Spring Singapore – LETAS grant ceases thus brings an end to the Gold Rush

With effect from 1 Feb 2010, Spring Singapore ceases supporting the Letas Grant . Instead the a new more stringent grant called the Infocomm@SME – Integrated Incentives for SME Infocomm Adoption was setup to help SMEs for computerize their operations.

This new grant limits funding of IT projects to more specific areas such as the following:

Types Of Project Support Level Qualifying Costs Packaged solutions* pre-qualified by IDA for:

• Finance/ Accounting
• Human Resources/ Payroll Up to 50% of qualifying cost, capped at S$1,500 per packaged solution • Software
• Consultancy Services
• Training Customised solutions

E.g. Customer Relationship Management, Enterprise Resource Planning Up to 50% of qualifying costs, capped at S$10,000 per SME Consultancy services Advanced customised solutions that requires extensive development efforts and business re-engineering

E.g. Supply Chain Management Up to 50% of qualifying costs

(Grant amount is determined based on a case-by-case basis) • Manpower-related costs
• Consultancy services
• Hardware/ software

With effect of this new more stringent critieria I foresee that most newly sprung up IT companies surviving just on grants provided by the government to help companies build up web sites will slowly but surely evaporate from the market leaving only those that have in the midst of this gold rush found a strategic foothold in the  market.

I foresaw this coming when Garis tried to persuade me into setting up an IT company with him and a recently retrenched IT sales staff. The sales staff who was so confidant during the initial meetup session with us, suddenly disappear after researching that the grant she was going for had dried out. Then again I was not really inclined towards the whole engagement in the first place.

First and foremost Garis was trying to target a part of the IT market that had little to no barrier to entry and relatively low profit margins. 5 web pages for $2000-$2500 sales price. While it might sound lucrative up front. On further calculation it was a really bad deal.

Profit per person would be approximately 1/3 of the sales price  hence around $600++ for me per site. However  based on my previous experience I will likely have to spend up to 4 man days ($400 per day are my usual rates) for each site. This was inclusive of the back and forth liaising process with each clients which Garis and the potential sales girl had already declared a lack of interest in being involved in.

Garis was also having the idea that we would each only draw out a small sum per month as salary which will cut further more into my potential return in each deal. To top it all up, Garis was of the opinion that I should stop engaging clients independently and just concentrate fully on this venture, if not direct these clients to obtain service from this venture.

Directing of clients to this venture was not a feasible option. What my clients required of me was more than just simple 5 page websites. Most of what was required by them were comprehensive e-commerce solutions or backend operations systems. To have done as Garis intended would have meant to commit corporate suicide by introducing 2 redundant free riders to the process as well as complicating the picture.

Also based on information gleaned while furthering the conversation between us, I realized the sales girl was only confidant  in bringing  3 to 4 projects per month and at the  same time not really experienced in the pre-sales of systems more complicated that 5 pages web sites.

After the discussion amongst the three of us, I begged to be excluded from the partnership. As to do so was to incur huge potential loses on my side.

This new scheme that Enterprise One will be finalizing in March 2010 seems to be very promising as the barrier to entry for creating the mentioned systems are high in contrast to the creation of 5 pages websites. I will meanwhile look forward to what Enterprise One has to say.

Leave a Reply