Jismyl Teo, Chief Executive Officer of DMX Technologies

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Established in 1999 and listed on the Mainboard of the Singapore
Exchange, DMX Technologies Group Limited is a leading internet
network infrastructure and digital media solutions provider in Asia
Pacific.
The group specialises in providing integrated information and
communication technologies solutions for telecom operators, cable
TV operators, mobile operators, media corporations and enterprises.
In September 2009, Japan’s second-largest telecom operator KDDI
took a 51.68-per cent stake in DMX, allowing the group to leverage on
their experience and technological offerings for greater long-term
market competitiveness.
Jismyl Teo, Chief Executive Officer of DMX, shares with Biz Daily the
group’s strategy for seizing market opportunities in the world’s
second-largest economy and across the region.
1) DMX’s gross profit margin decreased in FY2010 as a result of
its strategy to capture more market share for managed services
through the marketing of digital media and infrastructure
solutions. Kindly elaborate?
The lower gross profit margin was partly because we decided to take
on more hardware projects for both infrastructure and digital media
solutions last year. Such hardware projects typically bring in lower
margins than our services because they involve the integration of
different equipment from different vendors. This means we have to
pay the suppliers upfront first for the equipment and receive payment
from the customer only later when installation is complete.
As the hardware projects we took on in FY2010 did not involve many
services, they were relatively easy to handle. For example, a
customer might just want to buy the equipment in the current year,
and we can then cross-sell or upsell our services later. Such services
tend to bring in better margins and recurring income for us.
By taking on hardware projects first, we can better understannd the
customer’s equipment needs. This raises our chances of increasing
our value-add to customers on a vertical basis where we can establish a more direct relationship with them and try to cross-sell other
services to them.
If we expect the gross margin for a project to be less than our acceptable level, we would usually walk away from the project. But last year,
we relaxed this requirement a little to first establish a relationship with
customers through hardware projects ahead of our competitors. By
sacrificing a little margin for hardware projects, we can better crosssell or upsell our higher-margin services later for the equipment that
we installed
We also had excess working capital last year from KDDI’s acquisition
of shares in our company in 2009, which allowed us to take on more
hardware projects. Normally, when we have lower levels of available
capital, we would try not to get involved in such projects.
Overall, we continue to focus more on providing services because
they bring in more recurring income for us and require less upfront
hardware investment.
2) With China expected to digitise all cable TV content by 2015,
what do you think of the country’s market potential in this area?
We have been providing digital media solutions in China since 2004.
From 2004 to 2007, the pace of migrating from analogue to digital
cable TV was slower than that currently. That was because cable
operators had to overcome funding and customer charging issues,
and people were still not used to such digital technology. As many
Chinese digital operators were government owned, they were under
many controls on things such as basic charges. But because the
government sought to overcome some of these issues with cable
operators, the shift to digital cable TV was faster from 2006 to 2008.
In fact, the number of digital cable TV subscribers in China is
expected to jump from some 82 million in 2010 to 165 million by 2015.
Once cable TV operators digitise, they start to look at value-added
services as they will then be competing with telecom and mobile
operators. Of course, value-added services can be immediately
launched in regions that are already fully digitised. Jiangsu and Shandong are among the faster regions in China to digitise.
3) You mentioned that you will focus on developing next generation IT software and solutions for growth areas such as cloud
computing in India. As your Bangalore subsidiary is still very
new, how do you plan to achieve recurring sources of revenues
and higher margins in the Indian market?
Before we opened the Bangalore office, we had already outsourced
software development for IT infrastructure projects to a group of
highly experienced people based in India. We invited them to join us
and operate from our Bangalore office instead. Being part of a bigger
organisation like DMX solved their funding issue and gave them
greater flexibility to increase headcount and go after customers that
they are already cultivating. Now, they not only support our software
development for India, but also for our international operations. So it
was mutually beneficial for both parties.
Unlike large organisations, SMEs may find it difficult to maintain a
large IT department to ensure information security. That’s why they
might want to outsource the information security function.
We have set up a security operations centre in Bangalore to help
SME customers manage their information security services. For example, the enterprise might engage DMX to help monitor its
network for security threats.
While we also have another software development arm in China, that
team does software development separately for our China operations
as its focus is on digital media.
4) You said KDDI provides the technological advantage that
allows DMX to differentiate itself from competitors by launching
value-added services (VAS) with high barriers to entry. How is
this so?
KDDI already developed mobile VAS for the market in Japan. In fact,
the mobile VAS market in Japan is very developed compared with
other Asian countries.
For example, their mobile point-of-sales service is not found in many
countries, not even in China. So this is a technology we can adopt
from KDDI. Then, we can localise the interface and language for use
in China, and talk to local operators to launch the service there.
Another example is location-based services for children and the
elderly. While such services are promoted in China, they lack
accuracy there. As KDDI’s system is much more accurate, it’s easier
for us to localise their technology for the Chinese market.
Such an adoptive approach saves us technological development time
although we still need to localise the technology.
5) What impact will the recent earthquake in Japan have on your
businesses in the region?
While it may affect KDDI and other businesses in Japan, we feel it
won’t impact us much directly as we don’t have any operations in the
country. However, we are more concerned with the nuclear crisis that
arose from the earthquake. It’s still too early to tell how this crisis will
affect us in the short term and we are still currently proceeding with
our operations as normal.
People across Asia are scared of the nuclear crisis. Consequently,
regional enterprise customers may scale back their IT investments,
but I cannot say this will happen with certainty. All I can say is the
nuclear issue’s impact on market sentiment may affect the capital
expenditure of enterprises.
6) Is DMX involved with KDDI in providing data centre services to
enterprise customers?
Our relationship with KDDI started sometime in 2009. KDDI operates
data centres, while DMX helps establish the network infrastructure for
customers’ data centres. We do not build the physical facility, but we
help to link up the different equipment in the data centre for customers.
Of course, there are also customers that use KDDI’s data centres for
business continuity. It depends on what the customer wants.
While we do not sell data centre services directly to our customers,
we offer them the option of leveraging on KDDI’s data centre services
if they wish to do so.
We are also working closely with KDDI to offer value-added services
with their data centres such as virtualisation, information security
services, or business continuity solutions. DMX will launch and
market such services jointly with KDDI.
7) As cyber threats are constantly evolving, how do your information security solutions keep up with them?
Our information security engineers need to constantly keep up with
the latest developments in the US through contact with suppliers
based there. We also need to explain to customers to help them
understand cyber threats.
While the suppliers provide the software or equipment for information
security, we need to know how the technologies work and understand
the cyber vulnerabilities on the customer’s side. This allows us to
propose appropriate security solutions for the customer.