Global Business Tie-ups - Key to Success of Incheon's IT Firms The Incheon Information Technology Industry Promotion Agency (IITPA) has achieved a remarkable feat in assisting IT companies in the city of Incheon, the western port city that is much anticipated to become the hub of trade, together with its Songdo Economic Free Zone. Established in 2002 with an aim to provide assistance to IT companies in the region in their search for business opportunities at home and abroad, the agency has created a "success story"' by enabling IT companies to which it had provided assistance to gain massive export growth percent during a two-year period, enabling a breakthrough in exports. Moreover, the agency has become a model for other IT promotion agencies as it has undertaken R&D operations for creating new businesses that had not been enforced in other regions. Having proclaimed its intention to provide more specialized services that can be differentiated from other IT promotion agencies, IITPA also plans to attract IT training centers, as well as R&D centers for the game and animation industry from international organizations and private businesses. The Korea IT Times is thus providing its readers with more background to this dynamic initiative through the following excerpts from an interview with Eugene Jun, president of IITPA. INTERVIEW Q: What is the current status of small and medium- sized IT enterprises around the nation A: The nation's IT industry has posted an annual 18.8 percent growth on average for the past five years, leading the nation's economy by taking 15.6 percent of GDP and 38 percent of exports. Moreover, it has secured a competitive edge in the world market in such fields as semiconductors, mobile phones, and PDPs, along with the rise in the number of competitive small and medium- sized IT companies. Nonetheless, the IT industry in Korea largely depends on a few conglomerates. Moreover, and from the standpoint of a small IT company doing business in a jobcreating field that plays a role as a growth engine of the nation's economy, adverse factors that hinder its growth are also on the rise. The competition in the small domestic market has grown fiercer in the midst of growing competition with China and other less-advanced developing countries. In contrast to companies in Seoul, small and medium sized IT companies in the Incheon region are faced with far more dire circumstances in terms of overall business environment that include human resource and incentives for attracting foreign investment. This is clearly evident when we consider that there is a big gap between the region's software output, which takes up about less than 0.45 percent share of the region's GRDP on average, with Seoul's 11 percent Against this background, the Ministry of Information and Communication has since 2002 designated "(software towns) Soft Towns" in the nation's seven major cities of Busan, Incheon, Daegu, Gwangju, Daejeon, Jeonju, and Chuncheon, and set up local IT promotion agencies. It has intensively fostered small-sized local IT companies by providing assistance in creating new businesses and developing human resource and technologies. As a result of these endeavors, the software industry in the Incheon region has made considerable improvements as it has grown more than 10-fold in terms of the number of companies and output in comparison to 1996. Nevertheless, the fact that the software industry's output nationwide accounts a mere 10.1 percent of the nation's total IT output still shows its weak standing in the IT industry as a whole. Q: Then, what measures are there for SMEs in the IT industry to cope with such a situation A: In order to create new markets and take the current difficulties as an opportunity to make new advances, we need to take a proactive stance by seeking new opportunities overseas. Of course, it is true that most small IT companies are experiencing difficulties in opening overseas markets due to such factors as lack of capital, information, specialized workforce and marketing systems. However, I don't think that opening new markets is such a difficult job as a lot will depend on the efforts a company exerts itself. Q: Do you have any suggestions you can give to small and medium sized IT companies for their successful operations overseas A: First of all, it is important to compete in overseas markets with one's own brand. In the past, many IT companies have adopted the OEM method, considered to be less risky. Perhaps this is due to the considerable burden that is entailed when advancing into overseas markets. However, for the sake of creating value-added and securing marketing channels for a considerable period of time we have to break away from engaging in a price war with lessadvanced developing countries. One has to compete with one's own brand in global markets and enhance product image while preventing buyers from drifting away. Even though it may be hard and difficult, it is an opportunity to find ways to overcome any difficulties in the global market through one's own brand. Secondly, it will be advantageous to actively seek assistance from IT promotion organizations both at home and abroad. The marketing methods undertaken by most IT companies in Korea for their overseas operations are carried out in the form of participating in overseas exhibitions, engaging in direct sales promotions, and securing distribution channels. However, it requires plenty of time and energy to get hold of local market information and take appropriate measures. Currently, IT promotion organizations around the nation share information on overseas markets and have been seeking business opportunities overseas for the companies carefully selected for their advancement into overseas markets under the "IT Korea" brand. Therefore, when one actively seeks assistance from these institutions one not only saves time and money but also increases the chance of achieving success and scoring new breakthroughs. Q: What regions of the world would be promising to small-sized Korean IT companies seeking opportunities overseas A: I think it is necessary to search for niche markets other than developed countries. Even though developed markets such as the United States and EU are regions that we must take into account for business partnerships, there are hurdles that are not so easy to be overcome by small Korean IT companies. In contrast to this, however, it is easier to make inroads into overseas markets by seeking opportunities in niche markets in such rapidly growing regions of Southeast Asia, Middle East and South America. According to a survey conducted by the International Cooperation Agency for Korea IT on 489 small-sized Korean IT companies, it was found out that, among overseas markets wherein Korean IT companies were doing business, China topped the list as the most preferred market followed by the United States, Japan, Southeast Asia, Western Europe and the Middle East. Among these regions, Southeast Asia and the Middle East, in particular, may be considered promising markets. In the case of Southeast Asia, there is the benefit of having it geographically and culturally close to Korea in addition to Korea's technological advantage. In the case of the Middle East, a market with its plentiful oil-based purchasing power that is stronger than any other markets around the world, it had played the role as a growth engine for Korea while winning trust through hard work and the fact that there still remains Korea's technological advantage is another factor in Korea's favor. Q: How would you assess the future business prospects of small Korean IT companies A: The competition among nations and companies in the world IT market is growing ever more fierce. As a result, those companies that cannot readily cope with changes in the business environment at home and abroad, or seek success in the domestic market alone, will be left behind. Moreover, the fierce competition among IT companies and the overseas market environment are becoming more unfavorable to smaller IT companies day by day. Nevertheless, as Korea's advanced technologies are already disseminated to nations around the world and anticipation of an IT-strong Korea is followed by interest in Korean products and their subsequent sales, I think the future is bright. However, what is important, more than anything else, is the efforts made by small IT companies to seek business opportunities abroad.