When Jack Zhong started TodayTech more than 12 years ago he harboured an ambition to build a great Australian-based technology company that he could expand across the entire Asia-Pacific region. Having now been appointed one of just four Intel distributors in the China market, Zhong is taking his Aussie-honed business savvy to a potentially huge audience. Gerard Norsa spoke to him recently about doing business in China and Australia.
ARN: What prompted TodayTech’s move into China? JZ: When I started TodayTech, it was always my vision to build an IT company that was successful right across the Asia-Pacific region. It would not be restricted to just Australia and it would not be restricted to just distribution. I always planned to expand in the region whereever there were emerging markets.
I developed a very strong and healthy base in Australia and was looking to expand. Being the largest country in Asia-Pacific means there is a huge opportunity in China. The Chinese market is more than 15 times the size of the Australian market.
ARN: How big is TodayTech’s China operation? JZ: In China, we have a distribution business, a software development business and a systems integration business. We have offices in Hong Kong, Guangzhou, Shanghai, Beijing, Chendu and Shenzhen. Overall, there are about 100 people employed in China. The distribution business employs about 35-40 people, there is a software team of about 40 people and about 15 people doing integration.
ARN: Why is it that not everyone has heard about TodayTech yet you are so successful? JZ: TodayTech is not a high profile company. I believe doing it is better than saying it and that is something that has always been my culture and philosophy.
ARN: Is it harder or easier to do business in China than it is in Australia? JZ: It is both hard and easy. If you know the way to do business, understand the culture and if you provide a differentiator to what everyone else offers it is easier. If you don’t know the market or you try to use the same western business style, then it is very hard. Regulations are unique and governments allocate specific areas for high tech companies. So you will find all sorts of information technology companies in the same area. When you walk into one complex there can be as many as 500 companies in the same area. It is very different to Australia. If you want to build a high tech company then you have to do it where they tell you.
ARN: So do the consumers differ from those in Australia as well? JZ: Chinese consumers want more detail as to what all the components are within a system. They want to know exactly what kind of hard drive is used and motherboard. Often they will go to one of the complexes where there are hundreds of companies and then pick all the brands of components they want and then get one of the companies to build the system for them.
ARN: You compete in China for the lucrative Intel business against three very big companies — Ingram Micro, Synnex and ArCon. Does anybody dominate the market there? JZ: I only have my own market research to go by but the way I see it, there is nobody that dominates across all regions. One may be dominant in one region and another in other regions.
China’s geography is huge, the population is huge and the cultures are very diverse. In the south-east it is a very wealthy, mature market. The population is very aware of technology. But on the other side in the north it is still very much an emerging market and the living standards are very different. That is why you need to differentiate the markets. They are not all the same. As far as I can see, there is no distributor that is very strong across the board.
ARN: Are there any other companies that you know of who are doing well in China? JZ: I know there has been a lot of Australian companies that have attempted to invest in China but just how many and who they are, I don’t know. Some of them have failed dismally and others have been able to operate but I have not seen any that have made a big impact because of the differences in doing business there. There may be some but I don’t know of them.
ARN: What do other companies have to do to be successful in China? JZ: They have to understand the culture and the difference between China and Australia. You have to go in there to understand the cultural difference and to incorporate the differences into the way you do business there. If any organisation just thinks they can go in and copy the model they use in Australia, they are dreaming.
I think things may get a little easier now because Chinese business is becoming closely involved with the World Trade Organisation. There are still a lot of things that China needs to catch up on before business will grow to its full potential but I think now that it has started it will happen very fast. I also think that there is a good opportunity for Australian channel companies because the Australian market is very mature and there is a healthy channel here.
ARN: If you are successful in China is that a benefit to TodayTech in Australia? JZ: Definitely. We will be able to grow the Australian business as we grow in China. We will be able to leverage all our resources and leverage our buying power because of our bigger overall presence and additional intellectual property as we develop it.
ARN: It has been suggested that TodayTech is a top five player in Australia. Is this your feeling? JZ: I don’t know that because I don’t know what other distributors are doing. We don’t focus on revenues too much. If we are healthy and growing and we make a reasonable profit then we are happy because that way we can continue to fund the business to grow.
You need profits to develop mechanisms which help the business to grow and stay healthy. Profit is something that I pay much more attention to than just growing revenues and considering whether I am bigger than other distributors.
ARN: Why is TodayTech prospering and growing in Australia where other distributors appear to be very flat or in decline? JZ: Again I don’t know what other distributors are doing. We restructured our organisation and focused on what sort of business we are good at and on our customers. Our sales team is focused on our products and we look to develop them to the very best of our ability to the benefit of our customers.
The other thing which TodayTech has been very good at is that we respond quickly to market activity. We don’t wait for the market to push us into decisions. We make decisions to match what is happening in the market.
ARN: Why do you focus on just a few vendor partners? JZ: We are very focused on what we are good at. Vendors are knocking on the door every day with new products but we are only interested in ones that we can really add value to.
I don’t necessarily agree with the principle of having the one-stop shop with a wide variety of products. This has not really been all that successful in Australia at any time in the past and we see have seen a few organisations get it wrong.
ARN: Does the TodayTech model involve acquiring other companies or to a float? JZ: That is a hard question. TodayTech is a company that has been successful based on our management structure. While I cannot rule out ever acquiring another organisation, it would only be a business that meets our criteria for business culture, model and management philosophy. For me to be interested I have to be able to see that one plus one will equal more than two.
Secondly, in relation to whether someone else would acquire TodayTech. Well, I am a commercial man and everything is for sale but it has to be at the right price. Of course, the right price includes looking after all of the team that has been a part of our success.
At one stage we were looking at listing but at this point in time, I am not considering that because of the state of the market and the development of our business model is in a transitional stage. It will be much better proposition later in the story.