MAINBOARD-LISTED Frontline Technologies, continuing an aggressive regional expansion as it seeks to increase sales beyond Singapore shores, is spreading its wings to Vietnam.

'In the next one or two quarters, we will be going to our tenth country and that's Vietnam,' said Steve Ting, Frontline's executive chairman. Among the nine other countries in the Asia-Pacific region that the company already operates in are China, India, Malaysia, the Philippines and Taiwan.

Earlier this month, it added Indonesia to the list through a joint venture with Sun Microsystems and local IT firm PT Metrodata Electronics Tbk. And Frontline will adopt a similar cooperative approach for Vietnam, Mr Ting told BizIT in an exclusive interview.

He said Frontline planned to take a majority stake in the upcoming Vietnamese venture. 'Trying to achieve organic growth is not easy. If you want government contracts, you must have local partners. Whether you're in China, the Philippines or Thailand, it's the same (requirement),' he explained.

Besides tapping into Vietnam's domestic market potential, the company is also looking to the country as an emerging offshoring location, Mr Ting said.

To date, India and China have been hogging the limelight as the favourite destinations for multinationals to situate their call centres and software development facilities. However, the two countries are fast losing their competitive advantage as the battle for a shrinking IT talent pool has sent salaries on an upward spiral.

A recent survey by PricewaterhouseCoopers and the Economic Intelligence Unit revealed that, in light of such developments, Asia's two traditional outsourcing powerhouses are no longer viewed as favourable from a cost perspective. And this has prompted companies like Frontline to seek out other alternatives.

'One of the reasons we are looking to Vietnam is for offshore services. The cost in Vietnam is definitely cheaper than China and India and they have good programmers there. If you get there early, you can get something going,' Mr Ting stressed.

The foray into Vietnam is the latest chess move in Frontline's larger strategy of diversifying revenue streams beyond Singapore's mature technology market. For now, China and India are still the two 'key pillars of growth' as the firm seeks to even out sales from its home base and overseas operations, Mr Ting said.

In its last financial year, Frontline's regional businesses accounted for nearly 45 per cent its total revenue and the company looks set to achieve an even split this year. 'In the next three years, Singapore should represent one-third (of total revenue),' he said.

However, Mr Ting believes there's still growth potential in some market segments in the Republic. For example, he said a lot of companies here are still maintaining their IT systems internally and have yet to embrace the outsourcing model.

Moreover, the SME market is largely untapped and the usual technology frontrunners like banks, telecommunications operators and the government are still splurging on IT solutions and services, Mr Ting added.

For its last financial year which ended in March 2006, the company raked in revenues of $169 million, up from $147 million previously. Net profit for the period rose from $5.2 million to $7.3 million. 'The consensus from the analysts that track us is that we will grow 20 to 30 per cent in both our topline and bottomline this year,' Mr Ting said.

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