Micom Tech: Quality of service is the
key to success in consultancy business
(Electronics Bulletin - Vol. 12 No. 6)

Product development is not being highly appreciated in Hong Kong, a local microcontroller software consultancy house manages to successfully stay afloat with mainly overseas customers. With a shift of manufacturing to southern China, new challenges as well as opportunities may arise in the consultancy arena.

To the disappointment of Micom Tech Limited's Managing Director Victor Ng, local consultancy projects only accounted for less than half the company's consultancy business in 1993. Despite having completed over 600 projects since he established Micom Tech Limited in 1981, Mr. Ng was not able to promote his consultancy services to Hong Kong manufacturers as successfully as he did to overseas clients. Mr. Ng defines Hong Kong based companies with overseas headquarters as overseas companies. According to Mr. Ng, local companies usually do not value R&D as highly as overseas companies do.

Micom Tech Limited's Managing Director Victor Ng

Micom Tech Ltd., offers seven types of consultancy service: feasibility study, product specification proposal, circuitry design, software design ASIC design, speech editing and finally mechanical design, which was just started in 1992. Completed projects range from toys and games, computer systems and related products to consumer durables and OA products. Mr. Ng said that all these projects are micro-controller based.

To cope with clients' needs, Micom Tech has employed 22 engineers with expertise in different technical areas. According to Mr. Ng, in order to establish a long term relationship with clients, wide project range support is a must. "If a customer has 10 projects in a year, seven of which are easy conventional tasks and three are difficult unconventional tasks and his consultancy firm only supports the easy ones, the customer will be in trouble with the three difficult projects and doubtful whether he can rely on his consultant in the long run. Sooner or later, the consultancy firm will lose the clients." said Mr. Ng.

Bearing in mind that electronics project development is not bounded by geographical location, Mr. Ng determined to compete with overseas software houses to get overseas projects when he started out. "No matter where the competitors are, they use the same type of microprocessors, components and approaches as we do. There are no market boundaries between overseas software houses and us. We can compete with them and win the orders." he added.

Good R&D Minimize Cost

Just like other new companies, Micom Tech had a hard time during its establishment period. At that time, Mr. Ng competed with overseas software houses with lower consultancy charges. Bad results made him realise that his approach was off target. According to Mr. Ng, when taking manufacturer's total costs into consideration, whereby materials costs usually account for 60 - 70%, production 20 - 30% and R&D portion is very small. However, good R&D can significantly minimize material and production costs and also shorten time to market, the overall benefits to clients actually outweigh the R&D charges. So, what the customers would mostly be concerned with is the quality of the services rather than the cost. Micom Tech changed its market strategy accordingly amd gradually built up its customer base.

To cope with clients' needs, Micom Tech has employed 22 engineers with expertise in different technical areas.

With a history of over 600 completed projects in different areas since its establishment, Micom Tech has now become a rather high profile software consultancy house providing full project development consultancy services in Hong Kong. Highly technical development projects, such as fax machines, and educational games, which are quite rare in Hong Kong, are also included in Micom Tech's consultancy services.

Despite having close relationships with major semiconductor vendors, which enable Micom Tech to obtain first-hand up-to-date technical information, development tools and fast delivery schedules for clients, Micom Tech has no plans to become a sales agent for them. Mr. Ng said that would compromise the role of consultant, as the role of a sales agent is to promote its principle's components at all times, even when the components may not always be the ideal solution to clients' needs. Mr. Ng said he preferred being purely a consultant so as to provide the best available solutions to his clients.

In addition to fast development schedule and close relationships with major semiconductor vendors, according to Mr. Ng, the vast manufacturing infrastructure in southern China has helped Micom Tech in getting projects. According to Mr. Ng, 95% of manufacturers, who chose Hong Kong as their design centres, did so because Hong Kong is close to their manudacturing bases. As a result, project designers can better understand manufacturing practise and processes and production line management. Also, in the event of production problems, the designer can respond with prompt on-site support. In addition, designers can take the real manufacturing capability of the lines into consideration in the design stage, resulting in shorter design cycles and shorter volume ramp up periods.

However, these factors also imply that China-based consultancy houses will sooner or later be in a position to compete with Hong Kong firms for projects in China. When asked about the probable competition with mainland consultancy houses, Mr. Ng's view was optimistic. He felt that the rapid economic growth in China would eventually open the unexplored large potential consultancy market in China, although some of these projects may go to mainland consultancy houses. The overall result will be a much larger market with more competitors -- a new challenge to Micom Tech.

In spite of the big difference between Mainland and Hong Kong engineers' salaries, Mr. Ng still believes in the philosophy that the quality of the consultancy services, rather than the fee, is the ultimate consideration for customers, (both local and overseas). The benefits arising from a good product design will eventually outweigh the fee. Moreover, staff salaries comprise only a small portion of the consultancy charge. Fixed costs, such as equipment, components, development tools, masking and NRE are the same in China as in Hong Kong. When the total production cost is considered, the difference in consultancy charges will be insignificant.

As Micom Tech's customers are mainly overseas, they have not yet experienced any competition from mainland consultancy houses. On the other hand, Mr. Ng suggested that China's large engineering resources could provide Hong Kong consultancy houses, like Micom Tech, with a strong backup for large scale product development, not previously possible. According to Mr. Ng, because of the situation in Hong Kong, it was not hitherto possible to recruit large numbers of Hong Kone engineers to start large scale projects. But it is now possible with the resources available in China. Although Mr. Ng, does not as yet have any concrete plans for this development, he said it would provide a great opportunity and challenge for Hong Kong companies in the coming decade.

Mr. Ng had previously cooperated with Mainland engineers on a project. He observed that they were less flexible, less exposed to the outside world and less adaptable to working under pressure than their Hong Kong counterparts. As a result, they were relatively weak in application level projects. However, because of their extensive academic knowledge, Mr. Ng found that in academic or large scale systematic tasks, their performance was very good indeed.

"If we can successfully combine our engineering leadership and the abundant engineering resources in China and apply that in a suitable area, we can create a totally new market for ourselves." said Mr. Ng. Historically, because of the particular situation in Hong Kong, Hong Kong companies do not value product development. However, with the help of the potential engineering resources in China, the climate may change.