Invest in TaiwanDepartment of Investment Services, MOEA
[ Accesskey ]
The information technology services industry has a history of more than twenty years in Taiwan, beginning when the government launched its technical services programs not only to assist with business automation and computerization projects but also to develop local IT service capabilities and solutions. With the rise of e-commerce and government programs promoting the computerization of local business operations in the mid nineties, increased demand for software applications and information systems by Taiwanese companies spurred the expansion of the local IT services industry. Moreover, the IT services industry was identified by the Science and Technology Advisory Group under the Executive Yuan in March 2004 as a strategic service industry for development, with the aim of enhancing the competitiveness of Taiwan's manufacturing sector through added value and strategic services and cultivating leading IT service providers in key global business areas.
According to the Services Sector Development Framework and Action Plan issued by the Council for Economic Planning and Development in 2004, total production value of the IT services industry was approximately NTD 160 billion in 2003, and is expected to nearly double to NTD 300 billion by 2008 with the proactive support of government policies.
According to Gartner, a technology industry research organization, the IT services are defined as "the use of professional business and technical knowledge to facilitate the creation, management, optimization or access to the business processes and information of a company or organization." Gartner also divides IT services into the two main areas of product support services and professional services.
In Taiwan, the Directorate General of Budgeting, Accounting and Statistics in May 2006 redefined IT services as including telecommunications, computer system design and services, data processing and information service provisioning within the greater industry scope of the information and communications technology (ICT) industry.
Computer software design (design, revision and testing), computer systems integration (planning and integration services involving hardware, software and communications technology as well as on-site IT facilities management and IT consulting), and other computer systems design services (all computer systems design services, computer data restoration and processing, software installation services, etc.) all fall within the computer system design and services industry category.
Data processing and IT services provisioning includes the operation of websites, data processing, web hosting, and other IT services provisioning such as news providers, etc.
Within the broader telecommunications industry, services that use cable, wireless, optical, and magnetic systems or other technology products to broadcast, transmit or receive symbols, signals, text, imagery, sound or other form of data are categorized as IT services. Internet access providers fall into this category as well.
In 2003, Taiwan's IT services market was valued at NTD159.8 billion. Although relatively small compared with markets in the most developed countries, Taiwan's IT services industry experienced an average growth of 10% from 2000 to 2006, which is significantly higher than the average growth rate of 2.8% over the same period for the global market, underscoring the great potential of the local market.
Specifically, Taiwan's IT services industry has both linguistic and cultural advantages in the Chinese-speaking markets. For example, China's IT services market in 2002 was valued at RMB110 billion (NTD440 billion), or just 2.7 times the size of Taiwan's market. Given Taiwan's cultural advantages, the potential business opportunities for local industry providers in China's rapidly evolving IT services market are vast.
In light of the advances in Internet technology, people are spending longer periods of time on the Internet, which has increased demand for e-commerce services and produced moderate growth for data processing and information provisioning service providers. Larger enterprises are also diversifying their production structures beyond Taiwan, turning to the biggest IT service providers to integrate their information and communications infrastructures. Growth in the demand for IT services by small and medium-sized enterprises, however, stayed relatively flat from 2003-2005.
Looking at the different types of services, in 2005 software products and applications accounted for the largest share of the IT services market at 40.3%. The second largest service area in terms of output value was networking services, accounting for 31.61% of the market, has benefited from broadband networking, ecommerce/shopping and online gaming/entertainment services. The business area with the third largest share of the IT services market at 27.96% was contract services, for which government and financial services industry were and continue to be the main drivers for demand.
According to a study conducted by the Taiwan Economic Research Institute, the average annual turnover for most local IT service companies is NT$20 million, indicating a relatively limited average business size. As business development capabilities and resources tend to be more scattered, the structure of the industry has yet to develop the level of sophistication, specialization and integration that other key technology industries have achieved. The IT services industry is more focused on the domestic market, which explains the relatively limited growth of the market relative to its international peers. However, Taiwan's IT services enjoys unique cultural strengths in cross-strait and Southeast Asian business opportunities, which it has been actively exploiting in the region.
Despite the fact that Taiwan consistently holds one of the top spots in international e-government rankings, such domestic demand has had limited impact on increasing international sales for Taiwan's IT services industry. For this reason, related government agencies in Taiwan have spared no effort in the continued cultivation and development of the local IT services industry.
To build up and enhance the capabilities of Taiwan's IT services industry to able to effectively compete in international markets, the government has sponsored several key industry development programs.
The main purpose of the BEST program, launched in 2005, is to help Taiwan's IT service providers to develop overseas markets by promoting strategically selected IT service applications as models for Taiwan's major industries. Under the BEST program, flagship business operators from different business areas work together to create mutually beneficial cooperative structures to expand into international markets and exploit niche markets. To date (Oct. 2007), seven BEST projects have been completed in the financial services, manufacturing logistics, data security and e-government areas, creating overseas production output value of NTD 1.7 billion dollars. Moreover, the steel making, petrochemicals and the software OEM industry areas were also brought into the program. The inclusion of all these industries under the BEST program will help to ensure the competitive advantages of Taiwan's IT services industry as it develops into international markets.
To address the digital divide in different business areas and ensure Taiwan's overall e-readiness, the Small and Medium Enterprise Administration under the Ministry of Economic Affairs brought together industry specialists, representatives from trade and industry representatives, SMEs requiring e-business services, innovative companies and traditional manufacturing companies to create a service structure to improve the digital prowess of Taiwan's business sector. Companies are assisted under this program by helping them to find the appropriate software and application solutions to address their different needs. Thus, many small and medium-sized companies have been able to successfully complete their e-business transformation. This program has given the local IT services industry a major boost and is expected to generate NTD 7.0 billion in business opportunities.
In 2002, the Industrial Development Bureau under the Ministry of Economic Affairs initially launched a program entitled the "Web-based Multimedia Industry Development Plan: Increasing Productivity" to raise the capabilities of the software industry in terms of development and overall quality. In August 2005, the focus of these efforts were shifted to the Capability Maturity Model Integration (CMMI) Program, which included funding of NTD 4.0 billion over a four-year period to help Taiwan's IT services companies to implement the CMMI process. It was expected that the program would help companies to improve their capabilities from inside their operations, thus raise the overall standard of software development in Taiwan. The program focuses on lower development costs, raising product quality, shortening delivery times and quick response through enhanced process management and abilities, strengthening software and IT service provider's competitiveness and opening up new business opportunities in local and international markets. The program has set targets of 70 companies achieving CMMI Level 3 capabilities and 3 companies achieving CMMI Level 5 capabilities by 2008.
Taiwan's IT services industry, compared with those of other countries, boasts advantages in Chinese-speaking markets. At the same time, salaries for senior-level management and technical personnel are generally lower. Other more general advantages include higher Internet penetration and an overall higher quality workforce. The business knowledge and internationalized operations of Taiwan's huge IT hardware manufacturing sector also provides Taiwan's IT services industry with competitive strengths.
Some of the world's top international IT service providers have been active in the Taiwan market for more than thirty years, making great contributions to the government's and industry's digitization process. In addition to providing the latest technology and professional services, some international companies have even shifted some of their R&D work for core technologies to Taiwan. Since 2002, IBM, Sun Microsystems, Microsoft, Google and other well-known IT services companies have all established R&D centers in Taiwan.
To summarize, the main advantages and strengths to investing in Taiwan's IT services industry are:
The production value of Taiwan's IT services industry in 2003 reached NTD 160 billion and is expected to achieve NTD 300 billion by 2008. These figures do not include business opportunities from corporate IT outsourcing.
Taiwan's high tech industry is a key player in the global supply chain for high tech manufacturing; the IT applications and management for the high tech manufacturing industry has established best practices for global supply chain information operations.
With one of the best educated workforces in the world, Taiwan's IT services industry boasts many middle and senior level personnel that have attained master's and doctorate degrees overseas. Average salaries, however, are only about half of U.S. salary levels and two-thirds of Hong Kong salary levels.
Over the last few years, legislation to encourage industry upgrading has laid a solid foundation for industrial technology development in Taiwan; incentives created by this legislation includes tax reduction for investment-related equipment or technology procurement, 5-year tax holiday or shareholder tax reduction for manufacturers and technical services in emerging strategic industries, 5-year tax holiday for new capital investments in the manufacturing or related technical service sector, and preferential loans to promote industry research and development. These incentives have been expanded to include IT services businesses with the aim of speeding up industry development.
Intrinsyc Software is a mobility software and services company serving the needs of consumers and partners worldwide. Intrinsyc's mobile software products, engineering services and systems integration expertise help our customers deliver better products with lower development risk and faster time-to-market. Our focus is helping service providers and equipment manufacturers bring consumers the latest in handheld devices for the 3G world. Our vision is to become the leading enabler of next generation handheld products.
In September 2007 Intrinsyc Software opened its Taipei, Taiwan office, which serves as its business and engineering hub, providing local Soleus™ software support and wireless engineering services to Asia-Pacific customers. Intrinsyc Taiwan has also entered into an engineering services agreement with a leading Taiwan-based Original Equipment Manufacturer (OEM) of wireless handheld devices.
Since its founding in 1956, IBM Taiwan has grown from just four employees to a force of 1,600 people today, developing along with Taiwan and its economy. Over these many years, IBM Taiwan has cooperated with local companies, government agencies and many academic and research organizations. A recent example of such cooperation is the SOA (Service Oriented Architecture) Innovation Center formed between IBM Taiwan and the Institute for the Information Industry (III) in a bid to strengthen the nation's software development industry. IBM Taiwan is also recognized for cultivating a large pool of IT talent and has played an important role in charitable activities benefiting the local society. IBM Taiwan's parent company also established its Greater China Software R&D Center in Taiwan in 1999; with 350 employees, it is the largest software R&D organization among foreign IT companies in Taiwan.
Founded in 1975, Microsoft is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software -- any time, any place and on any device. The company has worked closely with IT industry partners in Taiwan since the founding of Microsoft Taiwan in November 1987. Microsoft Taiwan employs over 200 people covering operations across the entire island, including offices in southern and central Taiwan.
Sources: TAITRA, IDB, SMEA, DOIT, STAG, Intrinsyc Software corporate website, IBM Taiwan corporate website, Microsoft Taiwan corporate website, Google Taiwan corporate website
(Posted November 2007)
E-mail this page.