Doing Business in Asia: Ian Watterson, CSG interviewed by Professor G. Suder, RMIT University

Absolutely. Thank you, Gabrielle, for the invitation. It's a pleasure to be part of the series. Yes, so CSG is a US-headquartered business, just short of a billion dollars we were last year in 2019 in revenue and growing strongly. My remit, as you say, is across Asia Pacific, so a good way to think about that geographically is South Asia, so India, Sri Lanka, across to Far East Asia, so China, Taiwan, and then down to New Zealand and Australia. It's very interesting. Previously I managed the Americas, which I always say Argentina to Alaska, living in the US, and prior to that I was based in Europe in the UK in very similar technology industries. In terms of what we do, what is CSG's product base, how do we benefit society and all our stakeholders, we provide, we build, design, build, develop, and launch platforms. A good way to think about it is in different sectors like cable and entertainment. Our customers are people like Disney globally or Comcast in the US as a cable provider, telecommunications companies like Telstra here in Australia, Deutsche Telekom in Europe, BT, Verizon in the United States. We also have a business in financial services, which is mainly around payments processing, and then we have what we call a customer communication business, which is all the interactions between a customer and a corporation. A good example is in the US, a large pharmacy chain called Walgreens. They're one of our very large customers, and we manage all their outbound communications, all their SMS, all their app communications to their customers about prescriptions or any kind of medicines that you need. We do that across a range of different industries, a whole bunch of different verticals within that outbound messaging business. We both build the software, design and build it globally, and we also operate it. We have a managed services team globally who operate everything, both third-party systems and our own systems, mainly for telecoms and cable companies, but increasingly as well in that kind of financial services and payments. That's led to our main business model being SaaS, as you mentioned, a recurring revenue model where we will basically sign up multi-year contracts that allow a customer to have an assured cost basis for their platform and gives us the recurring revenue base we need to grow our business.

That's a great question. CSG is a very forward-looking organization. We're always interested in optimizing our structures. Constant improvement is a theme throughout the whole of CSG, so we always see our structures as evolving all the time, which is part of the dynamic environment of the company that I love. At the moment, and for the past couple of years, we've been structured with three business units: one based on digital monetization and revenue management, that's mainly our billing systems; one around the payment systems that I mentioned; and one around the outbound messaging functionality. Those business units basically provide the delivery organizations globally to all our customers. Across the top of those, we have geographical regions: the Americas, Europe, and what I run, Asia Pacific. We basically sit across the three business units and interact everything to do with the client. We manage everything from the marketing, from the front end, through the sales cycle, through to delivery, and then post-delivery operating the system. We have client business executives who are responsible to the customer for fulfilling their business requirements.

It's a wonderful matrix, a very large matrix organization as most large organizations are at the moment. We recently were soon to change CEO to Brian Shepard, who's my manager as of January 1st, and he describes it very well. He said that in the matrix, the cross-functional points between the business vertical and the horizontal business unit, the person at that intersection is the actual absolutely critical person. If they cannot work the matrix, which means being able to work with people who don't report to you, then... So to give you an example, in Asia Pacific there's about just short of 3,000 people across the whole region. Out of that, a very small proportion work directly for me, but I am the most senior representative in the region of the business, so the entire business is my responsibility. My job is to gather the whole of CSG to fulfill the customer's mission. That's how I view it, and to lead the whole business forward so that their objectives are enabled by the platforms we supply.

That's really interesting. First of all, I love diversity and I love different cultures as well. I always have. Having lived in different cultures on different continents like yourself, Gabrielle, I just love meeting new people and new types of people and learning about them. So first of all, we need to be culturally relevant in the markets we support. As you say, we have teams in India, we have teams in Southeast Asia, we have teams here in Australia. In terms of the customer-facing teams, how we support those teams is a delicate balance between being close to our customers whilst achieving the optimal cost mix. So we have centers of excellence, for example, in Bangalore in India, here in Brisbane in Australia, in Malaysia in Kuala Lumpur, where those teams may focus on a particular solution or platform. There'll normally be a number of geographic or historical reasons why there's particular skills on that platform. It might have been an acquisition, or we might have transitioned to a lower cost geography. But most of our customers are served by a delicate, very deliberately managed structure of a small team close to the customer who are gathering requirements, feeding those back to a team who are in a lower cost center who are able to then build, develop, and release function. Then we are able to fulfill the customer's needs and translate, not in a sense of language but in a technology, what business outcome will be of new features or new deployments to the customer by being close to them and understanding their business problems. A great example is we have teams in Sydney who sit near our customers in Sydney. That's a relatively small team in the tens of people, serving very large customers, many telcos in Sydney. But they're supported by everyone from a Canadian team to an Indian team to a Malaysian team, to an Irish team in Galway, depending on what specialism they need or what platform they're talking about.

Yes. A great example is we've talked a lot about Asia Pacific. In the Americas it's very similar. When I was living in Atlanta or recently when I was working in Denver, the nearshore operation there is based in Bogota, Colombia. For the US delivery to or for the US customer teams to work with India is very difficult; it's the exact opposite time scale wise. Whilst it's good because you can send stuff off at the end of the day and it's worked on overnight, it's bad because it's quite often misunderstandings and that can lead to errors. So we created a center in Bogota. We did an analysis of all the countries in Latin America, but geopolitically, culturally, technological ability, recruitment potential, how many graduates are coming out in the IT space, etc., and we found Bogota to be a great general place to do business. So we set up a nearshore team there. Similar to Bangalore, which is my nearshore for Asia Pacific, we have Bogota in the Americas that serves that. When we serve our customers, we look for the majority of staff to come from that center because that keeps our costs low, and then the more expensive staff who are close to the customer, say in the US or Australia or Singapore or Taiwan, those teams are close to the customer.

Absolutely. Digital innovation is an often-used term, and some people are very tired of the term, but if you drop the digital and just say we transform our customers' business, that's what we aim to do. If you say digitally is by technology enabling business transformation, that's absolutely what we do. We come into situations where customers have legacy systems where they want to evolve their business but their systems are restricting them. Lots of our customers can't bundle products, can't bring other vendors' products to market with their own, can't go into new markets, all because of their technology ecosystem. The technology ecosystem is really restricting them. So we look at a lot of ways to do that, a lot of different technology which is into solving those problems.

Yeah. You would have seen, one of our big clients in Australia is Telstra. They sent home over 20,000 people. That creates huge technology challenges for systems that are normally run by IT teams on site the whole time. Also, our customers then interacting with their customers, the B2B or B2C relationship becomes very difficult. One of our new areas is customer experience and how our customers interact with their customers. If they weren't digitally enabled before COVID on a very mobile app-based customer engagement, very rapid response times, with social media enabled as well, then a lot of our customers have tried to very dramatically move to that as fast as they can. Call centers have been flooded. We've seen big failures globally around call centers being flooded with inquiries. The way to deal with that is to move customers off out of those call centers to a non-personal interaction. All the data shows that actually customers prefer to do it themselves. They'll spend longer solving their own problem themselves than they will at a call center, and they'll be more satisfied at the end of that than if they've sat in a queue and somebody else has solved the problem for them. It's a strange psychological dilemma, but all the data shows that's how we work.

Very definitely. One of our customers is Telenor out of Norway. They split their Asia business, which is very large, 60% of the global revenue, into emerged Asia and emerging Asia, which is really interesting. Singapore, Hong Kong, Malaysia to an extent, Thailand, you've got a much more emerged. Indonesia maybe is on the border, and you've got emerging such as Myanmar, Vietnam, Cambodia. A lot of those countries have a long way to go in technology transformation, but also cultural because the technology like the iPhone changes culture. We all know that from seeing our sons and daughters walk with their phones down all the time. It changes the culture. So as that cultural change happens with it, as the technology is introduced, we're taking leapfrogs. But definitely countries like Singapore are some of the most advanced in the world. South Korea, one of the first 5G nations globally. Taiwan incredibly enabled. Obviously China as well. So there's quite a divide culturally, and it's generally by the extent to which technology has been able to transform and then culturally change people. In evolved or emerged countries, people get more and more acceptable to change. The curve increases. People accept and expect change because technology evolves so rapidly for them. They get bored very rapidly. There's an iPhone every year. 11 months in with their old phone.

Any of the above. It's normally we would go in on the back of our customers. Similar to a GE model where they globally expanded on the back of US corporations becoming global, we're quite similar. Our customers quite often are big groups. If you look at some of the big groups that exist, either financial groups or telecoms or cable or media like Disney, Disney globally is our customer. They're very large in Japan. Our presence in Japan is through our deal with Disney, which is a global deal, and they basically took us into there. But any of those options, we have a very strict criteria to evaluate whether we form an entity or do M&A or any other type of vehicle. We're open to any way in. It's a function of what fulfills the customer's needs primarily, but also our own tax basis. There are a lot of international tax issues nowadays with residency, particularly for technology companies and actually particularly for US technology companies going into countries. We have to be very careful that we're doing the right thing in each country in terms of tax payments and reporting and being very accurate. So we're very diligent. CSG is a very values-based culture in every market we serve. We make very deliberate, very considered decisions, but we'll consider any type of vehicle.

Oh gosh, yes. Absolutely. As I mentioned before, that's part of what I love. I've been to every country in Southeast Asia. I've been to India, Sri Lanka, Pakistan, Bangladesh, everywhere basically. Every country is different. The way business is done is different. The regulations are different. Everything from data sovereignty in terms of for us as a cloud company, as a SaaS company, where we can keep data. Which cloud we have to use because Microsoft Azure has different nodes to AWS to Google Cloud. We're able to put solutions differently in different places, or we might put a solution on premise. In some cases, we're not allowed to access the data from outside. Indonesia is a great example. You can't even access a solution from outside. Recently they've signed an agreement with Singapore where they're allowed to do that, but previously we couldn't service Indonesia from anywhere but Indonesia. Culturally as well, the way of doing business. In Vietnam, we always need a partner. We can't prime our opportunities there. We always have to go through a local registered agent. In Japan, it is a country where if you don't have a local Japanese, fully Japanese-speaking enabled team that has been there for a long time and have trust, a critical part of that market, you can't do business as a global business. We're used to being able to, before COVID, fly into a country, conduct a number of due diligence exercises, execute deals, and drive a business. But you probably need to be there two, three, five years to earn trust before you can do business.

First of all, I'd say be selective about your markets. It's very easy... When I landed in Australia from the US, I actually didn't really appreciate the size of the geography. You have India, Southeast Asia, China, Australia, New Zealand, four enormous land masses with a huge distance between them and very different culturally. You need to look at the markets and very thoroughly evaluate where you're going to put your resources and where you're going to decide this opportunity for your business. Once you've done that, and that's a very big decision because you probably can't cover all of the markets. Japan, which is one of the world's largest economies, are you going to do business there? Yes, you need a presence. You need either an entity or a branch and you need a staff, and you need to be prepared for new business there for a couple of years. That's a real business. India, completely different. Pre-COVID and even now during COVID, it's still very face-to-face, and Indians like to negotiate quite often in Hindi. As a westerner coming in, you need local representatives, you need a local team there who are able to service a customer, who are able to discuss locally their requirements. It's a very different way of doing business than in the West. Southeast Asia, completely different again. Australia and New Zealand is very Western. So I would say the key thing is investigate and pick your markets very carefully. The incomes in those markets are very different as well. There are a lot of good TED Talks actually about how to grow in India around innovation. Basically, take a sophisticated Western product and descale it, de-automate it, make it simpler. Because in India, you need to sell at scale rather than through sophistication. You need to get a lot of lower value units rather than single high value. So each market has its own characteristics. Investigate them, and then you need to very thoroughly work out the way to go to market in each of those countries. As I say, in Vietnam, you're going to need to investigate agents. By the way, it's very easy to choose the wrong agent because everyone will tell you they can get you that customer and do many things for you, but they might not be able to. We've actually found a very good way to do that is to go to the end customer and say, 'Who would you trust to represent?' and find that representative office or company. The bigger the company, the better, because they're more stable and able to offer you that long-term future. Then set your business plan expectations appropriately. I was talking to my future CEO, Brian Shepard, and I said I want to build the best, highest growth, most profitable business in the world for CSG with respect to Asia. But benchmark has lower profitability than Western Europe or the US. So he said, 'When I look at your business in Asia Pacific over the next three to five years, I don't expect you to have the highest percentage profit per dollar of revenue compared to say Western Europe or the US. You may be higher growth, but I would expect your profit percentage to not be as high as them.' And he's right, absolutely right. So set your expectations with your, if you're working for an MNC, appropriately. Yes, you can get strong revenue growth. We've seen that. We've doubled our business in the last five years. But your margins may not be as strong as a more developed market.

From a business point of view, COVID has been very interesting because it's forced a lot of companies to work remotely and work digitally. It's accelerated particularly for the emerging economies a lot of those benefits. I think that will continue. Post-COVID, things will not go back to normal. Everybody's very used to working at home. All my team calls are now video calls. Our office is reopened here, but we have about 15% of staff attending. Out of the size of the office, that's universal across the offices we've reopened. We haven't reopened all of them, but the ones we have, we have a very small percentage of staff because staff appreciate the flexibility, the time savings, and the cost savings of not commuting. They've enabled themselves to work from home. So I wouldn't be surprised in the crystal ball if in the future my offices are smaller, my work teams are much more distributed at home. For my customers' businesses, that's going to force this digital customer engagement much stronger. I think there's going to be a much bigger demand for that. How do those businesses get to that end state of digital engagement with their customers faster? Rather than changing out all their legacy systems, how do we put a layer in that enables us to interact very quickly and downstream interacts with all my legacy as well, but gives my customer that seamless, omni-channel type of experience? With people working remotely and being very flexible around their families going forward, I think that's going to be critical. China is going to keep growing strongly. It's still going to dominate Asia Pacific as it does today. Geopolitically, we've got some very interesting dynamics at the moment. I have a potential opportunity in Pakistan, and I have a lot of issues between that and India, and a lot of issues between India and China, a lot of issues between Australia and China. That geopolitics is going to continue to emerge and dominate businesses. So that adds to the complexity of things.

Gosh, that's a huge question. I love the space that we work in, which is basically telecoms, media, financial services, and technology, because it is mainly global. As I mentioned, we staff and serve customers from multiple geographies and across the world. So inherently my business is globally connected. My customers are, so my business is. The issues that I grew in Europe versus the business that I grew in the Americas versus the business here now in Asia Pacific, it's a lot of the same problems, a lot of the same issues. When I was in Buenos Aires in Argentina about 18 months ago, I was like, 'Gosh, this feels like Vietnam or Thailand.' So you see similarities and similar challenges or priorities. Different culture maybe, in terms of Thailand versus Argentina, slightly different culture, but actually business-wise, a lot of the same issues: an economy that's trying to emerge, trying to be sustainable, trying to build itself on its core differentiators, whatever that economy might be, and trying to grow into the next generation. There's a huge income gap between some of the emerged economies and the emerging, particularly say Western Europe versus Eastern Europe or Russia. There's huge differences. When we look at doing business in Asia, the geopolitical issues are becoming more and more pervasive and difficult. We've seen a closing of borders, a nationalism that's reducing, and countries are saying, 'If you're going to supply me from this country, I'm not interested.' As a US business, we have anti-boycott that we're not allowed to agree to contracts that boycott different countries. So we're not allowed to do that. Going forward, I really hope that there will be a geopolitical reasonableness that comes into space and international business is allowed to resume. We'll see what happens in the US election, and I don't know if that will change anything, but this polarization, this nationalism, is not helping the global businesses that we serve.

First of all, don't underestimate how difficult it is. A lot of Western companies, European or US, come to Asia. It's very interesting. There are some very popular countries for people to try and enter. Singapore is normally the first place to go, first port of call. Then normally people will try and expand in Southeast Asia into say Malaysia and Thailand. What we find is every single Western company is there, so the competition is red-hot, and the growth that you may expect out of doing that may not come because they're already ultra-competitive marketplaces. So I would say if you get the opportunity, go there, do your investigation, visit, meet your customers, and see what they need because you might be surprised. You might be surprised when you meet your customers, first of all, how sophisticated they are and how advanced and developed. It continues to impress me just how much progress a lot of those have made. Some of the evolutions of those economies are far beyond what someone like myself from Western Europe expects of Asia. Far in advance of them in reality. South Korea is an amazing place. Seoul is one of the most advanced cities in the world. So I would say get out there, go see the businesses, do your homework. Don't rely just on data because the data may show, 'Oh, this is a lower income but it's high growth, so therefore if I do that analysis, I'd probably be able to build a high growth business there.' Well, you may not be able to because everybody else has done the same data analysis and they're all there, so you might not get a single deal. So I would say go there, thoroughly investigate business opportunities. If you have a business there yet, go and understand your customers because they may be way more sophisticated, way more interesting, and know their markets so well that you might think you're bringing lessons to them that they already know. So don't underestimate the leaders or the executives in a lot of those markets.

Thank you, Gabrielle. It's been a pleasure.