HITACHI SUNWAY

INFORMATION SYSTEMS
NEW MARKET IT SOLUTIONS

Lecture: Dr. Anand Oalser

Tutor: Dr. Vinc Wee

Tittle Modules: International Business

Student name: Tong Weng ON

Student ID: 0137SMCSMC0415 (MBAE)

Class Group: 43
TABLE OF CONTENTS
1.0 Abstract ............................................................................................................................................. 2
2.0 Introduction ....................................................................................................................................... 2
3.0 Literature Review and Critical Analysis ........................................................................................... 4
3.1 The Opportunity ................................................................................................................................ 4
3.2 Organization Structure ...................................................................................................................... 5
3.3 Exit Strategy...................................................................................................................................... 6
3.4 Competition....................................................................................................................................... 6
3.5 Revenue Model ................................................................................................................................. 7
3.6 Entry Strategy ................................................................................................................................... 7
3.7 Porter Diamond Analysis .................................................................................................................. 8
3.8 Product Strategy & Description ........................................................................................................ 8
3.8.1 Virtualization (VMware)............................................................................................................... 9
3.8.2 Cloud Platform ............................................................................................................................ 10
3.8.3 Mobile Application ..................................................................................................................... 10
3.9 SWOT analysis ............................................................................................................................... 10
4.0 Growth Strategies............................................................................................................................ 11
5.0 Defensive Strategies........................................................................................................................ 12
6.0 Market Study................................................................................................................................... 12
6.1 Strategic assessment........................................................................................................................ 12
6.1.1 Positives ...................................................................................................................................... 13
6.1.2 Risk ............................................................................................................................................. 13
6.2 Global Virtualization and Cloud Platforms Analysis...................................................................... 13
6.2.1 Brazil Virtualization Market ....................................................................................................... 16
6.3 Global Mobile Application Analysis .............................................................................................. 16
6.3.1 Brazil Mobile Application Market .............................................................................................. 17
6.4 Market Strategy ............................................................................................................................... 19
6.4.1 Advertising.................................................................................................................................. 19
6.4.2 Media Mix................................................................................................................................... 19
6.4.3 Direct/Personal Selling ............................................................................................................... 21
7.0 Conclusion ...................................................................................................................................... 21
8.0 Recommendation ............................................................................................................................ 22
References .................................................................................................................................................. 23
1.0 Abstract
Hitachi Sunway Information Systems plans to be one of the diversified solution provider on
virtual environment and digital application developers across country Brazil Latin America, with
the country growing and it has the world’s ninth largest economy by nominal GDP and the fifth
largest by purchasing power parity. The company has recently strengthened the position in
ASEAN with the partnership of TATA communication, a leading provider of a New World
Communications with using the tier 1 provider that is in the top five in continents by internet
routes towards the world. With the partner strategies, it can be delivered the world class
communication, supporting the clouds computing services. As forecast by International Data
Corporation (IDC) that worldwide revenue from public cloud services is projected to reach more
than USD 195 billion in 2020. With IDC predicts that by 2020, half of all new business software
purchase will be of service-enabled software, with mobile and loud consisting of more than a
quarter of software sold. Manufacturing, banking, and professional services which represent
nearly a third of total worldwide revenue in 2016, will lead way in cloud adoption, mobility
platforms. IDC ads that Asia/Pacific (excluding Japan) (APeJ) and Latin America will see the
biggest revenue growth in the forecasted period.

2.0 Introduction
Hitachi Sunway is the leading one stop ICT solutions and services provider in ASEAN with a
local presence in 15 strategies location across 7 countries (Singapore, Malaysia, Thailand,
Indonesia, Vietnam, Philippines, Myanmar) with supported by 400+ workforce and serving more
than 1,000 clients in the region.

The company plans are to focus and sets up an expansion base in one of the non-emerging
market in country Brazil. The company believe as in forecasted by IDC the upcoming potentially
growing in IT market will be in the Latin American. The market strategy it will be privately held
corporation with Hitachi Sunway Information System with controlling 60% of equity and 40%
will on local based company which have a better influence in geographical environment.

With the current economic sizes in Brazil the projection of forecast improvement will be
expected to continues this year (references, export gov). As the inflation accelerated reducing
from 7.3% year 2016 and expected to improve 3.8% in year 2017, the GDP is improve from -
3.7% to 2.4% by year 2020. (Table 1 market outlook, The Economist Intelligence)

Table 1- market outlook

In this year, the company objective plans is to focus on more virtual environment (virtualization),
customization on mobile application with running in more flexible language and clouds services
segment which will contributing 80% of the group revenues on year to year basic. And another
hand, the company plan will diversify to mitigate the risk by reduce the dependency on Brazil
marketspace in 3-4 years and expand to different geographical portfolio in Latin America which
is Argentina. As in economy of Argentina is the 2nd largest in South America and there is a huge
potential portfolio market segment once the initial Brazil is being established. With the
expansion on mobile application, virtualization and clouds services platforms business segments
across market Brazil and along to Latin American such as Argentina with international
constituting contribute 50% Group revenues by 2022. The company core business segment
activities will be categories in 3 areas which are virtualization, mobile application development
and clouds platform services.
3.0 Literature Review and Critical Analysis

3.1 The Opportunity

Hitachi Sunway has probable target the market segmentation worth of USD 20 million in
projection of next 4-5 years (2017-2022) on the technology and solution provide in the
application design for mobile with develop and situated on virtualization by using the
platform of VMware technology suite. The solution given will be use as a core business
technology provider to Brazil.

Mobile application development, virtualization reselling & distribution and clouds

platform services segments are extremely fragmented including the low district and local
saturation in Brazil along with neighboring country Argentina. There been little
emergence in volumes or sales in the solution provide on the cloud platform,
virtualization and mobile application. One of the factor are whereby the local distribution
are in a poor to server and do not have the expertise or direct contract with the principal.
Therefore, Sunway Hitachi will able to serves the gap by improving the solution given on
VMware virtualization, cloud computing technology and mobile application solution
across the Brazil.

Application solution for mobile is a fast demand and growing stage in any organization or
sectors segment. This will increase the requirement and as well in the position of
application customization solution to give more effectiveness solution in term the cost
and system flexibility. The solution given is easily serve the specifically needs in the
industrial and the demand from the local SME’s as comparing to the big organization
with restricted in the technology expertise, and can leverage with the budget of
applications between USD 20,000 - USD 50,000. Majority of large and medium size IT
solution company are target customer base between USD500,000 and above. There is a
small number of IT consultant company will cater the solution which in less than the
amount of USD 100,000 and below. Thus, Sunway Hitachi can easily have area of
interest in the market positioning.

Declining in worldwide IT spending, this will be hampering the net margins of profit in
niche market for Hitachi Sunway. But with the venture into of business strategy which
providing the packaged pricing model to SME’s market on clouds and virtualization
solutions it will enhance the cost synergies. Thus, this will be serve as the entry approach
for SME’s market and it will be much easier to tapped into the market gap given by the
solution from Sunway Hitachi.

3.2 Organization Structure

With the structuring between JV partnership with local partner, Sunway Hitachi expected
to grow the workforce to by additional 10 staffs in next year (2018). The company will
have the 6 executive management members which 3 will be transferred from Malaysia
and 3 will be existing JV partnership company. Remaining others will be the engineer
and sales force with to help to boost the sales and implementation. The proposed JV
partnership structure for Sunway Hitachi in Brazil for 2017-2022 as follows; (Table 2 –
Organization structure)

COO
(MY)

Presales HR & Admin

(MY) (local)

Solution
Sales
Specialist
(local)
(MY)

Engineer
(local)

Table 2- Organization structure

3.3 Exit Strategy
Common virtualization resellers, cloud computing and mobile apps services are engaged
by the customer for the support activities. The acquired divest into non-core activities
which to retrain the main segment business in the cloud computing, virtualization
platform and the customize for mobile application. Here will be the list down for exit
scenarios for Sunway Hitachi;

o Subsidiary the long-term partnership with the VMware on the location market
o Owned the entire stake of company
o Merging with others similar portfolio company which providing the mobile
application, virtualization and cloud computing.

3.4 Competition
Virtualization, clouds platform and application for mobile solutions reseller marketspace
are very fragmented. As in the virtualization product for VMware solution and there is
only one direct competition faces is from Microsoft Hyper-V. Although in the
segmentation, Sunway Hitachi also will face indirect competition from the local market
solution provider which from large size company until the medium size of company.
Even its competitive, the company can be diverted the focus to more economic scale of
solution with are aiming on the high volume of sales and subsequent with provide the
minimal of operating/solutions costs which are important to survive at these segments. As
segmented in the table with Primary target and Secondary target which Sunway Hitachi
will face in the competition. (Table 3 – Market Competition)
 Primary Market Secondary Market

Table 3- Market Competition

3.5 Revenue Model

Sunway Hitachi will have diversified and differential dual revenue model due to
vertically integrated business activities. In virtualization marketspace, the company will
generate revenue from commission VMware and the subscription of the clouds storage to
upholds the services. Subsequent mobile application development will bid on the fixed
fees oriented as that will be on the customization and implementation cost.

3.6 Entry Strategy

Hitachi Sunway plans to venture into virtualization software and service segment via
reseller agreement with global leader “VMware” and subsequent the company also have
the Data Center to facilitated the cloud storage services across the globe with the
agreement of TATA communication to provide the better internet route across. The
company will be one of the direct local distributer of VMware software and service
portfolio predominantly in Brazil and moving forward expanding to other neighboring
region geographies such in Argentina. The company will focus predominantly on SME’s
customer base due to need and gap based opportunity analysis.
 3.7 Porter Diamond Analysis
With the factor of analysis, it can be easily designed to help to understand the competitive
advantage of groups possess and will give all factors that are important to group
expanding and identifying the key area in businesses.

It has clear indicate showing the Porter Diamond Analysis with advantages of low price
strategy in the current economic markets. (Table 4 – Porter Diamond Analysis)

• Technology • Low price strategy with

Conditions for firm,
• Security providing packages.
strategy, structure
• Flexibility • Rivalries
and rivalry
• Scalability ✓ Hyper-V
✓ Secondary market

Demand Conditions
Factor Conditions

• Reduce the cost of asset Related and Support • SME’s

ownership and hardware Industries • Declining IT
depreciation. budgets
• Labor force: low cost

Table 4- Porter Diamond Analysis

3.8 Product Strategy & Description

Hitachi Sunway business strategy will rest on offering customized and standardized
mobile solution, virtualization solution and cloud services for diverse customer base
across segmentation. The stipulated creation of value based content and platforms
network is the final goal and is represented in the diagram. (Table 5 – Product Strategy)

Virtualization Cloud platform

Sunway
Hitachi

Mobile
Application

Table 5- Product Strategy

3.8.1 Virtualization (VMware)

The virtual environment is to replacing the physical environment which are more
IT agility, flexibility and scalability. Workload get deployed faster, performance
and availability increases and operations become automated, resulting in IT that’s
simpler to manage and less costly to own and operate. With additional benefits
include;

• Reduce capital and operating cost

• Minimize or eliminate downtime
• Increase IT productivity, efficiency, agility and responsiveness
• Provision application and resources faster
• Enable business continuity and disaster recovery
• Simplify date center management
 • Build a true Software-Defined Date Center

3.8.2 Cloud Platform

Cloud computing is a delivery of on-demand computing resources with
everything from applications to data center. Connected over the internet on a pay-
for-use basis. With cloud computing it will be able to

• More flexible and able to scale up or down quickly and easily to

meet demand usage
• Pay by per storage usage
• Transparent to admin as all IT resources is can be self-service
access
• Disaster recovery will be easily to set up as compare the traditional
method.
• Data uptime will be on 99.9% SLA as it will automatically fail-
over to another data center if there is event of disaster.

3.8.3 Mobile Application

The solutions will be providing the different technologies variety in term of the
system design language which can be include the visual C++ embedded, Java
application and the standard platform of Microsoft frame .NET. The solution also
will enable the JAVA specification to support the Android and IOS platforms.

3.9 SWOT analysis

By comparing Sunway Hitachi with the others competitors in the target market segments,
it will give us the advantages about our strength and weaknesses in these markets. It will
improve our marketing and sales, distribution to penetration the selected areas. The
SWOT analysis service portfolio and business model will be combined given a better
view of understanding the business need with provide the competitive landscape applies
into business.
 Strengths Weaknesses
• Unique integrated solution to focus on • Funds is limited as it’s required huge
SME’s market. amount to penetrate the entire state of
• Early entry into the target market with Brazil.
estimated worth of USD 10.5 million. • Solution specialist dependency as its built
• Solution offering is in niche market which from customization.
are still untapped by others competitors • Direct reseller agreement with VMware
(higher ROI and ease of penetration). need to be permanent, otherwise it will be
• Scalability in operations and adjacent on losing from the market share.
the emerging economies.
• No direct competitor in local market
which offering the differentiated
distributed segment.
• Better operational competence due to the
straightforwardness of business activities.
Opportunities Threats
• Internationalization • The unique business model it can be
• Support towards the online partner copying by competitors.
platforms.
• Filling the large gap in the SME’s market
which looking for technology
improvement.
• Flexibility, scalability and cost
effectiveness

4.0 Growth Strategies

In order to build the sustainable benefit, Sunway Hitachi must be competitive to transform and to
be more unique as in;
 • Unique value for money for mobile application, virtualization and clouds platform
services with bundled with pricing model.
✓ Sunway Hitachi will be the first to offering the direct services in
virtualization environment by using the technologies of platforms, mobile
application and together with the cloud solutions. This bundling will
enhance the recurring revenues with long-term suitability along the
aggressive diversification of customer.
• Low cost
✓ With the unique cost of solution in virtualization, cloud solution and
mobile application, this will allow Sunway Hitachi to enter the local
market easily and across to country Brazil and neighboring Latin America.

5.0 Defensive Strategies

By forming the value based plans; cost advantages will decline with time when its long run in
any platforms of virtualization, cloud platform or even in mobile application. There is needed to
develop the more unique plans to attract the customer and to formalize with the win-win
situation in IT solutions to provide better entry for new customer who want to implement the
services. (Martinek, 2009)

6.0 Market Study

6.1 Strategic assessment

Sunway Hitachi is operating in one of the niche and growing fastest emerging markets
across Brazil in region Latin America virtualization, cloud platform services and mobile
application. The estimated direct market revenue for the company in 2018 will be worth
USD 6.5 million and subsequent expected growing to USD 11.3 million in next 3-5
years’ projection. As in the secondary market on the mobile application solution will be
estimated worth of USD 5 million in 2018. Therefore, the total direct and secondary
market opportunity will be topped at USD 11.5 million in year 2018-2019.
 6.1.1 Positives
• The offering solution will be in the end-to-end packaged with given the
cost advantages.
• With the provisioning using virtualization technology with collaborating
with the VMware solution it will help to reduce the cost of operating as
the initial set up. It can also be hosted in the cloud platform whereby the
customer no longer worry about the hardware failure or any redundancy
cost.

6.1.2 Risk
• Breach in the licensing agreement with software principal VMware and
the customer due to failed to provide the virtualization segment.
• To develop the mobile application technology is practical high cost to
purchase or implement. If there is any decline in mobile application
demand develop by Sunway Hitachi it can give a risk on the revenue
sustainability.
• Lack of stability infrastructure provide by local service provider will direct
hamper to the revenue as the clouds platform is required the internet
connection.

6.2 Global Virtualization and Cloud Platforms Analysis

Global virtualization and cloud platforms market is worth USD 160 billion, with year-to-
year growth of forecast 24% from year (2013-2020) refer to table 6 & 7. Server
virtualization of VMware platform will have contributed 44% in year (2016) as compare
from 33% in year (2015) refer to table 8.
 Table 6- Market forecast on cloud

Table 7- Percentage growth on cloud platforms

 Table 8- Virtualization performance growth

As indicator in (source: Gartner,2016), the market leader on the global virtualization is

still VMware which Sunway Hitachi will have the priority to engage and getting right
solution to the target market. (Table 9 – virtualization market leader)

Table 9- Virtualization market leader

 6.2.1 Brazil Virtualization Market
As forecast in the virtualization market segment will be growth and increase in
year 2018 by USD 1 million from year 2017 with the results of USD 11 million.
The segment which are targeted by Sunway Hitachi in virtualization will be the
largest segment of using the virtualization and targeted will be 70% in total
market year 2018. Even there is the global crisis in year 2015-2016 but the market
demand and competitive are still in higher. In order to manage the competitive
market, it need to be manage and utilize the IT resources in more effectively by
develop more flexibility, scalability and economical infrastructure to sustain the
current competitive market segments. (Table 10 – virtualization market
spending)

Table 10- Virtualization market spending

6.3 Global Mobile Application Analysis

The market application worldwide is worth of USD 12.3 billion in year 2016, through
with mobile app development services is constituting USD 7.8 billion of total market
segment in 2016. There is an aggressive market demand which require using the mobile
application for personal and corporate environment such as banking, browsing, games,
IM messaging, health etc.

The market is stipulated to reach USD 13.1 billion in year 2018. Mobile application will
be increase to USD 8.9 billion and such growth will be 15% 2017 and it dominant the
market position into mobile application market share is 32% of the total mobile segment.
(table 11 – mobile development services)

Table 11- Mobile development services

6.3.1 Brazil Mobile Application Market

In 2017, Brazil mobile subscriber base stood at 250 million as the growth
prospects to be robust. It did indicator that the mobile provider are focusing to
increase and promote the long term subscripting to mobile SIM plan where it can
be generate more revenues. This is the key indicator that market is to
predominantly by mobile SIM customer and such though is a high penetration.
Therefore, the mobile application of usage will be dominated and increase year by
year from the source Dataxis 2015 (Table 12 – Mobile Telecom line & Table 13 –
Mobile Platform market)

Table 12- Mobile Telecom lines

Table 13- Mobile Apps platform market

6.4 Market Strategy
The market strategy will cater all the marketing need whereas it will also into the all-
inclusive plans with research and focus on the product mix to maximize the profitability
business revenues. The company can promo the branding and product towards. (Charles
W. L. Hill, 2007)

6.4.1 Advertising
To increase on local awareness and to penetration more on virtualization licensing
with world leader VMware, mobile application development capabilities and the
cloud computing platforms.

To develop the branding recognition and inquisitiveness to all level which can be
joint and combined by direct marketing approach which can create the entry point
into prospective organization.

6.4.2 Media Mix

It’s good to establish the B2B virtualization solution and reseller services which
targeting the SME’s and large corporation markets, advertised through with the
focused on the industry specific channel. It has been identified two distinct
advertising channel on Virtualization, clouds platform and mobile application
development. Based on the market research 70% people would rather learn about
the product through content. (Table 14 – B2B market research)
 Table 14- B2B market research

1. The primary target customer base on B2B for Sunway Hitachi will be the
SME’s sector in market virtualization, cloud computing and mobile
application. B2B publishing advertisement spend USD 28.4 billion and
stipulated to reach USD 50 billion by year 2022. (Table 15 – B2B market
speeding). In the events and exhibitions, the Top management will participate
in the talks or given the key notes to promote the technology and solution
which carry by Sunway Hitachi.
2. IT based business target meets could be growth consistency and ROI on
marketing.

Table 15- B2B market speeding

3. Direct Mailing, it’s only way to maintain back the existing customer over-time
to-time to keep in touch on any technology update or new platform are
available or any press release.
 4. In the form of indirect advertising is also equally important to the media mix.
This will be way of by newspaper or any form of articles in business
magazine.

6.4.3 Direct/Personal Selling

With backed by advertising campaigns, the follow-up method and understanding
the organization needs, it’s a most crucial role as it need to be convincing the
prospect into the real buyer.

7.0 Conclusion
In short-term, Sunway Hitachi will depend on its in-house sales staffs to communicate with the
potential client to generates the revenues of sales. This is appropriate in conformity with
stringent virtue implications because of instant start-ups within local market.

The sales force will initially only focus to two biggest cities in Brazil which Sao Pablo and Rio
De Janeiro by focusing the existing customer and from the local contact. Company will also be
focuses on training and deploying the small effective sales force that will improve the sales
revenues.

Through the value-added associate partnership, direct approach will be supported by associate
partners, with involving of presales, sales and support in the realm of virtualization, cloud
computing and mobile application across Brazil. This will be allowed the company brand to
divert more resources towards the marketplace growth and more effective. It will be allocating
for associate partner commission 10% on each of the recommend successful customer in each of
the projects whether in virtualization, cloud computing or in mobile applications.

It will be a percentage commission of revenue model or the contract in sales of virtualization

solutions. There will be dual revenue stream from the VMware virtualization commission and it
has a direct revenue for cloud computing as the company are host as a cloud datacenter in
various country in ASEAN.

Sunway Hitachi, will be in Sao Pablo with the special privilege around the economic zone, with
the government given the tax exemption for 5 years until 2022 in free tax zone. This will
increase the higher profit revenues value as in without of any taxation. With the average
industrial net profit marginal is normally stood at 10-15% but with strategic location giving to
the company with tax exemption, this will be easily get return more than the 30% because
Sunway Hitachi are with the special agreement to only one of the local company have direct
access VMware platforms and subsequent can be leverage of exiting technology in ASEAN as a
cloud datacenter.

8.0 Recommendation
Throughout the feasibility study in geographical country and location, its recommend to invest
into Brazil as a base set up in Latin America before venturing to others neighboring country.
With the world ninth largest economy by GDP it will have a bigger market gap of technology
revenues which can be contribute and tap into the segment based on the revenue group forecast.
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