E-Business "Cayman's Way Forward" Address by Hon. LinfordPierson
"Why promote e-business at all?"I believe that there are least 6 major reasons. The first 2 mightbe called "defensive" in nature, and concern the increasedglobal competition we are facing.
"Firstly, then, let us consider the2 pillars of our existing economy, financial services and tourism.I will not bore you with masses of statistics proving how rapidlyuse of the Internet is growing. You know as well as I that moreand more companies and individuals are turning to the Internetfor information, improved customer service and, to a lesser extent,for purchases. They do this because they like the 24 hours a day/7days a week availability, the ease with which they can compareworld-wide prices and options (even if they don't actually buyon line), and the speed with which transactions can be completedif they wish to go that far. Few can doubt that use of the Internetis going to increase rapidly.
"If Cayman companies do not have acompetitive presence on the Net, they are going to lose business,and the economy will suffer. Notice that I said a competitiveon-line presence. Many Cayman companies now have a basic web site,but that is no longer good enough. Customers are looking for realvalue from the web. This translates into the delivery of trulyuseful information, personalised and efficient service, and theability to complete transactions simply and easily. An on-lineversion of a glossy brochure is not competitive. It is vital thatcompanies recognise the need to implement e-business practicesas quickly as possible.
"The other side of the coin is thatif Cayman does not provide the legislative, technical, and humanresource environment that enables companies to cost-effectivelyimplement e-business, they may quickly relocate to a jurisdictionthat does. If other factors that give us competitive advantage,such as low tax levels and confidentiality laws, are put underpressure, companies will have no reason to accept a high costof doing business or a below average e-business infrastructure.They may relocate, - and the Internet makes such relocation particularlyquick and easy.
"Of course, some companies will not,or cannot, relocate as they are local businesses, owned and runby Caymanians. This brings us to the second reason for promotinge-business - because local businesses too are under attack fromoverseas competition. Many of our own people are competent Internetusers. They see the wide choice, lower prices, and excellent customerservice provided by some overseas Internet merchants.
"If you don't believe that they aremaking Internet purchases, just ask carriers such as FedEx, DHLor USLink how many packages they receive each day from companieslike Amazon.com or other on-line retailers. Of course this doesn'ttake into account "invisible" purchases such as travel,software, music and films, or services that previously would havebeen obtained locally.
"This is already affecting our economy.If local businesses are to hold their own, many such companieswill have to "re-invent" themselves, identifying nichemarkets, forming new partnerships, providing outstanding service,and embracing the new technology. In other words, becoming e-businesses.Some have already begun. For example Tortuga Rum Cakes are beingsold on the web and through new partners on a recent checkthere were over 400 references on the Web to Tortuga Rum or TortugaRum Cakes. International Travel has opened a specialist cruiseagency and has formed a partnership with Travelocity.com to supportclients locally, and Bank of Butterfield is offering InternetBanking services.
"We must encourage many others to follow their example, andassist them by doing everything we can to reduce the cost of doingbusiness, and providing an environment in which e-business canflourish. Only then will they be able to compete successfully.
However, the reasons for promoting e-businessare not all "defensive" by any means. There are realopportunities to attract new businesses from overseas, and fornew local companies to be established or to grow.
· With the strength of our financial sector, and the easewith which most financial products can be sold across the Internet,this seems to be the obvious place to start with the developmentof e-business. However, many of the financial institutions onthe Island are only small parts of bigger businesses elsewhere.It is likely that the local representatives will require the supportand cooperation of Government and the private sector in presentingto their boardrooms off-Island their case for the developmentof e-business on Cayman.
Many existing clients of the financial servicessector would like web sites to complete their offshore portfolios.
Multi-national companies can structure theiroperations to obtain significant benefits from locating theirweb activities offshore whilst still meeting their legal tax commitments.Examples of companies that have already taken such steps are GeneralMotors and McCormack Spices. In general, however, such companiesrarely think about location, let alone an offshore location, whenplanning reorganisations.
Government and the private sector must jointlypromote the advantages of e-business on Cayman, proactively targetingappropriate companies, and knocking loudly on boardroom doors.
Other suitable target businesses are thosewhere the goods are "intangible". Consideration shouldbe given to travel and leisure agencies; intermediaries of allkinds; companies selling digitally delivered products such assoftware, music and video; web portals; and web hosting and applicationservice providers. Another possibility advocated by Vision 2008is distance-learning organisations.
These suggestions are not pipe dreams. Establishede-business companies, such as Baltimore Technology and PhilipCohen Consultant AB, are seriously considering the Cayman Islands,and especially Cayman Brac, as a potential site for specialistIT activities such as an offshore disaster recovery centre, certificationauthority, or small regional call-centre. As an aside, it is easyfor us to underestimate our potential as an e-business location.For example, we did not consider the potential of call-centrebusiness because, amongst other factors, our labour costs weretoo high. It transpires that the greatest expense for call-centrecompanies is high staff turnover.
They can spend months training a new recruit,only to have them stolen by another employer within weeks. Theytherefore are looking to establish small regional centres in locationswhere staff turnover will be minimal. In this connection, therefore,the actual cost of labour is a relatively minor concern. The Bracbecomes an attractive option in such circumstances. The lessonis not to second-guess what potential investors are looking for.
There are many opportunities too for newor expanded local companies in many different sectors. You maybe pleasantly surprised to learn that we already have companiesestablished, or about to launch, in many of these areas. Examplesinclude on-line trading (SEGOES), web hosting (Internet FinancialServices and Cyber Commerce Services), computer and network support(Silvanaus Technologies), digital certificate providers (KPMGwith Certica), graphic design (EyeWaves), marketing (Tower Marketing),publishing (Cayman Financial Review, Cayman Connections and CaymanNet News), and disaster recovery (Shelter Island), together withour several well established computer and network dealers andinstallers.
Again, Cayman Brac warrants a special mentionwith their Brac Informatics Centre initiative. I am sure thereare more, and I apologise for not naming them. I do congratulatethem all for their pioneering efforts and the contribution theyare making to our economy and to our community as a whole.
"Several of these companies are usingthe Internet to access skills and services located elsewhere inthe world in order to augment the services they provide. I recognise,however, that this is a two-edged sword. Jobs that were once locatedin Cayman could in future be "outsourced" to workerslocated overseas. Indeed, many of us have been critical of Cable& Wireless for doing just that by outsourcing their 411 servicesto Jamaica. In that case, we have particular concerns about theredundancy of long-term Caymanian employees, and the resultingquality of service. In general, however, this is an inevitableconsequence of globalisation that we will have to come to termswith.
"On balance, I believe that this abilityto make use of overseas skills and expertise will usually workto Cayman's advantage. Government still will receive income fromcompany registrations, trade and business licenses and telecommunicationlicense fees; our community will get a better range of services;and when the outsourced services would otherwise require the employmentof expatriate labour, the need for additional work permits isreduced."