Tech Companies in Asia upping the ante in collaboration

Singapore, 12 March 2009 – In today’s challenging economic climate, collaboration opens up innovative opportunities by providing access to resources and new talents, sources of capital, and marketing channels, according to PricewaterhouseCoopers (PwC) in a recently launched survey report “Technology Executive Connections: Managing the risks and rewards of collaboration”, the sixth in a series that explores challenging issues facing executives working in today’s global technology companies.

“In times of financial and economic uncertainties, companies are looking for strategic advantages at low costs. With the pace of change in technology, it is virtually impossible to do everything on your own. Effective external collaboration is critical in our increasingly complex and interconnected world. Technology companies in Asia are recognising this, especially as they seek growth in developing markets” says Greg Unsworth, Asia Pacific Technology Industry Leader, PricewaterhouseCoopers LLP (Singapore).

Key findings of companies in Asia:

  • Core competence in managing collaboration is becoming more important in Asia: The PwC survey findings reveal that more technology companies in Asia are attaching increasing importance to collaboration in the next three years. Over 50 per cent of respondents in Asia Pacific agree that collaboration is very important to a company’s success, but a significantly higher percentage, at 78 per cent, expect to see collaboration becoming more fundamental to their success in three years.
Over 70 per cent of Asia Pacific respondents indicate that they need external collaboration to keep up with the pace of technology. Forty-five per cent particularly expect open-source collaboration to become a very significant component in their business model.
  • Meeting the needs of customers is the primary driver for collaboration: Companies today choose to collaborate – and choose their partners – based on a belief that it will lead to improvements in products, services and the overall quality of a customer’s experience. Survey respondents in Asia Pacific indicate that collaboration today focused mainly on product and service development (37 per cent) and selling (29 per cent), with research and development (24 per cent) and marketing (24 per cent) also significant areas of focus.
These focus areas are expected to change in three years as companies enter the next stage of collaboration, centering on business transformation programmes (27 per cent) to improve overall customer experience, increasing marketing initiatives (27 per cent), and managing talent and human resource (22 per cent).
  • Respondents are more open towards complementary, non-competitive relationships: The best type of collaboration perceived by respondents is one where both parties have clearly defined roles and boundaries with little crossover of activities. The most active collaborative relationships are with customers and complementary non-competitors, ranked by Asia Pacific respondents at 45 and 39 per cent respectively. Collaboration with competitors is considered riskier. Asia Pacific respondents are less receptive at this stage towards co-opetition as a form of collaboration - only 4 per cent will consider active collaboration with competitors, compared to 16 per cent from total global respondents.
  • Collaboration via alliances is preferred when entering emerging markets: 57 per cent of respondents in Asia Pacific opt to enter emerging markets via informal alliances compare with 39 per cent opting to enter by acquisition. Tight liquidity and a challenging economic environment are increasingly making alliances a more attractive option for companies seeking growth.
Uncertainty about the unknown tends to increase the risk hurdles perceived. Respondents in Asia Pacific reveal a greater tendency to utilise existing global relationship (51 per cent) than to go with new local partners (45 per cent). New local partners (49 per cent) are necessarily used more often when managing supply chains in emerging markets however.
  • Intellectual property and cultural fit risks are the biggest trouble spots: Like their global counterparts, three-quarters of Asia Pacific respondents agree that external collaborations are more complex than internal initiatives. More than half of this group (57 per cent) cite leakage of intellectual property as the biggest risk both in general and even more so when entering emerging markets. This is followed by the need to establish cultural fit (33 per cent) with collaborators and ensure data security and integrity (27 per cent). When it comes to entering emerging markets, governance (31 per cent), human resources (24 per cent) and reputational risk (24 per cent) are also prominent.
  • Collaboration is still in its infancy: Although executives see collaboration as critical to gain ground in terms of innovation and tapping opportunities, over three-quarters of respondents (83 per cent) believe that they could extract greater value from formal collaboration if they could improve collaboration capabilities. Currently, only a quarter in the Asia Pacific indicates that they currently use specific metrics to assess whether collaborative efforts had yielded positive overall results. Whilst 70 per cent indicate that they are confident about managing intellectual property, considerably fewer respondents, at 34 per cent, feel confident about managing cultural fit issues.

Conclusion

“What is needed is due diligence to make very educated assessments of the benefits and how much risk companies are prepared to take in developing collaborative efforts with business partners” observes Unsworth. “Collaboration can open up immense innovation and market opportunities, especially in emerging markets however, the real question is determining what you are willing to risk in order to gain these advantages.”

Unsworth elaborates “take for example the area of intellectual property - there is the need to evaluate track record and outlook on intellectual property protection. In addition the issues around cultural fit and talent development can be challenging and time consuming. It is not only imperative for companies to gain these insights but also to learn to define their risk appetite so that they can be savvy when making decisions to enable effective collaboration. As companies develop expertise in managing and profiting from collaboration, the competitive advantages and opportunities for growth are compelling for any organisation.”

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Media Contacts
Ivana Teo, DID: (65) 6236 3959, Email: ivana.tt.teo@sg.pwc.com
Yih Lin Chen, DID: (65) 6236 3960, Email: yih.lin.chen@sg.pwc.com

Notes:
1. For more information on PricewaterhouseCoopers Technology Industry practice or to download a copy of the full report, visit: www.pwc.com/techconnect .

2. Survey Methodology: The Economist Intelligence Unit, on behalf of PricewaterhouseCoopers, conducted an online survey of 158 senior technology executives based in five principal regions: 31 per cent Asia; 36 per cent Europe, 27 per cent North America; 3 per cent the Middle East and Africa and 3 per cent Latin America. In addition to the online survey, 18 executives were interviewed for this report: some on the record, some willing to name their company but not attribute their quotes, and others insisting on complete anonymity.

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