When Japan's Fujitsu and South Korea's Samsung were preparing their first assault on foreign computer markets more than a decade ago, it caused consternation at many US and European hardware vendors.
The Asian giants seemed poised to cut a swathe through the computer establishment, as surely as the Japanese car industry had done in the 1970s and South Korea's consumer electronics industry had done in the 1980s. But their challenge soon faltered: a result of bad management, ill-conceived acquisitions and an inability to act quickly enough in the ultra-competitive computer hardware market.
Undaunted, both companies are now launching a fresh invasion. But this time their primary target is not hardware, but software and services – traditionally considered to be the Achilles heel of Asia's giant computer companies.
The strategy has been some time in the planning. In recent years, Samsung SDS, the computer services division of Samsung, has moved quietly into the US and Europe. Initially, its purpose was to support Samsung's growing operations in the region, a reflection of its heritage as Samsung' in-house IT department. But in April 2002, Samsung SDS was formally unveiled at trade fairs across Europe. A similar, upbeat launch is planned for the US in the summer.
As in South Korea and the wider Asia/Pacific region, the principal target of Samsung SDS is small- and medium-sized businesses (SMBs) – a departure from the usual Global 500 targets of the other major software and services suppliers. Samsung SDS's software is simply a more natural fit for the SMB market because its software was developed for and sold to its many subsidiaries and then to suppliers that support its many different operations.
The company is offering a number of its flagship software products through a network of resellers. These packages include the Bizentro enterprise resource planning suite for discrete manufacturing, the Acube enterprise knowledge portal and the Reqube business intelligence tool. Other packages cover Oracle database management, contact management, building management and computer-aided design.
Samsung SDS has about 500 users of Bizentro worldwide, albeit mostly in companies that are associated with Samsung in some way. According to JH Park, business development director at Samsung SDS Europe, one of the principal selling points of Bizentro is its price. "While companies such as Baan and SAP are always talking about scaling up and trying to address the needs of large enterprises, we actually think that there's a mass of SMBs out there, and that nobody thinks about their requirements and their needs," he says.
Samsung SDS' launch coincided with a major reorganisation by rival Fujitsu. In April 2002, it reshuffled its overseas operations in a bid to increase its emphasis on software and services and, for the first time, the company introduced major new software packages into the North American and European markets.
Prior to that, the biggest software package it had actively marketed outside Japan was the TeamWare groupware product, a throwback to subsidiary ICL's ill-fated acquisition of Nokia Data in 1993. TeamWare eventually withered away under fierce competition from Microsoft and Lotus.
Fujitsu's strategy is more complex than that of Samsung SDS, but it has also adopted an SMB focus, emphasising the low price, in comparison to competitors, of products such as its SystemWalker systems management suite.
The SystemWalker suite is, in fact, sold as a high-end product with a price tag to match in Japan. But the company knows that it is unlikely to be able to wrest market share from the entrenched high-end system management software vendors in Europe and the US, such as IBM Tivoli and Computer Associates. Instead, it has developed a lower cost entry-level version of SystemWalker solely for the European market, so that it can target the SMB sector where the competition is less formidable.
The challenge for Samsung SDS and Fujitsu will be in replicating their domestic successes in foreign fields – something they have singularly failed to do even in neighbouring Asia/Pacific countries. The IT services market is fragmented across Asia/Pacific, and where there is not a 'national champion', such as Legend in China, the market leader tends to be IBM Global Services. As a result of such fragmentation, price competition is the region is very fierce.
"Pricing is a pretty tricky area," says IDC analyst Jun Chin. Customers can often negotiate discounts of between 30% and 40% off the list prices. That perhaps provides the most convincing explanation of why Samsung SDS and Fujitsu are so keen to expand into North America and Europe.