Going Digital During the Pandemic

Cynthia Eng from Astro Awani Review talks to Mr Chan Kee Siak, founder and CEO of Exabytes. 

How has the pandemic affected businesses? Is going online going to help businesses sustain and even grow?

Let us find out more about Mr Chan, Exabytes and how they have and continues to help businesses in the tough times now.

How did Exabytes start?

Cynthia:
Good evening, you are tuning in to Awani Review with me, Cynthia Eng. On this show, we speak with business leaders, entrepreneurs as well as individuals shaping their future of business and society.

In this episode, we want to take a closer look at a company from Penang that for the past 20 years has provided a wide range of support to businesses, especially SMEs to grow their digital presence.

Joining me on the show today is Chan Kee Siak, founder and CEO of Exabytes.

Well, thank you Kee Siak for coming on Awani Review. I am very excited to speak with you. Just to let our audience know, you are currently in Penang, this is where Exabytes is based.

Now, let us start by talking about the Covid-19 pandemic and then the resulting MCOs.

Definitely dealt a heavy blow to many businesses. But your company, Exabytes has benefited from it. So, we’ll talk more about that later.

Let us talk about how did it start. I understand that you were just 19 years old at that time.

Mr Chan:
Yes, so I started a company when I was 19 years old. So that is exactly 20 years ago. So that time I was a year one in college, TAR college Penang.

Like many of my college peers back then, I just wanted to find some extra income or pocket money. So, I decided what I wanted to do instead of going out and looking for a part-time job because I have the skills and knowledge in terms of fixing computers.

I started my first business as a servicing and selling computer parts. Then from that journey it probably like I ran that business for like six months. From the process, I read an article about Michael Dell. I was greatly inspired back then by Michael Dell from his del.com. How he sells computers fully online. So I thought okay I need to have a website for my computer sales and service business.

From there, I started to learn about web design. Then only I realized I need a server or hosting services in order for my visitors or my customers to be able to view my website effectively. From there, I realized there were not many service providers who were offering web hosting services back then, especially in Malaysia.

I quickly saw there was an opportunity. Then, from my further research, I ended up becoming a reseller for a US company. Bear in mind that that was 20 years ago when the internet was just at the early stages. So quickly I became a reseller for a US company. Then I started to use the services for my own website. Then very soon I offered it to my customers and friends. Slowly I do a bit of marketing online then you know the rest is history.

The business has kept growing since. I stopped my computer business and I fully focus on the web hosting basis until 20 years later, today.

Tell us about the decision to quit college or university to start Exabytes.

Cynthia:
That is quite a long journey, 20 years.

Well, what is interesting is I found out that you quit college or university to start this company.

Tell us about that decision back then. 

Mr Chan:
Right, it is actually the other way around. I started a business when I was still in college. At that time, on one hand, I was a student and on the other hand, I started running two businesses.  One is selling computers and the other is the web hosting business. Both businesses were doing very well, especially the web hosting business.

So, you come to a point that because I have so many customers. I need to take care, to serve them so I start to skip my tutorials in school in my college. Then I skip my lectures, then later on I skipped my assignments. In the end, I skipped my exam.

So, it came to a point where I have to make a decision. To focus back on my studies or I told myself I need to make a decision. So back then, I make a decision as to why not give myself one year to be fully focused on the business. In case I fail on the business I can always go back to study, the college will be there still. But if I wait until three years later, I complete my studies then only go full time into the business, I think three years means a lot for the business.

The entire landscape will change, my competitor will grow even bigger and who knows what will happen then.

With that as my logical thinking back then and also by that time I already you have some base in terms of my business. So it is kind of like stable and growing. So I managed to convince myself and convince my parents to give me one year to try and then since we have been growing.

Would you advise others to do the same?

Cynthia:
So you essentially went down the path like Steve Jobs and Mark Zuckerberg. Would you advise others to do the same? When they come to you and ask you for advice.

Mr Chan:
Only if they already started the business somehow and start showing traction.

You see the difference is a lot of youngsters today want to do business and they quit their studies without starting the business or even without having any clues or ideas on what they want to do. I will not recommend that because I feel that that is too risky and always in the business world you only see the glory side, you only see the successful case study. But you know, every thousand probably there will be 990 that failed but no one mentions that.

So I think I would not recommend it. I will not advise the youngsters to quit their studies and go to business. They can do that concurrently if they have confidence that they can manage it well until it comes to a point that you show traction that is fine then you decide what you want what to do best.

How has the industry changed over the years? As a business, how have you grown since then?

Cynthia:
When you first started the company, there were very few in Malaysia that was offering hosting services at that time. How has the industry changed over the years and as a business how have you grown since then?

Mr Chan:
20 years ago when you subscribe for a hosting package, you will be surprised that you get is around 10-megabytes only. So, if you get a 50-megabyte package, it will probably cost you like RM5,000 or RM10,000 a year.

But I think technology changed a lot today. You send one email, and it already is 20, 30-megabytes. You know, not a surprise so that is how fast or how far the technology itself developed and change.

Going back to the industry landscape. Back then, those offering web hosting services, the majority are just ISP or telcos and the other local telcos. Versus today, pretty much everyone also jumps into this cloud space. Microsoft has their cloud services, Amazon has cloud services, Alibaba has cloud services. Pretty much everyone is doing that so it is a lot more competitive. A lot of competitions, not just domestically but also internationally.

What has changed is also the offerings. During early days, it is very straightforward. You know, just the services to host websites and emails. But today it has already expanded to become so complicated. You have like containers, you have clouds, you have all sorts of digital needs.

What is your differentiation? Why do you cater to small businesses specifically?

Cynthia:
So, I want to talk about, you mentioned, competition, right? You are faced with a lot of big-time, I mean big names such as Alibaba and Microsoft. Tell us about your differentiation.

Because I understand from day one Exabytes have been very focused on small businesses in Malaysia. Why small businesses? Why do you cater to this specific target?

Mr Chan:
Right, I think that is also because where we started from or where we came from is surrounded by all sorts of small businesses. We ourselves are also from a small business background. Very naturally we started with the community or the audience that we are more familiar with.

Without realizing it, we have been doing that for the longest enough since day one. And also, back then a lot of companies or a lot of competitors or even those much bigger telcos and ISP, most of them they will prefer to serve much bigger corporations or enterprises. Because the revenue and the fees or money they can collect is always way bigger, versus the resources and effort they put in.

But dealing with SMEs, you are probably talking about only a few hundred ringgits a year. Not a few hundred thousand but just a few hundred ringgit a year per SME. So a lot of the businesses, a lot of service providers have felt that is actually not justifying even the effort and cost.

But for us, because we start with a very humble beginning and a very small base we keep our costs low. So we managed to survive through that initial period until we groom and grow our customer base to a much bigger base.

As of today, we are servicing throughout the world, many Southeast Asian customers about 160,000 of them, mostly SMEs with a million over users so we have accumulated kind of like our know-how, our best practices. To also really bring the cost down and maximizing efficiency, we have to find ways to automate. So that you would not require that many employees versus the client headcounts and you can run the business very efficiently.

What are you doing to help Malaysian SMEs get on board to digitalise? Are Malaysian SMEs really on board with this digitalisation?

Cynthia:
So, I want to talk about the MCO and the covid-19 pandemic. 

What has happened is the pandemic has accelerated digital adoption among businesses and SMEs here. Probably one of the positive things that came out of this pandemic. And I understand that Exabytes has been very focused on helping SMEs to get on board, to be digitized, really digitalised. 

Tell us about those things that you are doing and do you feel that Malaysian SMEs are really on board with this digitization aspect?

Mr Chan:
Yeah. So, we have businesses across Malaysia, Singapore and Indonesia. What is interesting is we can actually compare and see what the differences across the three markets are. 

For our side, I will start sharing with our own company. We actually declared work from home probably two weeks before our prime minister announced it. That means we were already prepared well ahead.

So when the prime minister at the moment announced the first MCO and lockdown and all that, everyone is actually panicking. All the SMEs, all the businesses. Because this is unprecedented, never have before. But because we were already preparing for work from home two weeks in advance, we were already into the mode. So when everyone is panicking, we have already launched a lot of our online initiative. 

But to be honest, no one actually knows what is going to happen at that time and how long that will prolong. That one we only have one simple intention. Since everyone does not know what to do, what we can do is just share whatever information as well as the best practices that we know to help all the SMEs digitize. 

So apparently it works out quite well during the first few weeks of MCO. We organize lots of webinars, sharing sessions and all that. Bear in mind, the first few weeks there are actually not many web builders around still because everyone is still panicking. Then after we launch, more and more people also do something similar and it comes to a point where there are too many webinars. And that is it.

What we can also see the differences is that compared to, for example, Indonesia where we are also in, the business users and also the market itself is actually not that ready for full digitalisation or even to handle the initial weeks and months of that lockdown. 

One example is that a lot of the employees in Indonesia are actually not equipped with laptops. They will usually go to the office and use the desktop to work. But when their government also announced the lockdown and work from home, immediately there are problems. They do not have proper computers to work at home and most of them are probably from other villages or some other states. So in Jakarta, they are just renting a room. They do not even have proper broadband and they just rely on mobile.

So we can see that is one of the big differences in terms of like in Malaysia what we can see is that the lockdown MCO accelerate the digital growth because our infrastructure and people are ready. 

But the same thing is not happening immediately in Jakarta back then because of their infrastructure and also the equipment is not ready.

Singapore is different again because we saw Singapore companies, probably their living costs are higher and the ability to spend on digitalisation is also slightly more compared to Malaysia and Indonesia. So their adoption in terms of digitalisation, they are probably looking at something even more advanced, more high-end and more automation.

But in general, it is quite positive.

What are some of the services SMEs need and/ or require during this pandemic?

Cynthia:
I want to understand what are some of the services. When SMEs come to your company, what are some of the services that they need, they require at this time during the pandemic?

Mr Chan:
Right, so for the SME versus our much, our other bigger customers what they need are slightly different. 

Let us talk about this SME first. What we can see is that a lot of them either they do they totally do not have any digital or web presence in the past. But because of the MCO lockdown, they cannot operate at retails, they cannot do the business the usual way. Then they were forced to actually go online and they actually started with e-commerce. A number of them actually started with establishing a simple website so at least they start to get their product featured on the website.

If they are encouraged, they can actually direct their customers to their website to place orders or view at least view through their catalogues and they can do the subsequent follow-up transactions over WhatsApp or other forms. 

For other enterprises or we call the bigger customers like enterprises or corporations, they will already have some forms of web presence or digital presence in the past. They probably even have something in the pipeline where they want to do more advanced or more complex transformations. So, when that when lockdown MCO kicks in, if they were not financially affected, we can see most of our customers will actually accelerate that adoption. 

Meaning to say previously without the MCO, it probably would take six months for them to make the decisions. We can see a lot of them, immediately they want to make the call and do, they want to execute the project. Bring the project six months to the front.

Is there still hesitancy among businesses to digitalise their business?

Cynthia:
Do you still see hesitancy among businesses to be on board to digitalise their business?

Mr Chan:
During March and April, there is a lot of uncertainty. Then we come to like June, July and August, it is quite clear that everyone needs to go full force on digital. But what happened was when it moved towards October and November, I think the market is also opening up quite a bit. Then as we saw some of the businesses seems like forgotten that painful experience. So some of them who have not decided then they are probably still have not designed anything.

But I would say the majority of our customers who were already quite clear, have that digital or transformation roadmap in place. They continue to proceed and pursue. What their priority now is how can they also adopt and deploy their online to offline strategy so that they have online complement the offline and if or offline is affected, for example, another lockdown right how they can quickly bring their customers to online. So we can see a lot of big brands retailers are working towards that.

How do you help SMEs get onboard mobile tech? Should SMEs focus on mobile or desktop? 

Cynthia:
Now with the growing use of mobile internet, how do you help to get SMEs onboard mobile tech? Do they come to you and say like you know which one with a limited amount of money, what do you recommend? Then you go mobile or do you focus on desktop?

Mr Chan:
The reality is you cannot really choose either mobile or desktop because we look at the traffic. I think still about 50 over per cent 60 is on mobile but you still have 40 over per cent 50 per cent is on desktop. So, you choose just either one you are probably losing half of the opportunity. 

But today, because of the competition and technology advancement, there are many solutions out there that is actually compatible with both mobile as well as what they call on the web. So, SMEs do not really have to choose mobile or web. You can have both. 

You need to make sure you pick the right solutions.

How has the business grown for you in this past year during Covid-19 and the MCO?

Cynthia:
For your company during this past year during covid and then the MCO, how has the business grown for you? Has it been very positive?

Mr Chan:
Yes, overall there is still positive growth. What is more interesting is we saw both sides of customers. On the good side, we saw our new sales grown by more than 50 per cent year on year. 

But for our existing customers, there is some growth but it is actually a bit stagnant. The reason being is there are some existing customers where their business was really badly affected, especially on the retail side. Then unfortunately they have to like downgrade or cancel some of the services.

But at least a good thing is when we put new sales and existing sales together, the business together we still see overall there is a healthy close to 10 per cent year on year growth.

Tell us more about the Sama-Sama initiative and what it aims to do.

Cynthia:
That is great. Now, one of Exabytes’ initiatives to help SMEs during this pandemic is the Sama-Sama initiative, which I understand has now been extended. Can you tell us more about this initiative and what does it aim to do?

Mr Chan:
Right, so that was actually an initiative from our partner which is Ekuinas. They have this CSR fund which they allocated to actually helped Bumiputera, especially Bumiputera entrepreneurs. 

So they actually have the funds for many other areas including like some is supporting the front liners, some are more towards the direct end consumers. 

But for our side, because they are also one of our investors, so our program is surrounding how to help the Bumiputera entrepreneurs to go digital. So under the Sama-Sama digital program, they actually subsidize up to 5,000 ringgit per qualified company and we will also help the qualified company to further claim another five thousand through MDEC and also the Bank Simpanan Nasional. They have these SME digitalisation grants. 

Five thousand plus five thousand together, ten thousand have been subsidized. So that practically brings down the cost of going digital for any SMEs from the original price of RM12,000. 

Now the SMEs only need to invest only like as little as two thousand as the other ten thousand has been taken care of.

Can you share some of the success stories of homegrown brands especially from the Sama-Sama initiative? 

Cynthia:
Can you share some of the success stories of homegrown brands especially from the Sama-Sama initiative?

Mr Chan:
Right, so I think in the past, a lot of people have the intention and understand the importance of having a digital or e-commerce presence. But sometimes you look at the initial cost, then we are not too sure whether they will be successful or how long it takes to do a full ROI so there is a lot of hesitation here and there. So the approach is always half cooked. You do a little bit here, they do a little bit there.

But I think on one end is you have this pandemic and also lock down MCO to you know let all the businesses feel the importance of having an online presence. 

Then on the other side, with all the support or grants or whatever forms of assistance provided by the government as well as a private initiative, at least that lower down their risks significantly, right? 

So a lot of them for example, we have one customer who is selling scarves. In the past, you will probably just do it the very manual way through just social media or through friends and families. But the customer actually leveraged on the programs and set up a full-fledged e-commerce store. 

So now it has a more systematic approach to actually take orders and also allow the customers to place orders easily. Compared to the very manual way you have to message me, I message you the bank details. That is okay to start with but you cannot scale when you have like a hundred orders a day. Everything will probably mess up. So you would need some basic system to automate the ordering, the payment and invoicing etc. 

So we saw a lot of all these very energetic, very positive and very talented homegrown entrepreneurs. They have very good products. 

But without this pandemic, they are probably still hidden somewhere. But because of the pandemic, everyone with no choice but is forced to make good use of digital. They fully turned themselves on for e-commerce and now, they expanded their sales. 

One of our customers, we can see their products increased by 40 per cent because of having an online presence.

What are the future trends that you are seeing opportunities in?

Cynthia:
Now, Kee Siak, I understand that besides Exabytes, you are a founder and you invest in a few other start-ups. For instance, I know easy parcel, easy store and easy work and these are some of the businesses that help small and micro-businesses to manage their operations. To bridge the gap between technology and also the new normal, right? So, let us talk about that as an investor yourself as somebody who looks into technology, what are the future trends that you are seeing pockets of opportunities that look exciting to you?

Mr Chan:
Definitely, there is a huge opportunity in terms of logistics. When we talk about logistics it is no longer just the B2B or the traditional logistics we talk about today. 

Today, you probably see more and more people selling and buying live seafood as one example. So you need a different kind of transport services to be able to bring the livestock from one place to the other in the shortest time. Not only that it has to be really affordable because you do not want to buy 50 ringgit of seafood and end up you spending 100 ringgit for the delivery. It does not make sense, right. So that area itself, I think there is a tremendous opportunity. 

The other trend is that we can see what we are buying now online is getting bigger and bigger. In the past, you will probably buy some small gadgets or apparels things like that. But today, because you are not going to shopping malls and that will probably continue for some time, you start to shop for bigger items.

For example a big flowerpot, you are probably shopping for some furniture or even a mattress. So again, traditional logistics is not really designed to cater to that kind of bulk items so there are definitely areas where we can optimize further to lower the cost for handling large size items. 

For me, I saw the other opportunity is on the education side. Right now, it is quite clear that across all the different categories of businesses, everyone is talking about digital, talking about e-commerce, talking about cloud adoptions, all kinds of IT things. But back to reality, we still do not have enough talents in terms of those who are really I would not say like superb but at least have good knowledge of IT, digital marketing and e-commerce. Which we still do not produce enough or what we produce is probably there is a gap versus what the industry or the market really needs. 

So if there are any ways to disrupt the education a bit, bring the syllabus up to the current standard so that it is more future proof. I think there will be tremendous opportunities. 

I can imagine a lot of businesses their next hiring is no longer the traditional salesperson or traditional marketing. They probably would like to hire e-commerce specialists, they want to hire some digital marketing experts. They would like to instead of hiring a graphic designer, they want someone who can do some good video shootings and all that. So these are some of the new skill sets that are needed to empower the digital and e-commerce economy fully.

Are you looking to expand or invest in companies doing some of the trends you mentioned?

Cynthia:
So, would you be looking into expanding to some of those things that you have mentioned? Or maybe invest in the company that is doing some of the trends that you are seeing. 

Mr Chan:
Yes, so it begins with ourselves, as a technology company, we need to hire a lot of these talents and over the years we are always struggling to find the right talents. 

So through some opportunities last year, we actually invested in the start-up for education called Forward School. The idea is actually to disrupt a little bit of the education and also bridge the gaps of what the education produces versus what the industry needs. 

So, some of the things we are doing. We are aiming to shorten a typical full-fledged program from the standard four years. We want to reduce it to two years because I felt that spending four years learning computer knowledge is probably too long. 

What you learned in year one after you graduate becomes like an outdated version.

Cynthia:
Obsolete. 

Mr Chan:
Obsolete already, right? So, we have to reduce that to two years. 

On the other hand, we need to make sure what we feed the student with is exactly what the industry or the market needs. If not now, it will be what they need in the future to make sure the supply and demand are always aligned.

So, we focus on these few things and the other thing about how we do differently is we are quite flexible and creative in terms of what is called the tuition.

Because a lot of students are not from a great family so they cannot really afford the full tuition fees and so, what we do is we make it more flexible. We pair up with some private sector because all these private sectors have a shortage of good IT talents. So, there is a number of private sector companies that are willing to immediately sponsor the students. The only commitment is that after they finish their program they will have the first right to actually offer the students to work in their company. 

What is even interesting is some of the students we have already started even when they have not finished their first year. When they work towards the second semester, they already start working with some of the projects in the company so that they start to pick up the knowledge while at the same time they practice what they learnt. 

So, I think that approach will solve the gaps.

Cynthia:
Well, sounds like you are doing many exciting things. Thank you so much Kee Siak for speaking with me and hopefully one day we will be able to meet each other in person. 

Good luck and all the best with your future plans. Thank you.

Mr Chan:
Thank you. All the best and stay safe.