22 Sep From corporate drone to entrepreneur
Every entrepreneur has a story to tell. But not every entrepreneur can claim to have survived the baptism of fire the way that Wei Chuan Beng of REDtone International Bhd certainly can. He does not have a sad story to tell of growing up in poverty or obtaining a rich investor in the early days of the business. Nevertheless, he has been through many challenging times as an entrepreneur.
In fact, Wei will be the first one to tell you that being an entrepreneur is all about hard work and perseverance. In a recent interview with KINIBIZ, he spoke about his beginnings as an entrepreneur and how REDtone survived the dotcom crash of 2000.
When asked how he got started in the telecommunications business, Wei replied that after graduating from Universiti Teknologi Malaysia, he started working with Hewlett Packard, first with the systems support side and then later in sales.
“In sales I was an account manager, and that means I provided solutions to our big corporate customers and multinational companies. We supported customers globally for HP, Motorola, Intel and Alcatel, where we provided global solutions such as network consultancy, computer servers and software,” he recalled.
Wei said that at that point in time, he observed the budding convergence trend. (IT convergence is the technology of merging separate telecommunications services into a single platform, such as allowing a phone to both make calls and access the Internet.)
“We may talk about convergence right now but convergence as a phenomenon actually started in the mid-’90s. It was just at the beginning of the Internet era but in terms of IT and telecommunications, that was the beginning of convergence. The simplest example of convergence is a voicemail system where you can call a person who is not around and the call is then diverted into a server for a voicemail to be recorded,” he explained.
Convinced by his idea, Wei decided to leave his job and together with an ex-classmate, they realised they could produce a voicemail system that could sell. This became REDtone International Bhd’s first product line. The year was 1996.
“By 1997 we had our first product out. Within two to three years we were the largest voicemail system provider in the whole of Asia. We sold thousands of those systems because the old voicemail systems were big and expensive and a lot of companies could not afford those.
“So, when we were able to make it so affordable, a lot of medium- and smaller-sized companies could now afford the voicemail system. We sold thousands. We had our products in more than 13 countries – in the US, Europe, South America, and of course in Asia,” Wei recalled.
According to Wei, just on the voicemail product alone (even without needing any additional product development) they had a revenue of RM8 million to RM12 million a year, half of which was their profit margin.
“We made quite a few million during those two or three years. We could have chosen to retire. But we were either not very smart or a bit naive, or ambitious. We did not take a single sen out. Instead, we put all the money back into additional research and development (R&D),” Wei explained.
Fortunately, at that point in time, the Multimedia Super Corridor (MSC) had already been launched, Wei said.
“When we applied for the MSC R&D grant scheme, we were also given a second R&D grant as a matching grant. The first grant was RM3.2 million and the second one was RM3.5 million, and we put in all our own money into R&D as well.
“Within that few years, we spent around RM15 million, close to RM20 million, in R&D. It was a huge sum but the result was that we developed a communication server that combined the functions of telephone, Internet, voicemail, email, fax, telephone directory, and SMS server all into one platform. We thought it was a fantastic product. But when it was ready to get out to the market, the dotcom crash of 2000 occurred,” he explained.
How did the dotcom crash affect his company? “We gave up so much of our resources in terms of R&D and sales. We thought we wanted to sell our product to the market, but in the end we found that we could not sell it,” Wei said.
Something had to change for them to survive. “We were facing the threat of closing the company if we couldn’t turn it around in six months. Then we thought: ‘Okay, we have the technology, we have the core competency of the communication convergence server, what can we use in order to bring us into a new direction if we are going to sell the product? Perhaps we can sell it as a service?’”
That was the point where REDtone changed its business model to that of discounted call services. “At that time, people were focused on saving, not spending money. Saving money during a recession was a big thing then,” Wei said.
“So we thought we would help people to save costs. We then looked at what those cost items were. Usually communications costs are one of the top 10 cost items and we found we could help them in terms of savings by providing a smart call server.
“We repackaged our technology into a smart call server and installed these in hotels because in those days hotels made a lot of calls with a lot of guests. A lot of companies installed this, and just within two to three years we became the largest discount call provider and this continued for a number of years,” Wei explained.
Voice services were very expensive back then, Wei recalled. “These days we are talking about voice which is free because it is part of data. You can use Whatsapp now but bear in mind that voice at one time was very expensive. If you made a call to Europe, a minute was RM7-RM8. Then it quickly reduced when discounted call services came into the market. When the world went into deregulation, telecommunications costs actually went down, which has been a good thing for all consumers,” he said.
Wei explained that the discounted call services business helped the company grow rapidly, although it was a disruptive business to incumbent telcos. “We grew very rapidly from RM12 million in revenue a year during the dotcom crash, and by the time we turned the company around into a new business we had RM14 million a year. The next year, we made RM32 million. Then we grew to RM80 million a year and then RM120 million a year and then RM150 million a year,” he said.
In our next article, Wei continues the story of REDtone’s beginnings as a telecommunications service provider and how he took the company regional. Stay tuned.