This article was originally published in Chinese on Momentum Works’s WeChat account, translated into English by the Momentum Works team. The author has been leading engineering teams at major internet companies in Southeast Asia for more than 6 years, and has just moved back into the region from the US. 

We think that in the current heatwave of Southeast Asia tech, independent thinking has become even more important. You can reach the author on chaotalks@gmail.com.

Because of personal reasons, I moved from the US to Singapore in mid September, and has been living here for a bit more than a month.

Though this is not a very long period, I have been able to exchange note extensively with entrepreneurs in Singapore almost every week. I have also been travelling to Jakarta quite a number of times. Here are some of my (not so well thought of) ideas for Southeast Asia tech market.

You are always being reaped by the times

During my first week in Singapore, I saw a Chinese media outlet with an article “Go to Singapore, to reap an era!”

Sounds exciting – but unfortunately if you take off your rosy glasses, you will see a very different reality.

In the early days of mobile internet, Chinese smart phones wer aggressively expanding their market in Southeast Asia, and hundreds of millions of users were connected to the internet for the first time – a truly explosive growth.

However, it has been 10 years – and it has become increasingly difficult to make quick bucks on untapped or recently connected users. Internet industry in Southeast Asia is in fact at an awkward phase – not up nor down. 

Remember, in early days of mobile internet, the globe was still recovering from the Great Financial Crisis and interest rates were depressed for years. Capital was cheap and many internet companies, in ride hailing, food delivery and more, were able to raise a lot of money to quickly acquire customers.

This phase is over in Southeast Asia, with the public listing of Grab and GoTo.

If you look at global benchmarking – the hottest and most valued startups in the Silicon Valley are all in business services. The most famous is obviously Stripe.

In a mature market, large organisations do not have enough capability to innovate, they instead focus on improving operational efficiency; while startups, with venture funding, are willing to use money to trade for time.

Therefore, the consensus across the ecosystem is that machines are more efficient than humans. Companies are using SaaS to replace many functions and processes. This, coupled with the western ability and willingness to pay for such tools/services, ushered in explosive growth of SaaS opportunities.

How about Southeast Asia?

The consumer opportunities will go even lower. In the past, in Indonesia you will win if you occupy Jakarta. But now if you look at many new coffee chains, they are starting with smaller cities, bypassing Jakarta. The consumption power of Southeast Asia is growing but very slowly – without subsidies whether many consumer focused startups can survive is a big question market.

As the pandemic is more or less over in Southeast Asia, companies have no more excuses not to make money. However, the recent quarter reports of many such companies are not satisfactory.

Companies are not used to paying

Unlike in the US, where SaaS if often self-service with clear pricing structure, in Southeast Asia much of the enterprise services still depend on negotiations and giving discounts. You can’t do much about it – the manpower cost in much of Southeast Asia is very low.

Aside from Singapore, where coders salaries are at global levels, in Vietnam and Indonesia many developers are still paid about the 2005 salary level of their Chinese counterparts. Therefore, 2B in Southeast Asia is largely 2U(nicorn). The question is: how many unicorns are there in Southeast Asia?

So where are the real opportunities? Actually there are.

1. Digitisation of enterprises 

It is not that large companies in Southeast Asia do not want to digitise their processes. Any company with regional and offline operations will need hundreds if not thousands of people on the ground. Although cost of labour is low, but managing such a large workforce incurs a lot of cost. In regulated and/or sensitive fields such as financial services, information security and compliance are also a big pain point.

It is therefore a big opportunity to help these companies improve efficiency using technology. Localised, simple and gamified internal tools are probably more suitable for markets in Southeast Asia.

2. Upgrade of vertical services

Those who are used to the service level of internet companies in China and US will probably find it hard to get used to the services in Southeast Asia. My limited experiences shopping online in Southeast Asia have been quite disappointing – wrong items, bad delivery drive attitude, slow customer service response etc. Such poor services are common with even the largest tech companies.

There was once that I complained directly to the highest leadership of the platform. The result was: after a number of rounds of forwarding, the problem is still waiting to be resolved.

As talent and capital become denser in the region, consumers will demand higher and higher service levels – there might be a big opportunity there.

3. Enterprise collaboration and payment

What I miss the most, since I moved to Southeast Asia, is the fact that in the US companies I worked for, everyone was issued a company credit card. Any team building, travel, and procurement costs will be paid by the card, with electronic receipts issued. No need to claim expenses, no additional processes needed.

In most companies in Southeast Asia, expenses claims are done manually, and many receipts are paper based. I have seen cases where procurement process is so complicated such that the teams give up on buying productivity suites.

Southeast Asia is a complex region – and many companies operate in different countries in the region. How to help these companies implement a smooth collaboration, payment and reconciliation system – there might be an opportunity there.

 

These are my personal opinions – I hope they can lead to more debate, and opportunities to meet and exchange. Happy to be in touch if you have different opinions or would like a chat.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.