JETRO Monthly Philippine IT Industry Report No. 7: Cebu Special

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1 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) (, there are some 300 foreign companies that have made direct Figure 1 Location of Japan, Philippines and Cebu investments in Cebu, of which more than half are Japanese companies. At the same time, Japan is the largest export destination for Cebu s products. It can therefore be said that Japanese companies play a major part in the economic development of Cebu. The island is blessed with rich tourism resources such as beautiful coral reefs, and is very familiar to the Japanese as a diving resort. In recent years, however, Cebu has been exerting much of its efforts, not only in tourism, but also in the promotion of the Information and Communication Technology (ICT) industry. As part of these efforts, the Cebu Chamber of Commerce and Industry is hosting an ICT trade show called Cebu ICT 2005 from 22 to 24 June 2005, at the Waterfront Hotel in Cebu City ( the site contains animation features introducing Cebu). They aim to inform the world of the Cebu brand as the ICT Hub in ASEAN region. During the event, aside from the participation of local IT companies in exhibition and various conferences, it is expected that there will be many other participants from all over the world. In this special edition featuring Cebu, we report our findings from our visit to the island in mid-march Overview of the IT Service Industry in Cebu discussed in detail later) are helpful. According to this Estimate of Industry Scale survey, the total number of people employed by the The IT Service Industry in Cebu is still relatively entire IT service industry in Cebu as of 2003 was small-scale, and because of its short history, it seems approximately 9,800. Breakdown is as follows: that sales and export statistics for the IT service sector alone are not yet readily available. Estimated number Software Development Engineers 1,000; Engineering Design 800; Others including call center agents 8,000. of employment in this industry segment may be helpful in giving us an idea about the size of the industry. The results of a survey conducted by the Cebu Educational Foundation for Information Technology (Cedf-IT to be Foreign Companies Entering Cebu The core of Cebu s IT service industry is made up of foreign companies, which number relatively fewer. P 1

2 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 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 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. 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 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. 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 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 P 2

3 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 Cebu for Offshore IT Service 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 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 Software Engineer (Fresh Graduate) Software Engineer (3 year experience) Network Specialist / Administrator Computer Technician Graphic Designer Call Centre Agent Source: Cebu Investment Promotion Center (CIPC) P 3

4 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. 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 ( 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 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 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. 2 For 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). P 4

5 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. 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/month 3 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 Table 3 PLDT ADSL Service Rates Small Biz Lite ,000 Small Biz Jr ,000 Small Biz Sr. 1, ,500 Power Packed 1.5 MB 1, ,000 Power Packed 2 MB 2, ,000 Power Packed 3 MB 3, ,000 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 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 GPRS 4 EDGE 5. or Cell Phones: Philippine cellular phones operate in the 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 (March 2005) 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 3 rd generation technologies. P 5

6 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 Table 5: Transition in the Number of Graduates of IT-related Courses in Cebu Colleges and Universities 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 Free Minutes 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 IDD Rate Source: Smart P1.00 P0.50 P0.50 P0.50 P0.50 $0.40 anytime, anywhere 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 IT Human Resource Conditions in Cebu There are eight universities in Cebu, 30 colleges, producing some 20,000 graduates every year. All of efforts with industry, government, the academe and NGOs through proactive intervention in the ICT Human Resource sector (especially in the university level). 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 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 (IT). (2004 Cedf-IT Survey, Refer to Table 5). Cisco, foundation, to Bangalore and Hyderabad in India. In 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 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. resolved. The Cebu Educational Development Foundation for Information Technology (Cedf-IT ) was Cedf-IT has six major activity areas 6 but the core is established in 2001 as a means to resolve this problem. The following is a brief introduction to this organization. the IT Teachers Academy, a program designed to improve the level of IT trainers and instructors, and the Professional Certification Standards & Examination. The IT Teachers Academy is a two-year training program for 6 Refer to P 6

7 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 ( 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 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 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 P 7

8 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. Since 2004, ADTX has been taking part in the activities of Cedf-IT. According to the manager of the Cebu operation, Mr. Jonathan F. Tse (left), If Cebu universities are able to produce better human resources, it will also be beneficial for our company. This is the reason why ADTX has been supporting Cedf-IT. The company has also been active in making contributions to society through the IT human resource development, by way of accepting four interns from the Center for Industrial Technology and Enterprise (CITE) []. CITE is an organization supporting vocational training and education for talented youths from low income segments of the society. On the right in the picture is Mr. Ramil Villanueva, Assistant Vice President for Corporate Planning of ADTX Systems, Inc.. Alliance Software, Inc. ( Alliance Software Inc. is a software development and systems integration company established in 1999 in Cebu. The company was founded by a team of young Filipino entrepreneurs composed of a business and marketing oriented president and technically oriented IT engineers who had long experience in working for a Japanese company engaged in offshore software development. After five years from the establishment, 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 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 P 8

9 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 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 employees projected for hiring in Mr. Ishida, the General Manager, comparing to Manila, cited the following advantages of operating in Cebu: (1) There are many universities and colleges, and because there are fewer competitors recruiting engineers, is relatively easier to hire new graduates. (2) Low living costs. (3) Strong tendency for people to remain in Cebu. P 9

10 (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 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. 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. ( In Report No. 6, it was mentioned that COMPASS, a workflow and project management software product, won the 2 nd place of the best product award in eservices Philippines 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. In 2002, the company established a joint venture with C-Pax of Japan (with head office in Nara) called N-Pax P 10

11 to do offshore development work for Japan. Accountmate Philippines (established in 2000), another member of the group, is engaged in upgrades and 8 and plans to hire 90 more in Together with the American company Lexmark, NEC Telecom Software is one of Cebu s largest software development companies. 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 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 Its main business is telecommunications-related software development. As of March 2005, it had 263 employees, 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-ITTC 9, 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. P 11

12 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. ( 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 As of March 2005, the company has 14 employees, with plans to hire an additional six within 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 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 National Shopper s Choice Magazine s No. 1 Computer Software Provider in Metro Cebu for 2004 P 12

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