Homegrown software: The uphill battle to make a global impact

Posted on August 27, 1999 
Filed Under CNET, Julian

By Julian Matthews

Developing your own software in Malaysia is a lot of sweat and tears, and very often a labor of love. Ask Looi Hoong Thoong, he should know.

Looi started “playing around” with computer viruses in 1988 and on his own steam and imagination, sans a grant, bank loan or external seed money, came up with V-Buster, an anti-virus program which he began selling two years later.

“Although I started at around the same time as McAfee, one is a multi-millionaire and the other isn’t. Guess who is the poorer one?” said Looi.

Nine years on, Looi still puts in 18-hour work days and takes home no salary. He is constantly tweaking V-Buster with antidotes to new viruses, answers up to 300 e-mails a day, attends to after-sales support personally and, sometimes, copies and packs the product himself.

Looi admits he isn’t financially bad off. He is an architect by profession, drives a BMW and has interests in “lots of other businesses”. “But the money I make is not from V-Buster,” he qualifies.

Looi has 10 staff in his Penang office and a computer science graduate daughter who attends “to the usual small, not-so-important problems”. In her, Looi hopes to leave his legacy - the V-Buster - to build on.

Looi is a prime example that the homegrown software business is still very much a never-ending, Grail-like quest of one man with an idea.

In Malaysia, the odds appear stacked against the person with Camelot dreams. The homegrown software industry is under-developed and has no official body to represent its interests. Banks and financial institutions shy away from extending loans while grants, incentives and venture capital are hard to come by. Piracy is rampant, and copyright laws inadequate. Marketing to the masses is a tough-sell in the brand-conscious, foreign-biased local market, while foreign markets look with disdain at locally-made software.

Looi was especially miffed when someone offered to market the V-Buster in the US. “The conditions were that all copy protection be removed - this would have killed me in Asia; a US address be used with no reference to Malaysia; and, the author of the program was to be called ‘H.T.Louis’, ” he said. The last condition made Looi sick to his stomach.

Looi stands by his product and said it is equivalent if not better to any product the West has churned out, but he has had limited success abroad particularly because few foreign publications want to review it.

V-Buster is currently in its 9th version and can detect 27,643 viruses and can automatically rebuild the boot sector and partition table of a crashed, inaccessible hard disk. The program has garnered a pool of loyal local corporate customers including subsidiaries of multinationals such as Motorola, Intel, Siemens and Fujitsu.

An “imported is better” mentality

Another Penang-based software house making inroads in the local market is KarenSoft Solutions Sdn Bhd, which grew out of Chee Chong Hwa’s accounting practice.

Chee began dabbling with the software to speed up his work at Taiwanese company in Prai which resulted in a DOS-based fixed asset management solution. Word got around of its successful implementation and soon Chee had a growing customer base.

“In the early days, I was often asked ‘What will happen to us if you cross a street and get knocked down by a bus ?’ I used to be annoyed but it was a lesson in the importance of continuity in a potential customer’s mind,” he said. That led to the birth of the KarentSoft brand in 1991, Karen being an acronym for Killer Applications which are Robust, Elegant and Network-ready.

KarenSoft currently has a host of suite and standalone products including enterprise resource planning (ERP), manufacturing resource planning (MRP) and financial solutions, hotel management and healthcare information systems, and an integrated web browser.

Chee said the local software market is stifled by the deep-rooted “imported is better” mentality.

“There is a clearcut preference for foreign-branded software whenever the cost exceeds RM200,000 (US$52,600). The decision-makers, particularly the non-IT literate management, may want to play safe and avoid any risk by choosing expensive foreign software, which may or may not be appropriate for their needs. If the project fails then they would not be held accountable for choosing a lesser-known brand. The other fear is that local software outfits may fold and not be able to provide support and future upgrades,” he said.

Chee said unlike their foreign counterparts, local software companies have limited or no budgets to spend on marketing, advertising, promotion, brochures and attractive packaging.

KarenSoft grew purely from word-of-mouth and referrals. But the products were a cost-effective alternative and obviously useful as they currently have 200 customers from small to medium-sized enterprises.

“In retrospect, my biggest regret was not to concentrate on marketing. Fortunately, with a pending IPO and additional investments, this problem is now being addressed and we are expecting exponential growth in three to five years,” he said.

The company currently employs six programmers and is projecting revenues of RM1.2 million this year, RM5 million in 2000 and RM10 million in 2001.

Although KarenSoft was unable to raise any grants, it did get a five-year tax break for up to 70 percent of sales profits for its MRP2 product, and secured a banking facility in 1998.

An industry divided

Chee believes that the suggestion that software developers band together to improve their lot may not work as most lone software developers, of which he was one before, have limited resources and time.

“As such they would see this as unproductive and time ill-spent on a non-revenue activity. They will also be unwilling to share their hard-earned knowledge - perhaps, rightly so - and their interests may not converge,” he said.

The Internet appears to be a double-edged sword for local software companies offering a cost-savings means of delivery and near-free advertising, but raising the spectre of piracy.

“We see the Internet as a boon particularly for our Internet-based products and offer 90-day evaluation copies for downloading. But nobody is really safe from ‘warez’ sites where you can get full-blown products,” he said.

V-Buster’s Looi was also skeptical. He said the Internet may have raised awareness but doesn’t sell more software. “My homepage hit counter has 1.17 million visitors, many of whom are only after the free evaluation copy and do not necessarily follow-up with sales,” he said.

“A few months back I stopped putting an evaluation copy of the latest release of V-Buster for downloading in my homepage for fear of piracy. The copy available was a much older release. This brought thousands of angry emails from all over the world, some exceptionally rude,” he said.

Looi was also incensed to hear from customers that V-Buster was very popular in parts of Indonesia and Thailand. The reason: all the copies were pirated, and came complete with photocopied manuals.

“The other anti-virus program vendors offers free full working evaluation copies on the Net. My evaluation copy has limited features. So how do you compete with something that is free?” asked Looi.

In the back office systems market, the Internet has not really impacted business that much. “It helps with support, not with delivery. It’s good for people searching for products in specific industries though, ” said Kevin Steer, founder and CEO of Ice-Systems Consulting Sdn Bhd.

Steer’s company has developed a group insurance and employee benefits system with four major clients, two locally and one each in Hong Kong and Thailand.

Steer feels the industry is still desperately in short supply of trained developers and people with good project management skills.

“I think vendors should provide more grants and incentives for local developers to use their products as there is a lack of experienced developers, thus a lot of money is spent on training,” he said.

On the marketing front, Steer said many companies in Malaysia still cannot see the value of the IT solution from the hardware.

“There is still a tendency to budget a lot for hardware and expect the software and support to be ‘thrown in’. With this attitude it is difficult to effectively market,” he said.

In addition, the foreign-bias is too firmly ingrained. “A comment recently made to me was that you must sell your product overseas first then bring it back to Malaysia,” said Steer, who migrated from England to start his software company here.

Changes afoot

Malaysia’s Multimedia Super Corridor (MSC) holds out hope that change is coming. The costly government-led experiment to attract the world’s top IT companies to set up shop here and crank out products for the new millennium may well provide the leg-up the homegrown software industry needs.

MSC promoter Multimedia Development Corporation (MDC) is attempting to cover all bases to provide the environment where future software powerhouses can be incubated and flourish. These include grants, a venture capital fund, low-rent offices for start-ups, tax-breaks and unlimited import of foreign knowledge workers.

Ultimately, the project hopes some foreign-to-local brain-power osmosis may take place that will throw up a local Marc Andreesen, Linus Torvalds or Sabeer Bathia.

The top-down push, however, has its fair share of detractors. “Neither government nor the MDC nor financiers can take the ultimate responsibility for success or failure of individual companies or the software industry in general,” said Tim Loving, managing director of AccTrak21 Sdn Bhd, which designs and develops a range of financial and business management software.

Loving said business is business, and people going into software should expect to have to make a lot of sacrifices and take a lot of risks. “If they are not prepared to risk their house, they should stay working for somebody else. Don’t expect government to take all the risk and the effort out of it. They cannot, nor should they spend taxpayers money attempting to do so,” he said.

Loving said the American software industry model, the most successful seen so far, appears to have no government involvement whatsoever.

“The software industry there consists of 10,000 plus companies, most of which are small and struggling seedlings. But the ones that succeed go on to become mighty oak trees, and among the richest, most profitable corporations ever seen in the history of mankind. The ones that fail are not total failures, the staff do not die with the company. The experience of failure may be one of the most important lessons to learn in moving towards eventual success.”

On grants and incentives, Loving said local software companies should not await for such handouts. “If the Malaysian software industry has to depend on those it stands little chance of being robust and competitive enough to survive in a tough world.”

Loving added, however, that local financial institutions have not been supportive of the industry. “Malaysian financial institutions and venture capital groups cannot as yet get their minds around an industry that has little or no net tangible assets (NTA). Many of the great engines of wealth that today drive America would have been stifled at birth by Malaysian financiers, since they don’t fit the Malaysian asset-driven formula for loans and investments. So Malaysian software companies that need capital for global expansion should not expect to find it here,” he said. AccTrak21 itself has ventured out to get an IPO on the Nasdaq national market.

Loving said that even government-sponsored funds are usually administered by people with no knowledge or understanding of the software industry and its very special characteristics. “Hence the approval processes are likely to be onerous, slow and risk-averse. They may not even work. Time will tell,” he said.

Softly into the future

Of the future, the one consistent advantage that Malaysia has is the lowest cost of doing business in the region, said New Zealand-born Loving, who migrated to Malaysia eight years ago from Melbourne where he ran an IT consulting firm.

Benedict Lee, managing director of the Microsoft Knowledge Capital Centre Sdn Bhd, equates the current status of the homegrown software industry to that of a crawling baby, that has yet to discover the ability to walk or run.

“We are still in the early stages of the game. Software requires talent and creativity. But there are visible signs of a nascent software community beginning in Malaysia. There have been instances of Malaysian companies creating world-class software. I am also seeing more technopreneurs, who are no longer satisfied with a salaried environment and have a dream. Malaysia is on the right track,” he said.

Malaysia has thrown its hat into the ring, and wants to make the IT industry an economic growth engine with global software bigboys providing the fuel, and local talent the creative lubricants.

Promisingly, a legion of digital-hungry teenagers have already begun to burn holes in their parents pockets for computing access and demands for all-things-Internet. Perhaps in the near future, one in their ranks may come up with an idea that will have global impact and it won’t matter whether the Made-In-Malaysia label outside credits Looi or Louis.

Published in CNET Asia, Aug 27, 1999

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