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Lexmark
Lexmark R&D - Finding the Philippines as the right location for development work
Lexmark is one of the leading developers and manufacturers of printing solutions in Europe and North America. With headquarters in Lexington, Kentucky, Lexmark International, Inc. has positive growth prospects in the Asia-Pacific region. The explosion of color printing in the corporate arena with the impact of the Internet as a vehicle for business has increased the prospects of printing needs in this culturally diverse region.
Although brand recognition has become extremely important and challenging in the region, Lexmark's competitive edge is strongly founded on developing and owning the technology inside its products. This shortens the product development cycle and allows the company to integrate customer inputs into research, product design, and development.
As one of America's most admired companies, Lexmark arrived on Philippine shores in 1999 with the establishment of Lexmark International Philippines, Inc., an inkjet cartridge assembly plant, at the Mactan Export Processing Zone II. This 115,500 square-foot facility in Cebu, the newest addition to Lexmark's manufacturing sites in Asia, supplies inkjet cartridges to the growing Asian market, as well as supplementing the U.S. market.
R&D Mission
In 2001, Lexmark Research and Development Corporation (LRDC) was opened at the Cebu Business Park with a mission to design, develop, deliver, and maintain software and firmware for Lexmark consumer printers. The Cebu R&D lab currently specializes in software development for printer drivers and network adapters and in rebranding of Lexmark printers for original equipment manufacturer partners worldwide. LRDC Cebu is the base of Lexmark's R&D operations in the Asia-Pacific region.
"Our strategy was to start with basic software operations," said Stan Combs, President and CEO of LRDC. "And then we worked on steadily increasing the complexity of the products developed for both consumer and business printers distributed not only in Asia, but also worldwide."
Mr. Stan Combs, President and CEO of LRDC
The current 250-member staff of mostly programmers has been doing a lot of studies in printer technologies for wired and wireless connections like Bluetooth, consumer printing from the Internet, and total box designs in the next five years that will incorporate electronic design and mechanisms.
LRDC is the product of an extensive one-year study of potential locations in 10 countries, including Japan, Korea, China, Taiwan, and Hong Kong. There are several reasons why Lexmark chose the Philippines for its R&D operations. One core reason is the Filipino workforce, whom Mr. Combs described as "very skilled, talented, trainable, hardworking, and with a lot of potential due to a good education system and a lot of degree-qualified workers."
The second reason is more of an "accidental geography," as Mr. Combs coined it. The Philippines is centrally located and easy to access from all areas in the Asia-Pacific region. "We have business partners all over the place - China, Korea, Japan, and Taiwan - with the Philippines as the convenient place located in the middle of these countries," Mr. Combs added.
Another factor is that English is the second language in the Philippines, making it easy for an American company like Lexmark to communicate with its Filipino workforce.
In addition, he stressed that the Philippine government is open for business investments and encourages open yet fair business practices. "In some countries, doing business is very difficult for a foreign corporation like Lexmark. To operate in the local market, for instance, some governments require a local partner that owns about half or maybe 51 percent of the company. This is not the case in the Philippines. In all of the respective business rules and regulations in Asian countries, the Philippines is the most flexible and straightforward."
Aside from the Philippines having good intellectual property protection laws, LRDC is located near Lexmark's inkjet manufacturing facility in Asia.
Expansion and Challenges
Because of numerous development projects and prospects, Mr. Combs said LRDC is set to expand its office in Cebu in terms of office space and more development tools for its workforce, such as computers, software, and networking equipment. The company also expects to increase its manpower to 300 by the end of the year.
It partnered with Fujitsu Philippines to improve its data network facility and he emphasized that the company is very pleased with FPI's quality of service.
"The biggest challenge is keeping this lab tightly connected and coordinating the operations with our two other labs in Lexington and Colorado," he claimed. "As we are all working on the same kind of product and technology, the Philippine lab is like a satellite, so we have to coordinate our development activities very closely, doing the software designs on the printers. We send a lot of employees from here to the U.S. for about three to six months. I have 25 people there right now."
Mr. Combs also shared his biggest personal challenge -maintaining contact with his two daughters. His wife stays with him in Cebu. "It's difficult to keep the close family ties, particularly with my mother. My wife is quite happy here, and we're both enjoying the assignment. I told my boss recently when I was in the States that this is probably one of the most rewarding assignments the company has ever given me."
"It's been an opportunity to live in another country and meet other people from other cultures since we get to travel a lot to other Asian countries, too. And if you look at the foreign companies operating in the Philippines, a lot of the people working for these companies come from Germany, Italy, U.S., England, Australia, New Zealand, and Mexico. It's just a big group of international people in the Philippines, and so we have not found it to be a problem at all for us socially. We have lots of friends here," he candidly shared.
Lessons from the Philippines
Working in the Philippines is such an interesting learning experience for Mr. Combs. "It is hard to quantify. People with a different culture have different expectations about how to make things work. When I ask for something, I interpret it the way a fellow American would interpret it. However, Filipinos may interpret the request quite differently. I don't mean from a language point of view but in view of perceptions. So it's been an interesting challenge for me."
In the final analysis, Mr. Combs quickly stressed the Philippines' very large untapped opportunity for product development. "In the past, people had perhaps thought more of doing low-cost manufacturing in an export processing zone like the one in Mactan. We found we could go well beyond low-cost manufacturing and we've been successful doing development work here. We're quite satisfied in the quality of workmanship that we get in this country."
As a final message to any investor who is thinking of going to other countries to take on new development work, Mr. Combs has this to say, "I would tell them to consider the Philippines. The country certainly offers many business possibilities, providing an environment that is conducive to successful product development."
Indeed, Lexmark Research and Development Corporation in the Philippines is making a strong presence in the Asia-Pacific region and is set to increase Lexmark's leadership in the printer business worldwide, making it a truly global company.
