28 November 2007 - Speech By Dr Vivian Balakrishnan, Minister For Community Development, Youth & Sports and Second Minister For Information, Communications & The Arts At The ASOCIO ICT Summit 2007, Raffles City Convention Centre.
Speech By Dr Vivian Balakrishnan, Minister For Community Development, Youth & Sports and Second Minister For Information, Communications & The Arts At The ASOCIO ICT Summit 2007 on 28 November 2007, Raffles City Convention Centre.
Mr Pek Yew Chai, Chairman SiTF,
Mr Ashank Desai, President of ASOCIO,
Distinguished colleagues, friends,
Ladies and Gentlemen,
1. First, let me say I am very pleased to be here, both myself as well as RADM(NS) Ronnie Tay, who’s the new CEO of the IDA of Singapore. Let me also welcome those of you, especially those of you from overseas. I’ve had a chance to meet many of you just before coming in, and bid you a warm welcome to Singapore.
Infocomm: A Vibrant, Growing Industry
2. We’re having a good run of the economy right now, which I believe has got relevance to all of you in this room. Let me summarise and share a few observations. I think I don’t need to tell all of you that Infocomm Technology (ICT) is no longer a luxury. I think there may be people or governments which may be bit less familiar or less enthusiastic. But there’s no doubt that everyone regards it today as a critical driver and key enabler of the economy. And no economic activity in any country, whether you say First World, Second World or Third World, can prevail without use of ICT. The second point is that the infocomm industry, especially in Asia, represents one of the fastest growing sectors. I don’t think you need to be convinced that this is a high growth area.
Three Trends In The ICT industry
3. The next bit that I wanted to discuss and share with you is where we see things going from here. And let me start by saying I see three trends affecting our industry. The three trends are first the commoditisation of connectivity, second the standardisation of services, and third, increasing value creation from innovation. Let me quickly run through these three points.
4. The commoditisation of connectivity, I was asking the leaders just now where are the telephone companies at this conference. They politely said they are not totally interested in what this group is involved in. But actually if you take a 10-year analysis, and you ask any of you in any country what is the price or cost of connectivity, plain telephony, mobile telephony, or even internet connection, I think you will all see that those companies involved at that end of the business will say that there is still a lot of money to be made but margins are being squeezed. So that’s one trend which you need to understand, that if you’re purely in the business of providing connectivity, there is money to be made but it is one with decreasing margins. That’s why I referred to this as the commoditisation of connectivity.
5. Beyond connectivity, the next trend, obviously, is services. And that is what I believe many of you and your companies are involved in today. We can think of services at several sub-levels – one is developing the software, the other one is integrating and delivering the software and services. And again if you look back over the past 10 years, you will see that there is still a lot of money to be made in developing software, there is still a lot of money in systems integration and I know that many of you here are involved in that.
6. But again if you look critically at the forces affecting your business in this area, you realise that there is a clear trend towards the standardisation of software. Whether you talk about ERP or CRM, the point is users. You see, the big problem with users is that sometimes they don’t know what they need. And getting the users to define the specs is often an exercise in teeth extraction. But over time, there is what I believe a movement towards standardisation. Now that has got both pluses and minuses.
7. On the plus side, the hope is that it means software will be more accessible, usable and maybe more cost-effective to use. Of course on the minus side for the systems integrators’ needs, if the software really works as desired, if it is really as easy to work and plug and play as it claims, then perhaps systems integrators don’t need to charge so much for the services. The point is that the standardisation of software is going to pose a significant business challenge for many of your companies. This latest trend on SAAS – Software as a Service – which we were discussing just a few minutes earlier, is also a clear bellwether of things to come. Because it represents the ultimate example of the standardisation of software to the point where the end user may no longer be interested in the nuts and bolts of the software itself, or indeed, where the software runs, but is purely interested in the utility, the service aspect of the software. I think this will pose a significant challenge for your business model and in various ways, you will have to come to terms with it.
8. The third trend is related to the other three. If you see the commoditization of connectivity, you see standardisation of software, then it means you have to ask yourself where in the value chain is the greatest value going to be derived from in the future. If you just cast your mind back say two to three years, if I ask you where are the companies or the names that we are familiar with which have seen huge increases in value and market capitalisation, you think about companies like Skype, Google before that of course, you think about companies like Facebook. You see that what’s really happened is that we’ve now moved into an era in which individuals, or small groups of individuals, small companies or SMEs, with a bright idea, capable of developing that bright idea into a marketable product, can suddenly see explosive growth in value.
9. The analogy in the pharmaceutical industry is that there is this big pharma and then there are these small firms develop one-product companies. Increasingly, you see big pharma companies buying the patented products or drugs of these one-product companies. And you see a similar thing going on in the ICT space. In other words, it is about innovation, the innovative individual or group, developing an idea, building it to a point where it makes or has some market value and then seeing explosive growth. And the question only then is at which point did you get into that value creation? Did you get in early, in which case you see huge growth, or you come in later by the time it is IPO and share prices have already risen? So the point I’m trying to make is that there is going to be great value creation at the development stage, at the SME stage.
10. Now having said all that, that doesn’t mean those of you who have already established companies, big companies, have no growth. Because as I said, if you look at the pharmaceutical industry as an analogy, eventually when it comes to market reach, when it comes to roll-out, when it comes to system integration, when it comes to servicing, not at the level of the small market, but servicing at a global level, there is a need for large enterprises. There is a need for large companies like yours.
Singapore’s Role In The ICT Arena
11. So this brings me to the last bit which I wanted to share with you, is how I see Singapore’s role in this evolving, dynamic and vibrant area that all of you are in. I see Singapore’s role in three areas.
12. First, to attract and nurture innovators and developers who are the true champions of value creation that I spoke about just now. Secondly, having attracted innovators, SMEs or even large enterprises like yours, Singapore’s role is then to connect – connectivity – not in the physical sense, although of course we will make sure, as my colleagues will share with you later, that physical connectivity can be taken for granted in Singapore. But connection to global markets and to global business opportunities, that if any of your companies are sited here, or you have a regional office here, you have immediate access to market opportunities, not only in Southeast Asia and Asia, but indeed to the world because this is a good place for companies to be sited.
13. And our third role in Singapore is to be a showcase, to be a working model of the future. So if you have got a brand new idea, or you want to show another government how your product or service can best be exploited and utilised, the fact that it works and runs in Singapore and has demonstrated benefits is your calling card.
Conclusion
14. So that’s about all that I wanted to share with you, and I hope these ideas, a random walk, after having a discussion with you earlier this morning will be useful to you. So to summarise again, the commoditisation of connectivity, standardisation of software, value of innovation and Singapore’s role as a point that attracts innovators, builds critical mass, provides access to global markets and opportunities, and thirdly, as a showcase or working model of the future.
15 On that note, let me thank you again for this opportunity to be with you this morning. Thank you very much.
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