The Start-Up Environment in Singapore and The Technology Chase

2007 has been a challenging year for the business community, not only on the international stage but on the home front as well.

For enterprises operating less than three years, the going has not been smooth - 3 in 5 surveyed were in the red, driven in part by rising rents and prices of raw materials. Into its second year, the Start-up Enterprise Survey conducted by DP Information Group and the Action Community for Entrepreneurship (ACE), foresee tougher challenges ahead start-ups.

In comparison to the more established SMEs who highlighted increasing competition as the top hindrance to growth , 60% of the Start-ups see high rental cost as a key obstacle to their survival, followed by rising material costs/ goods (37%).

Aside from these cost related factors, the ability to hire and retain manpower was also singled out by 31% of the Start-Ups as a key concern, highlighting difficulties faced by Start-ups in attracting employees to join their set-up. In fact, 53% have identified recruitment as the top manpower challenge faced in 2007, and this is expected to raise business costs further as companies pay more to attract talent.

Table 1: Component of Operation Expenses

Given the challenges faced, the survey has surfaced a key area of concern which could hinder the growth of the Start-up community – many Start-ups have yet to embrace technology which can be a powerful tool for long-term sustainability. The survey found few respondents adopting infocomm solutions such as Point of Sales (POS) System, Customer Relationship Management (CRM) System, Inventory Management System and Construction Project Cost Estimation System which could improve the efficiency of their operations and give them a competitive edge.

In fact, more than half (54%) of the Start-ups surveyed spent no more than 10% of their operating expenses on IT related items such as computers, printers and basic software. In addition, only 5% saw the need to keep up with technological advances.

Meanwhile, Start-ups who have invested in technology are yielding results from their investments. 8 in 10 profit-making Start-ups have tapped on technology to achieve competitive edge.

With China, Vietnam, and other countries offering lower wages, Singapore can only increase its competitiveness by climbing the technology ladder. Thus, Start-ups needs to be more technology-driven, right from the initial stage of operation.

Another technology related area that is receiving little attention amongst Start-ups is the Internet. 62% of Start-ups interviewed do not have a company website. With the World Wide Web having revolutionized the way we communicate, work, play and shop in the last decade, a website can not only help in the dissemination of company information, but it has also been proven to be an effective marketing tool.

The introduction of e-commerce, which involves the buying and selling of products or services over Internet, is likely to give Start-ups a competitive edge over others. As business over the Internet has a global customer reach, the possibilities for companies to exploit and expand their customer base are endless. Thus for Start-ups who generally face the challenge of limited financial resources in the distribution and marketing of their products/ services, e-commerce is an alternative that is worth considering.

While it is tough to start a business, it is more challenging to bring the business beyond the Start-up phase in a highly competitive business environment. Thus for Start-ups, one of the keys to succeed in the fast changing business landscape and the efficient management of costs lies in the adoption of technology in the early stage.