BY ONG BOON KIAT

THE desire for more sustainable and recurring income has fuelled a significant services business push by Singapore Technologies Electronics (ST Electronics).

It wants to grow this business, whose offerings range from providing consultancy services for firms to helping companies manage their business systems, to contribute about 40 per cent of its overall revenue, from the current 25 per cent.

And ST Electronics, the electronics business arm of ST Engineering, will be hiring more staff to help it do so.

Elaborating on this target during the CommunicAsia tradeshow last week, Pang Hee Hon, deputy president for operations of ST Electronics (info-software systems), told BizIT that there are 'more opportunities than challenges' to grow the services pie now, particularly in the area of managed services.

Solely relying on infrastructure- building projects alone means sales could be 'very lumpy', but having a recurring revenue stream from services means that business growth will be more sustainable and steady, he said.

'From a managed services point of view, there is an opportunity to grow in Singapore - for instance, there is the second phase of the SOE (Standard ICT Operating Environment) project.'

The Singapore public sector has, in the last few years, aggregated its demand for services into bigger chunks unlike previously, where tenders for such services deals tend to be smaller and more piecemeal, he noted. 'Therefore, when you have that, the opportunities to grow a new capability is much greater.

'But we are not only focusing on the local market. There is a trend towards strategic sourcing by governments around the globe . . . That's where we need to keep our antennae up,' he added.

ST Electronics' aim to swell its services business to around 40 per cent of overall sales was disclosed by company president Seah Moon Ming last week. He told BizIT that the company aims to achieve this 'at a steady state, in five to 10 years' time'.

Managed services is the practice of taking over and running business and operational components, such as payroll or data centres, for companies which may be outsourcing these components to cut cost or focus on core businesses. Such services are typically delivered over multi-year contracts. 'Managed services is doing something on behalf of your customers,' Mr Pang explained.

He said for ST Electronics to grow its overall services prong, of which managed services is a key part of, 'we need to look at big customers - governments, public agencies, big institutions and big commercial enterprises'.

He expressed confidence that ST Electronics can win such large services deals because it has been steadily widening its breadth of expertise in this area. He pointed to the $250 million Ministry of Defence (Mindef) contract secured in 2007 as a notable move in this direction. The deal involves the provision of human resource, financial, payroll, administrative and other services to National Servicemen.

More recently, it clinched a deal with the Ministry of Community Development, Youth and Sports (MCYS) to deliver a similar range of finance and accounting shared services.

'Previously, we were very focused on doing maintenance of the systems that we built for our customers, such as providing 24/7 helpdesk services. But now we are expanding the suite of managed services into other new areas. And that's where the new thrust and renewed focus is.

'The Mindef services contract is a strategic one because having won that contract, we (can) build capabilities to grow that business not just in the local but overseas market.'

ST Electronics - which has wide- ranging expertise in satellite communications, infocomm technology, digital media and other fields, and has been raking in annual sales of over $1 billion since 2007 - will be hiring more to boost its services delivery capabilities, said Mr Pang.

'Certainly, in order to take on the opportunities now, there will be certain operational constraints that we have to overcome. For example, we need to hire more people, who can be in the areas of sales, marketing, as well as operational people for financial, payroll, transaction and other areas.'

This article was first published in The Business Times.