When it comes to deciding which country is best for your regional headquarters, what are the main considerations? The high cost of running a business in Singapore was a major factor in Microsoft choosing Malaysia rather than Singapore for its ASEAN regional headquarters, according to company officials.
The other main considerations were the fact that Microsoft's new regional director for ASEAN, John Lauer, was based in Malaysia, and that Malaysia has a larger PC base.
Although costs were not cited as the biggest contributing factor, Microsoft officials said it was a major consideration. "Cost is a factor in any business decision," said Paul Lovell, general manager for Microsoft Singapore.
And the costs of doing business in Singapore can be daunting. According to a 1995 Gartner Group report, it is more expensive to hire a top manager in Singapore than in either Australia or Hong Kong, other favourite locales for regional operations. Housing allowances are also highest for Singapore, although Hong Kong commands the highest rent for office space. In addition, it costs more to make a 10-minute phone call to the United States from Singapore than from Australia and Hong Kong.
However, this hasn't fazed some companies. IT corporations which have recently set up regional headquarters in Singapore include Silicon Graphics subsidiary Alias/Wavefront, remote networking vendor Shiva and TCP/IP networking provider FTP Software.
Microsoft's choice of Malaysia as ASEAN HQ comes after a recent reorganisation effort that has split the software vendor's Asia/Pacific operations into three divisions: Southeast Asia, Australia/New Zealand, and the Far East, comprising Japan, China, Hong Kong, South Korea and Taiwan.
The effect of a Southeast Asian regional operation in Malaysia, rather than an umbrella Asia/Pacific headquarters in Australia, will be quicker decisions and faster turnaround times, Microsoft officials said.
"I've always believed the head office in Australia was too far away, and the cultural difference between Asia and Australia just too great," said Darren Lockie, sales and marketing manager, end-user division, for Microsoft Singapore.
"Whether the Southeast Asian HQ is in Malaysia, Thailand or Singapore, this will still benefit Singapore because of things like regional advertising and campaigns, and OEM bundling with retailers in Asia," he continued. "Things will now be much quicker to implement since we don't have to go all the way to Australia."
End-users in Singapore will also be better supported, Lockie added. "Now if things don't work, we just go to Malaysia and say, 'Hey, this isn't working. Fix it'," he said.
The Southeast Asia operations will be overseen by Lauer from Malaysia. Microsoft will be trying to target the fast-growing PC market in Southeast Asia, where 1.06 million units of PCs were shipped into Thailand, Indonesia, Singapore and Malaysia in 1995, according to Dataquest.
Malaysia and Singapore were the leading markets. 254,750 units of PCs were shipped into Malaysia last year, as against 233,000 units for Singapore.
In Singapore, however, the PC market is expected to experience a slowdown over the next two years, said Janardan Menon, Dataquest industry analyst, computers and peripherals, for the Asia/Pacific region.
On the other hand, Malaysia's PC consumption will continue to grow at 20-plus per cent into the next decade, he said. "However, if Microsoft is going by the absolute size of the PC market for its choice of regional HQ, Indonesia and Thailand will in the course of the next two years become much bigger markets than Malaysia," he noted.