization, user training, and the maintenance
support. As a means to make the product affordable
especially for small and medium scale enterprises, the
company has adopted a sales strategy where it
recommends low-cost solution package, principally no
additional fees, and offers relatively long-term
installment payment options. More than 200
companies have installed Prime Software™ and the
company was chosen as the best software provider for
Metro Cebu in 2004.10
2
Mr. Jurado (left) has
two sons in their
twenties who works for
the company together
with their father.
Popoy, the elder son, is
mainly in charge of ERP implementation consulting and
customizing to client requirements. The younger son,
Chris (right in photo), graduated from UP-Cebu this year
with honor, has developed 3D modeling software for
creating games and a game engine on his own. At
present, the company is looking for partners interested in
investing research and development funding for the
completion of the 3D modeling and game engine
software as a commercial product.
(JETRO Monthly Philippine IT Industry Report No. 7)
10 National Shopper’s Choice Magazine’s “No. 1 Computer Software Provider in Metro Cebu for 2004”