IT Service Firms Diversifying Portfolio

IT Service Firms Diversifying Portfolio

IT service firms are turning their eyes to foreign countries as the domestic market for business-tailored software development and management has become almost saturated after a decade of growth. Firms such as Samsung SDS, LG CNS and Posdata are either expanding their operations in foreign countries or making considerable investment in new business items to re-ignite their slowing operations. Samsung SDS, the largest IT service firm in Korea, signed a strategic partnership contract with French firm Capgemeni this Wednesday. The companies agreed to share the same brand in the IT consulting field, and learn from each other's experience. Samsung said its French partner will also help it participate in outsourcing projects of big global companies such as GM, Citibank, BMW and Prudential _ deals it never dreamed of doing alone. Only 1.5 percent of Samsung SDS's revenue was made outside Korea last year. But the portion increased to 2.6 percent in the first half of this year. CEO Kim In said the company will further accelerate its globalization efforts. ``There are few Korean manufacturing companies who are global players, but there is no such firm in the IT service sector,'' said Kim. ``In such a situation, the partnership with Capgemeni will be a crucial opportunity for us to grow into a global IT service and consulting firm. It is a stepping stone for our bigger global strategy.''The IT service firms call themselves SI firms, short for ``system integration.'' Because most of their products and services are developed and sold directly to a single company, they receive relatively less attention from ordinary citizens and the media than other high-tech firms that make customer goods such as electronics or software. The SI firms, however, have a bigger influence on the economy than they may seem to. As an example, Samsung SDS is the second largest employer in the Samsung Group, next to Samsung Electronics. Last year the company recruited 800 university graduates, most of them computer and other engineering majors fresh from top universities. The IT outsourcing industry has prospered from the late '90s as private and public companies rushed to change their corporate management infrastructure from paper-based to electronics systems. Conglomerates such as Samsung, Hyundai, LG, Lotte, POSCO, Ssangyong and others have established their own IT service firms to set up and manage their IT systems, which often handle information too critical to be handed over to outsiders. Because of their nature, the IT service firms didn't feel much need to expand outside of Korea. But the situation is finally turning unfavorable for them. Growth in the SI industry has stalled at about 5 percent year-on-year, so has the need for new employees. Samsung SDS reduced its annual recruitment this year to 650 from 800 of last year.LG CNS, Samsung's main rival, is looking outside, too. The firm is visiting Mongolia and Kazakhstan next week to discuss plans to sell its electronic mail handling system to the two Central Asian nations, with support from Korea Post. It also has found a potential for further growth in the business consulting field. Earlier this month, the company announced forging partnerships with four consulting and research firms _ Archstone Consulting, Delphi Group, Edgar Dunn & Company and Javelin Strategy & Research. A more bold transformation is taking place at Posdata, the sister firm of steel maker POSCO. Its business has been mostly focused in providing IT hardware, software and maintenance services to public and private firms including POSCO. But it began manufacturing wireless Internet equipment and devices such as Mobile WiMax game consoles, hoping this will be its next-generation growth engine.

By Cho Jin-seo Staff Reporter
indizio@koreatimes.co.kr ( 10-05-2007)