The Next Silicon Valley – Part 1
Close your eyes for a second and think about what you will be doing at the age of 65. If you are Dr. Leonard Liu whose career included helping create and implement SQL, serving as a C-level executive at more than one multi-billion dollar companies including Acer Computer Systems, and being seen in the same light as executives that include Marc Benioff (Chairman & CEO Salesforce.com), at 65 you are the Chairman & CEO of one of the most ambitious “startups” in China. Read over the vision on Leonard’s three year-old, 1000 person strong Augmentum, and you see that he set out to build the best software development services provider in the world, not the best Chinese software development services provider or even the best software development services provider in China. In this week’s two part Trends Report, we examine the look at the man behind Augmentum, the company, and what it was like visiting the offices in Shanghai.
China has made a reputation for creating low cost goods thanks to an immense pool of labor willing to work for wages well below those of other developed nations who consume the goods. I think of the British pound and what it would be like to live in the US but earn my existing salary in pounds. That alone makes me wonder why more people in the Internet advertising industry don’t focus on the UK market. Quite a few people in China think the same way, and if you work for an Internet advertising network, when you see a publisher from mainland China, you often will not give the benefit of the doubt. You see that address and you automatically assume fraud. That $100 they might earn is not much, but if you imagine the pound being worth 10x to the dollar instead of 2x and our average salaries being 5x less; that $100 means something.
As a tourist, it’s almost a rite of passage to bring back DVDs of new releases. Not that I did this, but given that each title costs one dollar, you can imagine why tourists, especially, enjoy buying them. The problem of course is that these movies are illegal. The price is incredibly attractive (not to mention the experience of buying them), but imagine working for the movie studio and seeing your studio’s titles on the streets of China. There is your work, but you receive no money for any of those sales, and each one sold means lost revenue for you. The same holds true for software. In China and other parts of Asia, they have fake/pirated software marts. Lawmakers in China, like other parts where piracy runs rampant, do not have the bandwidth to both protect intellectual property and manage a country with more than a billion people.
Movies and software are not the only types of intellectual property under siege in China. Almost every major clothing and accessories brand has to combat thousands of stores selling knock offs of their goods. It’s gotten so bad that when people think of shopping in China, they think of the knock offs – be it movies, purses, clothing, watches, jewelry, even golf clubs. Put it together, and you have, from the outside perspective, a culture that does not protect foreign intellectual property. Consumer brands that rely on China for manufacturing do so with a somewhat love-hate relationship. Costs dictate they should, but it guarantees additional time and expense associated with trying to protect their brand from dilution as a result of knock-offs.
This is why BusinessWeek said that CEO Leonard Liu had picked an unlikely place to build the next software center. If any can pull it off though, Dr. Liu can. He was born in mainland China in the southern province of Hunan. At eight years-old, his family fled to Taiwan. Dr. Liu attended and excelled at the prestigious National Taiwan University in Tapei. He then attended Princeton University where he earned his doctorate in electrical engineering and computer science. Even though, he graduated from one of the best American universities, that didn’t guarantee him a job at a US company. In the present Internet economy, it’s commonplace to work with individuals from all over the world. That wasn’t the case with IBM in the 1960’s, where they were not
After 20 years at IBM, where he managed some of the company’s most important lines of business and teams from all over the world, he became famous, or infamous depending on whom you ask, for transforming Acer computers into a global company. After a little more than four years at Acer, he was the turnaround CEO for companies such as Cadence and Walker Interactive. His experience also includes being chairman of Applied Systems Engineering, a semiconductor company and world’s leading chip packager. Joichi Ito, founder and CEO of Neoteny, an IT investment and operating company and creator of Internet companies including PSINet Japan, Digital Garage, and Infoseek Japan, calls Leonard “one of the greatest CEOs I know and one of my mentors.”
For Dr. Liu, Augmentum is a ten year journey. It’s more than simply building a copy-cat company in China to compete with India. It’s a mix of practical and visionary, a company that knows what it takes to get started, but has a clear plan in mind of where it wants to go, and what it will take to get there. Continue reading Part 2 for more of Augmentum and why we can learn a lot from them and even use them as we continue to grow.
