Microsoft Spurs Economic Activity in Asia through Localized Software Initiatives

Editor’s note: May 13, 2008 —
Some details about the Microsoft Innovation Center in Pakistan were updated after original publication.

Jakarta, Indonesia – May 9, 2008 – As the Government Leaders Forum—Asia in Jakarta enters its second day, government and business leaders are coming together to promote sustainable economic growth through information technology (IT). While there is no clear consensus on how to achieve this, many agree that innovation is an essential part of the solution. Microsoft Innovation Centers (MICs) are one example of how innovation – coupled with public and private partnerships – can act as a “sparkplug” for local software economies worldwide, and provide a working model of how countries can take full advantage of the “knowledge economy.”

Communities that harness this new economic engine find vast opportunities and benefits. The data shows that empowering citizens with IT skills and nurturing strong, local software economies is a critical factor to improved competitiveness, increased social opportunity and economic growth – but finding effective ways to deliver on this potential is a challenge that needs to be overcome.

Microsoft Corporate Vice President of Strategic and Emerging Business Development, Dan’l Lewin is responsible for managing the company’s worldwide strategic business relationships with venture capitalists and emerging venture-capital-backed businesses, with an aim to help foster economic growth at the local level. Lewin says, “One hallmark of the digital age is new models of collaboration between the public and private sectors to deliver improved skills training, access to technology, and funding for new enterprises. Realizing the true economic potential of ICT, which requires setting ambitious goals and developing long-term strategies that focus on skills-transference and expert guidance, cannot be the sole burden of governments.”

Building Local Software Economies

Through Unlimited Potential, the company’s “on-the-ground” commitment to align its business investments and corporate citizenship efforts in a sustainable way, the company is working to provide IT that is accessible, affordable and relevant to the needs of under-served communities. Within this framework, the Microsoft Local Software Economy (LSE) Initiative serves as a catalyst in the creation of thriving software economies. In partnering with local governments, organizations and educators to foster innovation in the IT industry, and create job opportunities, the LSE Initiative aims to spur economic growth.

MICs are at the forefront of this mission. First established in 2006, a network of 110 MICs now serves 100 communities in 60 nations. The centers provide access to world-class resources for software developers, IT professionals, university students, academic faculties and entrepreneurs, with a focus on:

  • Building skills and intellectual capital through training courses, employment programs and mentoring experiences;

  • Fostering industry partnerships through programs that help companies to work more successfully, as well as through the cultivation of local and regional industry alliances; and

  • Increasing innovation at the local level through hands-on engagements, such as labs geared to local companies, startups, partners and students.

While MIC activities around the world share a consistent focus on promoting jobs, innovation and growth, Microsoft also recognizes that each community has unique characteristics and conditions that can have a significant influence on its economic progress. “Each MIC is a local partnership,” says Lewin. “So in establishing and running the innovation centers, we work closely with local governments and educational institutions, forging relationships that address local economic challenges. MICs are tailored to local economies and grow organically with them.”

Indonesia: Combining Innovation and Entrepreneurship

Microsoft Innovation Centers, such as this one at Bandung Institute of Technology in Indonesia, provide access to training and technology resources to students, teachers, entrepreneurs and IT professionals. Jakarta, Indonesia, May 9, 2008

As some of the world’s most influential thinkers share ideas and opinions at the Government Leaders Forum—Asia, local Indonesian software companies are putting the economic promise of ICT into action with the help of the five Microsoft Innovation Centers in the country, including one which officially opened in Jakarta today.

Established in top technical universities in Indonesia – Bandung Institute of Technology, University of Indonesia, Sepuluh November Institute of Technology, University of Gadjah Mada and Pelita Harapan University – the Indonesian MICs provide resources for technology entrepreneurs, offer training to university students, conduct prototyping for start-ups, and are at the forefront of building local software economies in the country.

According to Tony Chen, General Manager, Microsoft Indonesia, two qualities need to be promoted in the economy to ensure its development: innovation and entrepreneurship. “Despite the relatively under-developed IT infrastructure here, Indonesia has a strong core of talented technology startups,” says Chen. “The Innovation Centers empower these companies with skills development and connect them with potential customers.”

The iMULAI competition (“Mulai” is Indonesian for “start”) is a perfect example of this effort. Launched in 2007, iMULAI is Indonesia’s first high-tech competition. Organized by Microsoft and USAID, the competition challenges participants to find and implement solutions to real business problems. “Participants create ideas that eventually become actionable business solutions,” says Chen. “Microsoft provides business and technical training and guidance, thus cultivating both innovation and entrepreneurship skills.”

The MICs host seminars and workshops by Microsoft and other industry experts to coach participants in forming professional proposals and executing prototypes. Microsoft also funds a nationwide media campaign to raise awareness of the competition, its participants and their innovations.

In 2007, more than 100 quality proposals were submitted to Microsoft. The winning projects included PORTMAP, a Web-based port management application that optimizes port facility use for ship docking and cargo loading; and MAINS, a software application that uses mobile devices to perform inventory management with barcode and RFID (radio frequency identification) technology.

In 2008, three iMULAI winners will each receive US$25,000 in innovation funding, US$10,000 worth of Microsoft products and the opportunity to visit senior Microsoft executives at the company’s headquarters or at major international industry events.

The competition has drawn national attention in Indonesia with widespread media coverage. One user of the iMULAI Website described the sense of hope this program is generating in the country: “Despite all of our difficulties in our country, we always learn something and iMULAI lets [us] prove that we, as the youth of Indonesia, can change that!”* With 1,600 people currently registered on the site, some truly entrepreneurial innovations will again be emerging in Indonesia this year.

Pakistan: One Solution to Two Challenges

In 1995, the government of Pakistan established the Pakistan Software Export Board (PSEB), under the Ministry of Information Technology, to facilitate the development of the Pakistan software industry.

In partnership with FAST National University, Microsoft opened an Innovation Center in Karachi. The center provides sales, marketing and technical training and support to local software developers, and helps invigorate the local economy. Karachi, Pakistan, May 9, 2008

In 2004, the PSEB launched the Industry Automation Program to tackle a significant challenge to the country’s economic growth. Most small and medium-sized enterprises (SME), the mainstay of the economy, had extremely low levels of IT adoption. Moreover, Pakistan’s software development companies were disconnected from this crucial economic sector. “According to a study conducted in 2001-02, Pakistan’s small and medium-sized enterprises accounted for 80 percent of the country’s businesses, but only contributed 35 percent to GDP,” says Shahzad Basir, project manager, Industry Automation Program, PSEB. “The vast majority of these companies used paper-based processes, making it difficult to compete on a global level.”

Five industries were identified for this program: garments and hosiery, automotive parts and accessories, textile processing, surgical implements and agriculture. Enterprise Resource Planning (ERP) solutions were developed for each of the five industries by local ISVs and 15 small and medium-size enterprises from each industry were chosen as pilots for these ERP solutions. Initially, these solutions were offered on open-source technologies; but to address the requests of the targeted customers, Microsoft signed a Memorandum of Understanding (MOU) with the PSEB and participating software companies to migrate the ERP solutions to Microsoft platforms and technologies.

Microsoft brought these software companies into its partner ecosystem and, through its MIC in FAST National University, provided them with business and technical strategy management trainings and a platform to showcase the developed ERP solutions to customers. “ERP is perhaps one of the toughest and most demanding software solutions to provide to any client, involving the complete automation of the customer’s company processes,” says Basir. “Small businesses in Pakistan were particularly skeptical about this solution. Microsoft came to us with a sound go-to-market plan and helped us implement it through the MIC; this played a major part in winning over reluctant customers.”

Sheikh Akmal, CEO of Acrologix, a 70-person ISV that designed the ERP system for the automotive parts industry, agrees. “In the IT industry [in Pakistan], we are very strong developers, but we need to improve our marketing and sales skills. The companies we were targeting with this project didn’t even have IT support professionals let alone an ERP system. Our challenge was to change mindsets.”

AutoPlus, the solution designed by Acrologix and tested on 15 pilot companies, was a resounding success. Initial feedback has shown that it reduces costs and human-resources costs from 75 percent to 90 percent in finance, purchasing and inventory, sales, production and payroll processes. “It is no exaggeration to say that some processes that used to take these companies a week to perform, can now be done in one day,” says Akmal. “When the customers experienced these benefits, attitudes changed completely and Microsoft helped bring about this change. In addition to helping fine tune this solution, the MIC assisted us with marketing it to the other 400 potential customers in this industry segment. In particular, through our partnership with Microsoft, we have learned how to move away from piecemeal customer wins and implement large-volume marketing strategies.”

Similar results have been seen across all the industries in the project. “Microsoft’s technical and business expertise has been invaluable to the success of the Industry Automation Program,” says Basir.

“The results have been two-fold,” he adds. “Microsoft helped us to introduce a cost-effective IT solution into the most important sector of our economy and, at the same time, opened up new opportunities for our local software companies. The MIC is becoming a hub that connects all stakeholders in the Pakistan economy.”

Microsoft and the PSEB are collaborating on a joint-proposal to expand this project to other industry verticals to ensure a mutually-beneficial outcome for all parties.

Successful MIC projects are not confined to Indonesia and Pakistan; the demand for similar services and initiatives is felt on a global level. In response, Microsoft expects that the number of MICs will expand to 200 in 85 countries by 2009.