JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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) (www.cebuinvest.com), there

are some 300 foreign companies that have made direct

investments in Cebu, of which more than half are

Japanese companies. At the same time, Japan is the

said that Japanese companies play a major part in the

tourism resources such as beautiful coral reefs, and is

however, Cebu has been exerting much of its efforts, n

Communication Technology (ICT) industry. As part o

hosting an ICT trade show called “Cebu ICT 2005”

(www.cebuict2005.com： the site contains animation

“Cebu brand” as the ICT Hub in ASEAN region. Duri

exhibition and various conferences, it is expected that

this special edition featuring Cebu, we report our findi

Overview of the IT Service Industry in CebuEstimate of Industry Scale

The IT Service Industry in Cebu is still relative

small-scale, and because of its short history, it seem

that sales and export statistics for the IT service sect

alone are not yet readily available. Estimated numb

of employment in this industry segment may be helpful

giving us an idea about the size of the industry. T

results of a survey conducted by the Cebu Education

Foundation for Information Technology (Cedf-IT：to

Figure 1：Location of Japan, Philippines and Cebu

P 1

largest export destination for Cebu’s products. It can therefore be

economic development of Cebu. The island is blessed with rich

very familiar to the Japanese as a diving resort. In recent years,

ot only in tourism, but also in the promotion of the Information and

f these efforts, the Cebu Chamber of Commerce and Industry is

from 22 to 24 June 2005, at the Waterfront Hotel in Cebu City

features introducing Cebu). They aim to inform the world of the

ng the event, aside from the participation of local IT companies in

there will be many other participants from all over the world. In

ngs from our visit to the island in mid-March 2005.

ly

s

or

er

in

he

al

be

discussed in detail later) are helpful. According to this

survey, the total number of people employed by the

entire IT service industry in Cebu as of 2003 was

approximately 9,800. Breakdown is as follows:

Software Development Engineers 1,000; Engineering

Design 800; Others including call center agents 8,000.

Foreign Companies Entering Cebu

The core of Cebu’s IT service industry is made up of

foreign companies, which number relatively fewer.

JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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 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

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 2004. 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

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 23-33 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.

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.

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

Advantages of Cebu for Offshore IT Service 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 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 20-30

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

Position Monthly Salary

(in US $)

Software Engineer (Fresh Graduate) 250 - 280 Software Engineer (3 year experience) 320 - 450

Network Specialist / Administrator 400 - 600 Computer Technician 200 - 250 Graphic Designer 250 - 400 Call Centre Agent 210 - 250

Source: Cebu Investment Promotion Center (CIPC)

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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.

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

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 (www.asiatownitpark.com)

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

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. 2For 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). http://www.jetro.go.jp/philippines/

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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.

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. 1.92 (March 2005)

Table 3：PLDT ADSL Service Rates

Bandwidth (Kbps) Package

Down

Stream

Up

Stream CIR

Monthly

Small Biz Lite 512 256 32 4,000

Small Biz Jr. 768 384 64 8,000 Small Biz Sr. 1,024 512 128 14,500 Power Packed 1.5 MB 1,536 640 196 25,000

Power Packed 2 MB 2,048 640 256 46,000

Power Packed 3 MB 3,008 640 384 80,000

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/month3 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

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 2005. 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 GPRS4 or

EDGE5.

Cell Phones: Philippine cellular phones operate in the

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 3rd generation technologies.

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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

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 350 350 450 550 650

Free Minutes 100 210 350 500 750

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 P1.00 P0.50 P0.50 P0.50 P0.50

IDD Rate $0.40 anytime, anywhere

Source: Smart

IT Human Resource Conditions in Cebu

There are eight universities in Cebu, 30 colleges,

producing some 20,000 graduates every year. All of

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

(IT). (2004 Cedf-IT Survey, Refer to Table 5). Cisco,

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

resolved. The Cebu Educational Development

Foundation for Information Technology (Cedf-IT ) was

established in 2001 as a means to resolve this problem.

The following is a brief introduction to this organization.

Table 5: Transition in the Number of Graduates of IT-related Courses in Cebu Colleges and Universities

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

efforts with industry, government, the academe and

NGOs through proactive intervention in the ICT Human

Resource sector (especially in the university level).

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

foundation, to Bangalore and Hyderabad in India. In

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.

Cedf-IT has

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IT Teachers Ac

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six major activity areas6 but the core is

ers Academy, a program designed to

vel of IT trainers and instructors, and the

ertification Standards & Examination. The

ademy is a two-year training program for

p://www.cedfit.org/activities.html

JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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

(www.adtxsystems.com)

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 2005. 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 2005. 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

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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.

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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

edf-IT. According to the manager of the

ion, Mr. Jonathan F. Tse (left), “If Cebu

re able to produce better human resources,

beneficial for our company.” This is the

ADTX has been supporting Cedf-IT. The

also been active in making contributions to

gh the IT human resource development, by

pting four interns from the Center for

Technology and Enterprise (CITE)

.ph]. CITE is an organization supporting

aining and education for talented youths

me segments of the society. On the right

is Mr. Ramil Villanueva, Assistant Vice

Corporate Planning of ADTX Systems,

tware, Inc.

.com.ph)

ftware Inc. is a software development and

gration company established in 1999 in

ompany was founded by a team of young

preneurs composed of a business and

ented president and technically oriented IT

o had long experience in working for a

ompany engaged in offshore software

. After five years from the establishment,

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

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JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

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 2004.

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 20-30 employees

projected for hiring in 2005.

Mr. Ishida, the General Manager,

comparing to Manila, cited the

following advantages of operating

in Cebu:

(1) There are many universities a

because there are fewer com

engineers, is relatively easier to h

(2) Low living costs.

(3) Strong tendency for people to rem

P 9

nd colleges, and

petitors recruiting

ire new graduates.

ain in Cebu.

JETRO Manila Center Philippine IT Service Industry Update Report

No.7 (April 1, 2005)

(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

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. (www.esprint.com)

In Report No. 6, it was mentioned that COMPASS, a

workflow and project management software product,

won the 2nd place of the best product award in eServices

Philippines 2005. 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.

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.

In 2002, the company established a joint venture with

C-Pax of Japan (with head office in Nara) called N-Pax

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to do offshore development work for Japan. 8

Accountmate Philippines (established in 2000), another

member of the group, is engaged in upgrades and

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 2005.

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 2002. Its main

business is telecommunications-related software

development. As of March 2005, it had 263 employees,

and plans to hire 90 more in 2005. Together with the

American company Lexmark, NEC Telecom Software is

one of Cebu’s largest software development companies.

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-ITTC9, 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.

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No.7 (April 1, 2005)

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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.

(www.primesoft.ph)

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 1993. As of March 2005,

the company has 14 employees, with plans to hire an

additional six within 2005.

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 2004.10

2

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. 7）

10 National Shopper’s Choice Magazine’s “No. 1 Computer Software Provider in Metro Cebu for 2004”