Business Overview

5. INFORMATION ON OUR GROUP (Cont’d) 5. INFORMATION ON OUR GROUP (Cont’d) 5.7 BUSINESS OVERVIEW 5.7.1 Our principal activities and products I services In today’s technology-enabled world, most if not all enterprises and organisations use IT to automate and digitise their operations and thus have large amounts of digital data stored in various media including servers, desktops, laptops and external devices. For many of these organisations, the data is critical for their business and operations, especially for organisations that carry sensitive, confidential and mission critical data, and hence, it is highly important that the data is systematically protected through EDM solutions. EDM refers to the practise of putting in place a set of policies, procedures and technology(s) to allow enterprises and organisations to backup and store important electronic or digital data as well as recover and restore this data in the case where the primary source of data becomes inaccessible. The objective to ensure data is systematically protected and easily recoverable becomes particularly compelling in the event of a disaster that could potentially destroy or damage an organisation’s enterprise data. Disaster to an enterprise can occur because of destruction and/or damage to enterprise servers due to virus attacks, data corruption, computer thefts, fire, floods, earthquakes and other natural disasters, as well as serious structural damage to the servers. Our subsidiaries and associate are involved in the provision of EDM solutions, specialising in data assurance and protection to ensure business continuity for our clients. Our portfolio of products and services, which are delivered directly by our Group, provide our clients with the ability to achieve data assurance and protection through the systematic backup, storage and recovery of enterprise data to ensure business continuity, as follows:­• On-site data backup and storage;
• Off-site backup and storage for long term archival;
• Data recovery and restoration;
• Problem escalation and resolution in the event of issues or errors during the backup process;
• 365 days, 24 hours a day, 7 days a week (“365/2417”) technical support; and
• Consultancy on process improvement for data assurance, data protection and disaster recovery.

The breakdown of our principal activities to deliver the above-mentioned are detailed as follows:­a) Provision of EDM infrastructure technology comprising hardware and software; b) Provision of EDM value-added solutions and professional services; c) Provision of EDM managed services; and d) Provision of annual maintenance and technical support in EDM solutions.
5. INFORMATION ON OUR GROUP (Cont’d)
Management I
(i) Provision of EDM infrastructure technology comprising hardware and software We are principally involved in the provIsion of EDM infrastructure technology which comprises both hardware and software. EDM hardware refers to computer components used to record, store and retain digital data while EDM software supports the process of data backup, storage, recovery and restoration. There are two (2) types of storage:­(a) Primary storage Primary storage refers to the first tier storage where data is stored and immediately used by server applications. Primary storage may be internal or external and may include traditional hard disk as well as newer solid state disk or flash arrays. (b) Secondary storage On the other hand, secondary storage complements primary storage and may include technologies like data deduplication to maximise storage capacity. Data deduplication technology refers to a specialised data compression technique which eliminates duplicate copies of data. Secondary storage is also known as backup storage and consists of higher capacity hard disk, tapes or other optical media. We predominantly offer secondary storage infrastructure to our customers. Under QSA’s EDM infrastructure technology business, QSA exclusively market and sell EDM solutions from Quantum Corporation on a non-consignment basis. QSA has a strategic marketing agreement with Quantum Corporation that covers the SEA region (which includes Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and Cambodia). 63 5. INFORMATION ON OUR GROUP (Cont’d) The EDM infrastructure technology which we sell and market are as follows:

Description Specifications Disc Backup Systems Product cate or Disc-based appliances with Storage capacity: data deduplication technology. HB to 330 TB Performance: 1.5TB -16.5 TB per hour Automated Tape Libraries Storage device for holding tape Number of slots: drives. It contains many slots to
25 to 12,000+ slots hold the tape cartridges, a barcode reader to identify tape Number of tape cartridges as well as a robotic drives: arm to automate loading of tape 1 to 192 tape drives cartridges. Standalone Tape Drives Extemal storage device used Storage Capacity: for data backup. 800 GB to 6.25 TB
Storage Management Software for file sharing, • Integrates Software protection and archival seamlessly with purposes.
varying types of hardware and software. • Ensures high performance and consistent throughput.
• Can be used for large amounts of data and high performance equipment.

We enhance the overall EDM infrastructure technology by providing value-added solutions and professional services and maintenance and technical support, as detailed in Section 5.7.1 (ii) and (iv) below. This is necessary in order to ensure that the EDM solutions are able to operate and deliver its desired outcome in the End-User Customers’ IT environment. 5. INFORMATION ON OUR GROUP (Cont’d) (ii) Provision of EDM value-added solutions and professional services Our EDM infrastructure technology solutions need to be integrated to our End­User Customers’ existing IT infrastructure, such as servers, network equipment and primary storage devices. To achieve this, we provide value-added solutions and professional services, which are delivered using a combination of products and services developed by our Group and products sourced from external third parties, to design, install, configure and implement our EDM infrastructure technology solutions in our End-User Customers’ IT environment. Our value­added solutions and professional services also include after-sales service to our End-User Customers such as the following:­(a) periodic Health Checks;
(b) capacity planning to help End-User Customers plan for data growth and anticipate capacity increases;
(c) remote monitoring using an automated monitoring system to monitor the on­going status of the End-User Customers’ system in order to identify and react to any system faults detected; and
(d) disaster recovery service which is a consulting and advisory service that helps the End-User Customers plan and design their Disaster Recovery procedures.

We provide value-added solutions and professional services using our FABRiK framework. With a framework that predefines a set of implementation policies, protocols and processes, we ensure that our value-added solutions and professional services are delivered uniformly to all our End-User Customers. For a more detailed explanation of FABRiK, please refer to Section 5.7.8 of this Prospectus. (iii) Provision of EDM managed services We also offer Mid-market Companies with an alternative avenue to procure EDM solutions via our EDM managed services (offered by KS) without incurring substantial upfront capital investment costs. EDM managed services is a comprehensive service that we provide to our customers for data assurance and operational continuity. The EDM managed services, which are delivered using a combination of products and services developed by our Group and products sourced from external third parties, comprise the backup, storage, recovery and restoration of enterprise data Health Checks, capacity planning, remote monitoring and disaster recovery service. Building upon our cumulative twelve (12) years of technical knowledge and industry experience, we offer EDM managed services, which is on an “as­needed” or rental basis where our pricing is based on a Subscription Model, prOViding our clients with a flexible alternative to conventional outright EDM solutions procurement. We deliver reliable and cost effective EDM solutions to our customers, either through on-site data management or remotely through the internet. Some of the benefits which our End-User Customers can derive from this service are highlighted as follows: • Productivity improvement -As EDM is outsourced to us, our End-User Customers are able to focus on operating their core business activities.
• Access to expertise and advanced technology -As we are specialists in EDM, our End-User Customers are able to leverage on our expertise in developing best practices procedures and policies.
• Subscription Model -Rather than investing heavily in IT resources such as servers or licensing software, our End-User Customers are able to use the

 

5. INFORMATION ON OUR GROUP (Cont’d) resources they need on an “as-needed” basis. We charge based on usage capacity, with varied plans according to the different types of services and capacity needed. • Flexibility and scalability -EDM managed services are particularly well­suited to businesses which are growing and have dynamic computing needs, and as such may require the flexibility to scale their backup and storage capacities as needed. In delivering EDM managed services, we also leverage on our proprietary FABRiK framework in order to ensure that our EDM managed services follow consistent design, development and implementation protocols. For a more detailed explanation of FABRiK, please refer to Section 5.7.8 of this Prospectus. Our EDM managed services is delivered through the use of our proprietary EDM equipment called the POD. The POD is a proprietary, special purpose, c1osed­box appliance, and is the main component in the provisioning of on-site data backup and storage. As part of our EDM managed services, the POD is provided and located at our End-User Customers’ premises. It is connected to our KS data centre located at our premises by an internet line. With the POD at our End­User Customers’ premises, our command centre is able to remotely monitor the status of the scheduled data backup and storage processes. In the case of any failures that may be caused by hardware, software or processes, the command centre will be able to notify our End-User Customers so that appropriate activities can be activated. In addition, the POD provides End-User Customers with the ability to perform high speed, local recovery of their protected servers in case of any system failure or disaster. Below is an illustration of the POD:­
In the event of data loss experienced by our EDM managed service End-User Customers, we have put in place a disaster recovery readiness exercise. The exercise is essentially to assist in the development of a set of procedures and processes which are designed for our End-User Customers to follow in preparing for data recovery and business continuity. We ensure that our End-User Customers are familiar with these procedures and processes by conducting dedicated training sessions on an annual basis. Through our partnership with data centre service prOViders, we are also able to prOVide short-term premises for the exercises to be carried out as part of the disaster recovery exercise. Our EDM managed services are marketed through our “Kronicles Assure” DPaaS product suite. As our EDM managed services grow, we intend to expand our product suite in line with our future plans moving forward. Our “Kronicles Assure” product suite is as listed below:­
5. INFORMATION ON OUR GROUP (Cont’d) Product category Description Specifications .. AssurelEndPoint AssurelEndPoint Lite Basic EDM • Supports various operating managed services systems. for desktops, laptops • Data is stored at our data centre. and mobile devices. • Includes mobile data protection. AssurelEndPoint Comprehensive • Supports various operating Corporate EDM managed systems. services for • Data is stored on a POD at desktops, laptops customer premises. and mobile devices. • A copy of the data is replicated to our data centre.
• Includes mobile data protection.

Assurel Server AssurelServer Lite Basic EDM managed • Supports server operating services for servers. systems and applications such as databases, email and virtual machines (which is a software-based emulation of a computer). • Data is stored at our data centre. AssurelServer Corporate Comprehensive • Supports server operating EDM managed systems and applications such services for servers. as databases, email and virtual machines (which is a software-based emulation of a computer). • Data is stored on a POD at customer premises.
• A copy of the data is replicated to our data centre.
• Includes disaster recovery exercise.

AssurelTarget AssurelTarget EDM managed • Data is stored at customer services for premises customers operating • Customer has the option for a their own IT copy of the data to be replicated infrastructure. to our data centre AssurelTarget xSP EDM managed • Data is stored at our data centre services offered to partners’ premises. customers of our • Customer has the option for a data centre partners. copy of the data to be replicated to our data centre. Our EDM managed services are, presently, delivered in collaboration with our strategic partner, StarHub Limited, through StarHub Limited’s platform. This platform is a highly secured, on-demand scalable service with carrier-grade connectivity, providing us with a reliable back-end infrastructure that is well­suited for our EDM managed services. StarHub Limited is currently also a reseller of our EDM managed services, where our EDM managed services is offered together with StarHub Limited’s other services to its customers. 5. INFORMATION ON OUR GROUP (Cont’d) (iv) Provision of annual maintenance and technical support in EDM solutions We have a team of professionals to provide maintenance and technical support services6 to our EDM infrastructure technology End-User Customers. We provide technical support for our existing End-User Customers in instances such as storage device failures with scheduled and unscheduled maintenance when problems are encountered. We also provide on-site technical support and product training to our End-User Customers. This is essentially a maintenance service that covers all components of our Group’s EDIVI solutions. This service provides our End-User Customers with a 24×7 helpdesk support that they can use to report faults and request assistance for ad-hoc system break-downs. This is to ensure our End-User Customers are able to maximise the performance of their backup, storage and recovery capabilities.
5.7.2 Our Business Model We have a business model described as a “high touch indirect” approach with our distributors, resellers/channel partners and the End-User Customers since 2012. The adoption of this approach is a strategic investment decision which we believe will differentiate our Company and strengthen our presence in the markets in which our EDM solutions are delivered by focusing on building strong and lasting relationships and enhancing the brand preference for our EDM solutions among our End-User Customers and resellers/channel partners. This ensures long term sustainability of our relationships with End-User Customers and positions us as a preferred and trusted business partner to our distributors and resellers/channel partners, thus enhancing our overall competitiveness in the market as an EDM solutions provider. The diagram below illustrates the “high touch indirect” model:­
As mentioned above, we adopt a “high touch indirect” approach with the End-User Customers to ensure that we have direct relationships with them. We collaborate with our distributors and resellers/channel partners for their market reach, but we continue to maintain close contact with the End-User Customers to ensure we build long term sustainable business relationships with these customers. We hold regular seminars, meetings and customer conferences to update End-User Customers on our existing products and services as well as to showcase and discuss new product offerings. We also invite some of our End­User Customers to our product launches and press briefing sessions to keep them abreast of our developments. In addition, our marketing team proactively communicates with our End­User Customers via e-mails and product brochures, whilst our sales team keeps regular contact through face-to-face meetings and telephone calls. 6 We provide a standard but limited 3D-day warranty if EDM infrastructure technology is sold on a stand-alone basis. However, our End-User Customers typically purchase EDM infrastructure technology together with maintenance contracts, which would include replacement and/or repair of parts or components that are defective or not operating in proper condition or acceptance of return of the defective products at our discretion. As at the LPD, there have been no major repair and/or replacement costs incurred by our Group in the past as we enter into corresponding back-to-back arrangement with Quantum Corporation which includes engineering support and parts replacement for every maintenance contract we enter into with our End-User Customers. As a result, no provision for repair and/or replacement cost is necessary.

5. INFORMATION ON OUR GROUP (Cont’d) For the past three (3) FYE 3’1 Decem ber 2011 to 2013 and six (6)-month FPE 30 June 2014, 25.03%, 15.73%, 16.37% and 16.84% of our EDM infrastructure technology revenues respectively was generated directly from our End-User Customers whilst the remaining was via our distributors and resellers/channel partners. For EDM managed services, our entire revenue for the FYE 31 December 2012 to 2013 and six (6)-month FPE 30 June 2014 was generated directly from our End-User Customers. Our typical sales process is as follows:­• Our sales team collaborates with our distributors and resellers/channel partners to generate sales leads from End-User Customers. Sale leads for both EDM infrastructure technology and EDM managed services are generated through our sales team as well as via our distributors and resellers/channel partners.
• Our distributors and resellers/channel partners will also offer End-User Customers with other generic but necessary IT hardware and software required in the implementation of EDM solutions. It is a common practice in the IT industry for the resellers/channel partners to choose which distributor to fulfil the sales order. Resellers/channel partners typically choose to work with distributors that are able to provide one-stop services, i.e. the entire range of products and services required in a certain project, with the necessary payment arrangements. The payment arrangement provided by the distributors to the resellers/channel partners, in turn, minimises our credit risks and improves our cash flow since we have standard credit terms with the distributors.
• Upon securing the project, the resellers/channel partners would place the order with a distributor, who in turn would place the order for EDM solutions with our subsidiaries.
• Once the transaction has been processed, we deliver the EDM infrastructure to the End­User Customers directly from our warehouse or through our distributors’ logistics channels.

Our technical team carries out the following:­(a) the installation and implementation and remains on-hand throughout the service level agreement period to provide maintenance and technical support; and
(b) other value-added solutions and professional services including the configuration and integration of our solutions with End-User Customers’ computer systems. In line with our efforts of creating brand preference, we proactively collaborate with our distributors and resellers/channel partners to identify, anticipate and resolve any complex customer issues through regular project meetings in order to ensure positive customer experience.

• For EDM managed services, we will prepare and deliver the POD if required.
• Our sales team carries out regular follow up calls and visits with the End-User Customers to nurture and maintain the relationships.
• We continue to build business relationships with the End-User Customers in order to create brand preference. Brand preference is also created with our distributors and resellers/channel partners through our regular marketing and channel-enablement programmes where we provide training and conduct pre-sales and technical certification programmes for our distributors and resellers/channel partners.

Sales obtained from our EDM infrastructure technology business are transaction-based revenues. We also continue to secure repeat sales from End-User Customers in the event of upgrades or capacity expansions. Sales derived from our EDM managed services business sees recurrent revenue as it is based on a Subscription Model. 5. INFORMATION ON OUR GROUP (Cont’d) 5.7.3 Our Principal Markets Our EDM solutions are marketed and sold to customers in Malaysia, Singapore, Thailand, Philippines, Indonesia, India and other markets. The breakdown of our sales revenue by our principal markets in the FYE 31 December 2011 to 2013 and six (6)-month FPE 30 June 2014 are as follows:­Country  <—–••————–.–FYE 31 December—._._———————>  Six (6)-month <—FPE 30 June-·->  2011 RM ‘000 % 16,873 49.91 3,508 10.38 3,865 11.43 9,558 28.28 33,804 100.00 (1,026)  2012 RM ‘000 % 23,301 61.76 4,739 12.56 2,137 5.66 7,554 20.02 37,731 100.00 (1,936)  2013 RM ‘000 % 28,416 60.66 7,746 16.54 3,025 6.46 7,656 16.34 46,843 100.00 (4,673)  2014 RM ‘000 % 20,989 69.77 3,235 10.75 1,656 5.50 4,205 13.98 30,085 100.00 (1,986)  Singapore Malaysia Thailand Others  Subtotal Consolidation adjustment  Consolidated revenue  32,778  35,795  42,170  28,099
Our principal market is Singapore where we registered sales revenue of RM16.873 million in the FYE 31 December 2011, RM23.301 million in the FYE 31 December 2012, RM28.416 million in the FYE 31 December 2013 and RM20.989 million in the six (6)-month FPE 30 June 2014, accounting for 49.91 %, 61.76%, 60.66% and 69.77% of total revenue respectively. Our sales in Malaysia registered steady growth from the FYE 31 December 2011 to 2013. Sales revenue in Malaysia amounted to RM3.508 million in the FYE 31 December 2011 and grew to RM4.739 million and RM7.746 million in the FYE 31 December 2012 and FYE 31 December 2013 respectively. Sales to other countries include Philippines, Indonesia and India. 5.7.4 Key types, sources and availability of supplies The key supplies for our EDM solutions business is EDM infrastructure technology (i.e. hardware and software). These include storage, servers, automated tape libraries, disc backup appliances and EDM software. For our EDM infrastructure technology business, our Group sources these equipment and supplies from Quantum Corporation. For our EDM managed services business, we source these equipment and supplies from various international third-party manufacturers such as Quantum Corporation, Hewlett Packard Company and Dell Inc. These supplies are easily and readily available at all times. Other main resources of our Group comes from the intellect of our human capital as our core activities are in the implementation of EDM solutions, including EDIV1 managed services, professional services and maintenance and technical support. We currently have sufficient human capital and we have not experienced any problems in hiring the required personnel. Furthermore, as Kronologi is a MSC-Malaysia status company, we believe we are well­positioned to continuously hire and nurture skilled knowledge workers and technology personnel.

5. INFORMATION ON OUR GROUP (Cont’d) 5.7.5 Process flow The overall process flow for the implementation of our EDM solutions is as depicted below:­
The following are illustrations of the process upon confirmation of a sales order:­Internal kick-off meeting As soon as a sales order for our EDM solutions is secured via our distributor and resellers/channel partner, the team in charge comprising sales and technical personnel will be called in for an internal kick-off meeting. At this stage, the sales team which had been responsible for closing the sales will brief the technical team on the requirements and design of the EDM solutions, which would have taken into account the End-User Customer’s budget, schedule, specifications and other factors or constraints. Our technical team will then formulate an implementation plan for the customer, typically within one (1) week.
5. INFORMATION ON OUR GROUP (Cont’d) Project kick-off meeting with the End-User Customer Once we have decided and aligned our propositions internally, we will hold a kick-off meeting with the End-User Customer typically within one (1) to two (2) weeks, to finalise and sign-off on the project specifications and scope of work.
Project installation Based on the approved specifications, the project team will prepare the Installation Layout Plan. The EDM infrastructure required, which includes hardware and software, is delivered to the End-User Customer’s site, or prepared on our premises for our managed services business. At this stage, QC procedures are carried out on the hardware in order to ensure that it is in accordance with the specifications. The project installation typically takes between one (1) to eight (8) weeks.
Project implementation SUbsequently, the team will commence implementation of our EDM solutions, which will include providing our value-added solutions for the configuration and integration with the End­User Customers’ existing IT infrastructure. The project implementation typically takes between one (1) to eight (8) weeks.
Changes in request Should there be any changes in request from the End-User Customer, we will once again involve the sales team on the request raised in order for them to finalise commercial terms. Subsequently, our technical team will perform an impact analysis to gauge the changes in the request including impact on timelines, resources and equipment requirements.
Project completion Upon completion of the project, QC procedures are once again put in place for the confirmation that the system has been well implemented. Once approved, a Certificate of Acceptance will be issued to the End-User Customer for sign-off within one (1) to two (2) weeks.
On-going premium support After the project has been successfully implemented, we continue to provide on-going premium support ranging between 12 to 36 months, as an after sales service to our End-User Customers. In the case of our EDM infrastructure technology business, these on-going premium support services include value-added professional services such as capacity planning services, Health Checks, hardware and software issue diagnosis as well as on­going customer consultancy services for anticipation and avoidance of problems with our EDM infrastructure technology. We also offer these value-added services to our EDM managed services business End-User Customers along with our continuous remote monitoring of their data backup and storage activities.

5. INFORMATION ON OUR GROUP (Cont’d) 5.7.6 Quality assurance and control procedure The QC of our products are developed and maintained by our technical team. Our technical team has established and maintained an internal quality management system to ensure that our solutions and services are implemented through procedures and processes which allow us to monitor performance and control output quality. We adhere to the following quality assurance and control procedures: (i) Pre-installation QC procedures This QC procedure occurs just before project installation begins and after the EDM solutions (i.e. both EDM infrastructure technology and managed services) required for the installation and implementation process has been delivered. Pre-installation quality control procedures refer to procedures which ensures that the EDM solutions delivered are in accordance with the specifications and quantity ordered. Our technical team will also ensure that all hardware and software supplied by our vendors come with a warranty and/or a back-to-back return policy arrangement. This is to ensure that any products that are defective or do not comply with stated product specifications within the warranty period will be replaced by our vendors. In addition, our technical team also ensures that there is no damage to the physical packaging of the products before installing the EDM solutions. We may at our customer’s request, conduct a “burn-in” test at our premise prior to delivery. A “burn-in” test typically involves the running of our EDM hardware for approximately 24 hours to ensure all components are functioning properly. (ii) System handover quality control procedures Upon installation, our technical team will perform an integration test. This test is performed to ensure compatibility of our EDM infrastructure technology with the End­User Customers’ IT infrastructure. In the case of our EDM managed services, we also perform this test to ensure that the connection is successfully established between our customers’ EDM infrastructure and our command centre. Once our technical team has successfully implemented the EDM solutions, a User Acceptance Test (“UAT”) is carried out with the client and the client will then sign-off the Certificate of Acceptance for acknowledgement that the EDM solutions have been successfully implemented. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

5. INFORMATION ON OUR GROUP (Cont’d) 5.7.7 R&D We are constantly exploring and keeping up with the growth in computing technology and its applications. Our R&D activities are carried out by our technical team. We recognise the importance of R&D to ensure we remain competitive and sustain our continuous growth. Our R&D direction is guided by the following objectives:­(i) Continuous development of relevant EDM solutions to meet evolving market trends, customer demands and emerging technologies to remain competitive and commercially relevant;
(ii) Create marketable and cost effective EDM solutions; and

(iii) Build on strength and competencies of existing solutions and domain knowledge in implementing current knowledge. We aim to translate these objectives into the following R&D strategies:­(i) Development and integration of new and existing technologies The IT industry is characterized by rapid changes in technology and frequent introduction of new and more advanced solutions, changes in customers’ demands and evolving industry standards. Hence, we are committed to developing and integrating the latest relevant technologies in order to maintain our competitive edge in the EDM industry. Furthermore, we intend to ensure that our proprietary FABRiK framework is constantly enhanced as our technical knowledge and know-how in the industry continues to grow. This framework will continue to be used as a basis to design, develop and implement our EDM solutions. This will allow us to replicate our solutions rapidly and ensure consistent quality solutions. (ii) Collaborating with external parties and forming strategic alliances We collaborate and form strategic alliances in the area of R&D with other companies with the aim of enhancing our products and technologies and/or to develop new channels to market. For example, our partnership with StarHub Limited to deliver our EDM managed services through StarHub’s platform. In addition, we have also developed a partnership with 1CARE Global Pte. Ltd. (“1CARE”) in Singapore where we bundle our “Kronicles Assure Endpoint” solutions with 1CARE’s post warranty products for desktops and laptops. This partnership helps us market our “Kronicles Assure” product suite by placing them on the range of desktops and laptops sold with 1CARE’s post warranty products. (iii) Increasing R&D manpower, training and resources We intend to employ additional experienced technical personnel. This would enable us to further enhance our ability to develop new solutions and shorten the product development cycle, and hence increasing the speed of introducing new solutions to the market. Continuous staff training and development would be emphasized to ensure technical personnel are kept abreast with latest developments in the industry.

5. INFORMATION ON OUR GROUP (Cont’d) A summary of our R&D efforts are as listed below: R&D Activity  Description  Year commenced research  Expected completion year  FABRiK framework Product enhancements and advancement Management tools development  Integration of new tools and platforms into the framework To develop new products, including AraaS and StaaS. Development of new tools for IT infrastructure monitoring and management as well as security management  2013 2014 2013  On-going 2015 On-going
Note: Our R&D activities and expected completion years are subject to changes in customer demands and evolving technologies in the IT industry. We have incurred R&D expenses in the past, including expenses that have led to the development of our current products. From the FYE 31 December 2012 to 2013, our R&D expenses increased from RMO.887 million to RM1.003 million, which was 2.48% and 2.38% of our total revenue in the corresponding years. For the six (6)-month FPE 30 June 2014, the R&D expenses are 1.90% of our total revenue. Six (G)·month <··——–·——-··–·—-FYE 31 December—····-··—··_-···—···> 2011 RM ‘000  %  R&D expenses  – – Total revenue I  I  32,778  100.00
2012 RM ‘000  %  887  2.48  35,795  100.00
FPE 30 June 2013 2014 RM ‘000 % RM ‘000 % 1,003 2.38 533 1.90 42,170 100.00 28,099 100.00 I THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
5. INFORMATION ON OUR GROUP (Cont’d) 5.7.8 Technology used The technology that we apply in our daily operations and used in our Group’s entire products and services delivery, has been encapsulated into one single framework, namely the FABRiK framework. FABRiK framework is used to design, develop and implement our EDM solutions, and include technology blueprints, protocols and processes that enable us to deliver consistent quality solutions to our clients. This framework is built upon proven technologies, processes and procedures to deliver consistent outcomes and meet our business objectives. This framework encompasses our core processes and know-how. These can essentially be categorised into four (4) pillars, as illustrated in the diagram below:­
(i) Data management
The data management pillar is a purpose-built gateway for data movement in order to ensure data is structured, aggregated and delivered to the right repository or storage location. This pillar consists of a communications and transport interface, a data transformation engine and a message routing engine which sends and routes messages.
(ii) Services I Applications

The services / applications pillar consist of data capacity management which monitors all storage capacity levels, usage, downtimes and scheduled and unscheduled maintenance to ensure all devices are working at optimum levels. This pillar also involves an encryption system to provide customers with the assurance that all data backup, data transportation and data protection procedures will be encrypted using 128-bit to 256-bit encryption methods. In addition, this pillar also oversees and manages virtualisation in terms of virtual machine interfaces, managing” performance and capacity of virtual storage as well as communication with other back-end support systems. (iii) Workflows / Processes The workflow and process pillar comprises a network management system which entails rules and logic engines that determine the manner in which services will be subscribed, how customers will be engaged and how technical support will facilitate and troubleshoot End-User Customer issues. 5. INFORMATION ON OUR GROUP (Cant’d) (iv) Business services The business services pillar of the FABRiK framework consists of front-end business applications and data management applications. The front-end business applications are used to manage our EDM solutions in terms of service access management, customer contact and control, remote systems and recovery management as well as service order management and tracking. Meanwhile, data management applications involve processes in backing up operational data which will happen at up to two (2) instances, namely on-site at the End-User Customers’ premises and remotely at our data centre. All of the above mentioned processes are based on the following technology components and attributes:­• Open, robust and scalable Service Oriented Architecture -an open system ensures that future expansion can be carried out without re-engineering the whole solution platform;
• Graphical User Interface-driven environment -a user-friendly interface, to avoid dependency on specialist engineers;
• Multiple-technology accessible platform -operates in Windows, IBM, Sun-Java, Linux and Unix environments;
• Industry-proven programming tools -use of C++, Objective C, Java and PHP programming tools;
• Application Programme Interface -to consolidate the different communication protocols
(e.g. Transmission Control Protocolllnternet Protocol, Extensible Markup Language) into a defined set of APls and eliminate the need to re-programme;
• Multiple-channel technology adapters -to integrate and consolidate different service access channels such as desktop, laptops, smartphones and mobile tablets; and
• Application developer framework -a standard development environment to build add-on applications or solutions and reduce the need for complex programming knowledge.

 

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5. INFORMATION ON OUR GROUP (Cont’d) 5.7.9 Modes of marketing, distribution and sales Our sales team is based at our headquarters in Singapore. We also have sales offices in Malaysia and business development teams based in Philippines, Indonesia and Thailand. We generate sale leads for our EDM solutions through two (2) approaches, Le. direct approach through our sales and marketing team and via our distributors and resellers/channel partners. (i) Direct approach The direct approach entails sales or marketing activities which are targeted directly at the End-User Customers. Under the direct approach, our team has two (2) primary objectives Le. to promote the sale of our EDM solutions and services to prospective End-User Customers, including global strategic customers, and to build and maintain business partnerships with resellers/channel partners in order to ensure the preference for our EDM solutions in the respective projects. The structure of our sales team, by country, is as follows:­Country  Number of sales representatives as at the LPD  Singapore Malaysia Thailand Indonesia Philippines  9 3 3 4 2  Total  21
Save for our global strategic End-User Customers, where we process their sales orders directly, and several local End-User Customers in Singapore which our Group continues to sell directly to due to historical arrangements, any sales opportunity that is generated from our marketing activities will be forwarded to our distributors and resellers/channel partners for follow up. (ii) Distributors and resellers/channel partners Our distributors are primarily large, reputable and regional IT distributors who carry multiple brands of products and sell to the End-User Customers via their respective reseller networks. We have partnerships with IT distributors in Singapore, Malaysia, Philippines, Thailand and Indonesia. All sales generated, either through our sales team or by the distributors and their resellers, are executed on a non-consignment basis by the distributors. These distributors have a network of resellers to provide greater accessibility and wider market reach. By leveraging on the reseller networks of these distributors, we are able to increase our customer reach while incurring minimal costs. Our resellers/channel partners are typically IT service providers, who promote, resell and integrate multiple products and solutions as part of their IT implementation projects. These are usually large and complex projects with multiple components including enterprise servers and computers, application software, network infrastructure, IT security and data management, involving numerous product and solution vendors. We create brand preference for our EDM solutions by providing training to our distributors and resellers/channel partners on our suite of products. We also conduct certification programme for our resellers/channel partners. This enables them to anticipate, estimate and respond to End-User Customers’ needs with appropriate and relevant solutions. We also provide our distributors and resellers/channel partners with

5. INFORMATION ON OUR GROUP (Cont’d) back-office support functions to help them improve efficiencies and customer service levels. We use public relations and marketing activities to create awareness of our EDM solutions as well as enhance our brand visibility in the market. In addition, these activities also provide us with significant opportunities to meet new customers. All of our leads generated by these activities are channelled to our distributors and resellers/channel partners, save for selected strategic End-User Customers. Our recent activities include participation in events to increase the exposure of all of our EDM solutions amongst potential and prospective customers. We also increase our market presence through regular engagement with the media through press releases and press briefing sessions. The following are examples of the major events that we have participated in/ organised over the last three (3) FYE 31 December 2011 to 2013 and six (6)-month FPE 30 June 2014:­Year  Name of Event  Description of Event  Organiser  2014  Kronicles Assure Launch  Launch of new Kronicles managed services suite of products in Singapore jointly with StarHub Limited  Intemal  2014  Press briefing session and customer conference  In conjunction with the appointment of PT ECS Indo Jaya as our distributor in Indonesia  Internal  2013  Broadcast Asia 2013  Regional tradeshow focusing on media and entertainment  Singapore Exhibition Services  2013  vForum Partners’ Exchange  Partners’ event to bring forth VMWare and Quantum EDM solutions  VMWare  2013  vForum Singapore  End-User Customers’ event to showcase the best of breed VMWare and Quantum solutions  VMWare  2013  Kronicles Lunch Seminar at China Square  End-User Customers’ event to talk about disaster recovery and the importance of backup. Also to showcase and discuss about what Kronicles can offer  Internal  2012  Kronicles Lunch Seminar at Raffles place  To help create awareness of the importance of virtual backup during lunch hour  Internal  2012  APAC Partners Conference Chengdu  Partners’ conference for key partners in APAC  Quantum Corporation  2012  Get On vm seminar with Quantum (Thailand)  Showcasing the virtualisation solutions to the partners together with distributor, Get On Technology Co., Ltd.  Quantum Corporation  2012  Broadcast Asia 2012  Showcasing big media buyers  data  technology  to  Quantum Corporation  2011  Symantec vision 2011  To showcase Quantum’s solutions to Symantec partners  Symantec Corporation
Apart from building our brand reputation, such participation allows us to stay updated on relevant market trends and technical information as well as expand our business networking within the industry. 79 II Company No. 1067697-K II 5. INFORMATION ON OUR GROUP (Cont’d) 5.7.10 Approvals, major licences and permits obtained Details of major business licences, permits and approvals applicable to our Group as at the LPD are as follows:­Company  QSA(M)  KS  Kronologi
Description of licence/approval A Licence for Trades, Business and Industries issued to the Company for the business situated at Unit 705, Blok B, Phileo Damansara 1, No.9, Jalan 16/11, 46350 Petaling Jaya, Selangor Darul Ehsan. Services-Based  Operator  (Class)  Licence  Purpose:  Store and  Retrieve Value
Added Network Services MSC-Malaysia status Authority  Licence/ Reference no.  Date of issuance or commencemenU expiry  Major conditions imposed  Status of compliance  Petaling Jaya City Council  L950000146696  Issue date: 9 December 2013 Validity: Commencement date: 1 January 2014 Valid until 31 December 2014*  Nil  N/A  Infocomm Development Authority of Singapore  C120607618  Lifetime  Nil  N/A  MDeC  CS/3/80789(13b)  Issue date: 27 May 2014 Validity: Valid until and unless revoked  Please refer to Section 8.2 of this Prospectus  Please refer to Section 8.2 of this Prospectus
Note:­Will be renewed prior to the expiry of the licence. L THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I 80 [COffiflany No. 1067697-K II 5. INFORMATION ON OUR GROUP (Cont’d) 5.7.11 Patents, trademarks and registrations Save for the trademark of our logo, we do not hold any other patents, trademarks or registrations. No.1Trademark Applicant Registration number J I Class I Place of application Status of trademark A lication number I KS T1212520G 142 I Intellectual Property I KS had on 1 May 2014 acquired Office of Singapore trademark number T1212520G from KA. * 2. I I Kronologi I 2014058632 142 I Intellectual Property Application for registration of the Corporation of trademark has been filed on 11 Malaysia June 2014. Pending registration. 42 IIntellectual Property Application for registration of the 3. I K l’ 1 Kronologi I 2014058629 rono Ogl Corporation of trademark has been filed on 111 Malaysia June 2014. Pending registration. Note:­KS, a Singapore entity, was used to acquire the trademark from KA as KA is not part of our Group.
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5. INFORMATION ON OUR GROUP (Cont’d) 5.7.12 Contracts/arrangements on which our Group is highly dependent As at the LPD, other than as set out below, there are no contract, arrangement, document or other matter on which our Group is highly dependent:­A Strategic Marketing Agreement entered into between Quantum Storage (South Asia) ltd. and Quantum Corporation on 14 November 2007 as amended on 8 May 2008, 29 April 2014 and 12 June 2014, (the “Agreement”) for the appointment of Quantum Storage (South Asia) ltd. as Quantum Corporation’s exclusive reseller and marketer of its products in Singapore, Malaysia, Indonesia, Philippines, Thailand, Cambodia and Vietnam (“the Territory”). Pursuant to Amendment No. 1 to the Agreement dated 8 May 2008, QSA was included as a party to the Agreement and jointly shared in all of the rights granted to Quantum Storage (South Asia) ltd in the Agreement dated 14 November 2007. Subsequently, pursuant to Amendment NO.2 to the Agreement dated 29 April 2014 the rights, title, interest and obligations of Quantum Storage (South Asia) ltd. were assumed by QSA. As such, Quantum Storage (South Asia) ltd. does not have any role and is no longer a party to the Agreement. The term of this Agreement is for a period of five (5) years from 29 April 2014 and which term shall automatically be renewed annually thereafter unless either party of the Agreement provides notice of non-renewal not less than thirty (30) days prior to the end of anyone-year term. QSA may elect to subcontract with resellers and distributors so long as such other parties agree to abide by terms and conditions consistent with those contained in this Agreement. QSA will not, directly or through among others, sell, lease or otherwise transfer any product to a customer outside of the Territory or to a third party for sale or use outside of the Territory without the prior written consent of Quantum Corporation. Either party may terminate the Agreement at any time without cause upon 90 days written notice, provided, however, that no such termination will affect any order previously accepted by Quantum Corporation. In the event Quantum Corporation elects to terminate the Agreement without cause, Quantum Corporation will repurchase all outstanding inventory and service pool product from QSA at market prices. Quantum Corporation may also terminate this Agreement in the event QSA enters into a definitive agreement resulting in a material corporate change transaction with an unrelated third party who is a competitor of Quantum Corporation, as determined by Quantum Corporation, effective as of receipt by QSA of the notice of term ination. Please also refer to Section 4.1.4 of this Prospectus for the risk factor of “We may be affected by adverse change of relationship with our strategic marketing partner” for further details. 5.7.13 Interruptions to business and operations Our Group has not experienced any interruption in business which had a significant effect on operations during the twelve (12) months period prior to the date of this Prospectus. 5.7.14 Seasonality We do not experience any material seasonality in our business as the demand for EDM solutions is not subject to seasonal fluctuations. II Company No. 1067697-K II 5. INFORMATION ON OUR GROUP (Cont’d) 5.7.15 Major customers Our Group’s major customers which have contributed more than 10% of our total revenue for the past three (3) FYE 31 December 2011 to 2013 and six (6)-month FPE 30 June 2014 are as follows:­<———————-FyE 31 December———————->  Six (6)-month FPE 30 June  Length of business  2011  2012  2013  2014  relationship  Major Customers  Category  RM’OOO  %  RM’OOO  %  RM’OOO  %  RM’OOO  %  (years)  ACA Pacific Technology (S) Pte. Ltd.  Distributor  5,404.5  16.5  2,709.6  7.6  882.9  2.1  274.6  1.0  7  ECS Computers (Asia) Pte. Ltd.  Distributor  1,079.1  3.3  9,157.6  25.6  16,126.9  38.2  11,073.5  39.4  10  Get On Technology Co., Ltd.  Distributor  3,385.4  10.3  1,436.2  4.0  2,863.0  6.8  1,630.3  5.8  7  Ingram Micro Asia Ltd.  Distributor  3,782.1  11.5  6,473.5  18.1  3,646.2  8.6  665.6  2.4  10  Total  41.6  55.3  55.7  47.6
Our key customers are made up of established IT distributors and resellers/channel partners with wide reseller and distribution networks, which we leverage on to gain access to End-User Customers. It is a common practice in the IT industry for the resellers/channel partners to choose which distributor to fulfil the sales order. Most often, the distributor is selected by the resellers/channel partners based on the widest range of product and service portfolio available as well as the most favourable financing arrangements. We have been working with ECS Computers (Asia) Pte. Ltd. (“ECS”) since 10 years ago and officially appointed ECS as our distributor in 2011 in view of the good working relationship formed with them. Although ECS was only recently introduced as an additional distributor in 2011, the revenue contribution from ECS has been increasing. This demonstrates that we are able to work with mUltiple distributors and therefore not dependent on any specific distributor. A list of our distributors and resellers/channel partners are set out in Section 5.1.3(ii) of this Prospectus. I THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I 83 II Company No. 1067697-K II 5. INFORMATION ON OUR GROUP (Cont’d)

5.7.16 Major suppliers Our Group’s major suppliers which have contributed more than 10% of our total cost of sales for the past three (3) FYE 31 December 2011 to 2013 and six (6)-month FPE 30 June 2014 are as follows:­Major Suppliers  <—————————–FyE 31 December—————————–>  Six (6)-month FPE 30 June  Length of business relationship (years)  2011 2012 2013 RM’OOO % RM’OOO % RM’OOO %  2014 RM’OOO %  Quantum Corporation Team3 Associate Pte. Ltd. QIS  15,237.6 73.6 17,709.4 94.2 16,514.5 62.8 4,662.5 22.5 ——491.4 2.6 5,655.8 21.5  11,242.6 58.7 –1,735.4 9.1  7 6 2
Quantum Corporation is our major supplier, contributing 73.6%, 94.2%, 62.8% and 58.7% of our total cost of sales in the FYE 31 December 2011 to 2013 and six (6)-month FPE 30 June 2014 respectively. Under QSA, we have a strategic marketing agreement with Quantum Corporation in the USA to exclusively distribute their full range of EDM infrastructure technology products in SEA covering Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and Cambodia. We have an interdependent relationship with Quantum Corporation, where we purchase all “Quantum” products from them, and they rely on us to market their products to End-User Customers via our distributors and resellers/channel partners. Quantum Corporation has been our supplier for more than seven (7) years and prior to that our products were supplied by ADIC since 2002. Subsequent thereto ADIC, in 2006, was acquired by Quantum Corporation. We have established a strong, trusted and mutually beneficial relationship with them. In the FYE 31 December 2012, FYE 31 December 2013 and six (6)-month FPE 30 June 2014, we purchased hardware from our associate, QIS as part of our inventory management. Should we decide that it is operationally beneficial to our Group, we will seek prior shareholders’ approval, where required, before embarking on any such future transactions. I THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I 84 5. INFORMATION ON OUR GROUP (Cont’d) 5.8 FUTURE PLANS, STRATEGIES AND PROSPECTS 5.8.1 Future plans and strategies In order to maintain and enhance our competitive edge, our Group intends to deploy the following strategies as part of our future plans for the next three (3) years:­(i) Expand our EDM infrastructure technology business and value added solutions business to new geographical markets We have physical presence in Singapore and Malaysia through our subsidiaries in these countries, and in Philippines, Thailand and Indonesia through the presence of our business development representatives, as well as India through our associate, OIS. In the six (6)-month FPE 30 June 2014, 69.77% of our sales were generated from Singapore, with 26.25% generated from Malaysia, Thailand, Philippines and Indonesia. To continue expanding our EDM infrastructure technology and value added solutions business, we intend to strengthen our presence in countries such as Vietnam, Sri Lanka and Myanmar, where we have secured some sales in the past, which may involve the setting up of local sales offices. Myanmar in particular, is a frontier IT market which has started to develop with new opportunities since the opening up of its economy in the last few years. Our dealings with our distributors and End-User Customers in these markets thus far have been carried out on an ad-hoc basis without any market development or investment. Thus, we believe there are significant opportunities for growth if investments were made by setting up local presence in these emerging countries. Nonetheless, we are currently monitoring the political and economic development in Myanmar. Once we are of the view that the conditions for investment are more favourable, we will seek the appropriate consent to include Myanmar as one of the countries in our territory. According to Smith Zander, the global EDM industry had an industry size of USD31.0 billion (RM109.2 billion) in 2009, and this grew by a CAGR of 5.8% to USD38.8 billion (RM123.0 billion) in 2013. Smith Zander forecasts the global EDM industry to grow by a further CAGR of 5.8% between 2014 and 2016 to reach approximately USD46.0 billion (RM145.8 billion) by 2016. Compared to worldwide growth, the EDM industry in SEA experienced higher growth with a CAGR of 7.1 % between 2009 and 2013, growing from USD577.9 million (RM2.0 billion) in 2009 to approximately USD759.6 million (RM2.4 billion) in 2013. With the growing importance of digital data to enterprises, increasing volume of digital data; the emergence of internet-enabled computing and virtualisation technology, number of new businesses and enterprises established, coupled with favourable IT initiatives by the respective Governments in SEA, the EDM industry in SEA is forecast to grow at a CAGR of 7.3% between 2014 and 2016 to reach USD937.3 million (RM3.0 billion) in 2016. (Source: IMR report by Smith Zander) By expanding our presence to new markets with significant growth opportunities, we aim to increase our revenue sources to enhance our Group’s overall profitability. (ii) Progressive introduction of EDM managed services in SEA In line with our plan to grow our EDM managed services business, we plan to launch our EDM managed services, under the brand “Kronicles Assure”, progressively in our existing markets in the SEA region. We launched these services in Singapore in 2012 and in a short time, we have had positive and encouraging response from the market, where our revenue contribution from EDM managed services business have grown from 0.85% in the FYE 31 December 2012 to 5.68% in the six (6)-month FPE 30 June 2014, and we expect that it will continue to grow further as more End-User Customers adopt EDM managed services due to its flexible and lower cost Subscription Model.

 

5. INFORMATION ON OUR GROUP (Cont’d) We believe that there are substantial opportunities in EDM managed services among Mid-market Companies in SEA, due to the relatively large upfront investment costs required for conventional EDM solutions. EDM managed services is leading a shift in the way EDM is performed today. With continuous digitalisation occurring worldwide, the demand for EDM solutions is no longer limited to large corporations and international organisations, but will also rise from Mid-market Companies. As a large majority of enterprises in the SEA market consist of Mid-market Companies, the benefits of EDIIJ1 managed services would appeal to the SEA market. Although the EDM managed services industry is a nascent industry in SEA, the SEA market is already receptive to the managed IT services industry, witnessed by its CAGR of 9.4% over the period between 2011 (USD16.7 billion or RM51.1 billion) and 2013 (USD20.0 billion or RM63.4 billion). Smith Zander forecasts the managed IT services industry in SEA to continue to grow from USD21.9 billion (RM69.4 billion) in 2014 to USD26.6 billion (RM84.3 billion) in 2016 at a CAGR of 10.2%, and part of this growth is expected to be attributed to the growth in EDM managed services. (Source: IMR report by Smith Zander) As such, we believe that managed IT services will be a key driver in our Group’s regional growth and expansion. We aim to roll-out the expansion of our EDM managed services business in two (2) waves over the next few years. The following are the details of our plans in each wave:­Wave 1: We plan to first expand into Malaysia as we have carried out pilot testing and secured customers in this market. We intend to launch Wave 1 by 2015. Wave 2: Thereafter, we plan to expand our solutions and services into Thailand and Indonesia by 2016 and Philippines by 2017. To this end, we intend to intensify the marketing and promotional activities for our EDM managed services throughout the SEA region, in order to create awareness for these solutions as well as to educate the market on the benefits and advantages of EDM managed services. We believe that this initiative will provide us with levers for future growth, as we see managed IT services as the way forward for many Mid-market Companies. Our conventional EDM infrastructure technology business will continue to provide us with a steady and growing earnings base, while EDM managed services is expected to elevate our Group into the next phase of growth. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR GROUP (Cont’d) (iii) Expand our suite of solutions through the introduction of complementary technologies and services While our present suite of technology solutions are fairly extensive and provides significant coverage to ensure business continuity for any client organisation, we intend to expand our suite of solutions to include other complementary data management technologies. We are planning to introduce new EDM managed services solutions to the market, such as AraaS and StaaS, which are extensions of the EDM managed services that complement our current “Kronicles Assure” range of managed services portfolio. We plan to launch these new EDM managed services solutions over the next 24 months, depending on our assessment on the readiness of the market. We believe that the expansion of our suite of solutions will enable us to become an even more complete EDM player, which will allow us to become more competitive in both the local and regional markets. This will be important as we seek to grow our business further, as we will be able to offer a wider range of solutions to our clients. 5.8.2 Prospects Our Board is of the view that our Group will enjoy positive and promising growth and favourable prospects in the long-term premised on the following:­(i) Our competitive strengths as follows:­(a) Resilient market presence through our direct relationships with End-User Customers;
(b) Well-established value network of distributors, resellers/channel partners and End-User Customers in the SEA region;
(c) Strong technical expertise, with the FABRiK framework as our technology blueprint;
(d) Proven and profitable business operations across SEA;
(e) Strong leadership in our experienced management team;
(f) Growth strategy (Le. EDM managed services) that leverages on our extensive experience and core competency derived from our EDM infrastructure technology business; and
(g) MSC-Malaysia status, which enables us to reap the financial and non­financial incentives attached.

Further details of our competitive strengths are set out in Section 5.1.3 of this Prospectus. (ii) Our Group’s future plans and strategies as set out in Section 5.8.1 of this Prospectus. (iii) The promising prospects of EDIV1 industry as set out in Section 6 of this Prospectus.

 

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