3S System wins out with a focus on systems integration
3S System is a subsidiary of 3S Pocketnet. In just a few years’ time the company quickly built up success in various sectors including smart city, transportation, railways, factories and buildings. As a relative “young” systems integrator in the security industry, how did they do it?
A discussion of 3S System cannot be possible without introducing its parent company, 3S Pocketnet, which began as a mobile phone software developer and cloud service provider. With NOKIA being its largest customer, 3S Pocketnet also provided OEM services for other mobile phone manufacturers. With the evolvement of the market, 3S Pocketnet adopted a “platform strategy” and formally entered security in 2010. In its R&D and technology upgrade efforts, the company increasingly saw a need for systems integration. As such it turned its SI business unit into a wholly-owned subsidiary, 3S System.
Meeting end users’ needs
“The reason for expanding 3S System is to cultivate the local market in Taiwan as well as the SI market overseas,” said Jeffery Lee, Chairman of 3S Pocketnet, who immediately set 3S System’s development strategy and was deeply convinced from past successful experiences that such strategy would take the company in the right direction.
With deep industry experience in China, 3S System started with in-vehicle systems in 2016. After face-to-face discussions with end users and project implementation, the company realized that customer demand for technology and service was not fully met. According to Lee, end users mostly obtained products/services through engineering contractors, system integrators (SI) or distributors. However, many of them did not keep up with the pace of the industry. Especially, IoT and the Internet of Vehicles brought tremendous integration needs, and more and more companies felt helpless not able to get the right technology and service.
Employing a direct, go-get-them approach has allowed 3S System to find the real needs of customers and win large orders from many well-known bus, tour bus and logistics operators.
"After communicating with end users, we found that what they really needed was integrated service, not standalone products. Specifically, many customers wanted vehicle solutions in the beginning but later requested non-vehicle solutions as well to improve operations. For example, a logistics company at first requested CCTV for its service stations yet later integrated it into our vehicle solutions for fleet management. In these cases, 90 percent of customers were willing to pay and form a long-term relationship,” Lee said.
A good partner with consultants, SIs
System integration is a great expertise; without the real deal, it’s quite difficult to gain a foothold in this fiercely competitive market. Specifically, SIs need the support of manufacturers, without which they often find themselves constrained. Therefore, after establishing a clear business model, 3S System became the largest customer of 3S Pocketnet.
According to Lee, 3S Pocketnet is now responsible for making 100 percent made-in-Taiwan products; 3S System is its biggest support, fully promoting system integration services. This, however, puts 3S System in a competitive relationship with other SIs. To maintain close ties, 3S System actively partners with consultants and large SIs in their efforts to bid for public and private sector tenders, promising them that 3S System will only focus on the security system part.
At present, 3S System’s vehicle and non-vehicle solutions cover all of Taiwan, and the company is also building its own technical service team. Once a service mechanism is established, local engineering companies are expected to become 3S System’s “subcontractors” rather than customers. Lee uses as an example food delivery services that are popular in Taiwan. Although the media has disclosed that there are some service quality, process and management issues that need to be improved, this type of service does meet the needs of users. "What 3S System can do is get things right, not only the service flow part but also the integrity of products. Going from vehicle to non-vehicle applications, that is where 3S System’s value as a system integrator lies.”
Taiwan’s next opportunity
Speaking of the security market, Lee disagrees with the notion that Taiwan’s security industry sluggishness is due to the Red China invasion. Rather, Lee says it’s due to SIs lacking the support of manufactures as well as their inability to keep up with time. In addition, the domestic market has been quite competitive in recent years, so no one wants to put their efforts to into service improvement. Another factor is SIs’ use of Chinese products due to a lack of suitable alternatives from Taiwan.
However, the China-U.S. trade war can be seen as a positive development to Taiwan’s security industry. Further opportunities for Taiwan security players are also expected thanks to the current administration, which takes a more hardline approach towards China, with more and more government agencies specifying that Chinese brands, even components, be banned in tenders. Despite this, Lee expects the current sluggishness to continue over the next three years, due to the lack of readily available “non-Chinese” chips and the huge difference between what’s expected and what’s real in artificial intelligence. For example, H.265 chips are still Hisilicon's world. However, due to the current political situation, Taiwanese manufacturers will have to choose other chips, and no alternative can be found right now.
Meanwhile, the “unmanned store” concept, which had attracted lots of attention, has been quite silent, highlighting AI-based recognition algorithms still have accuracy and reliability issues – in addition to limitations at the technology level, processing power is another challenge. “AI works fine at 720p, but not so at 1080p. Video takes too much processing power, rendering algorithms ineffective. As far as security applications are concerned, AI is still too costly, while its accuracy is not in line with end user expectations,” Lee said.
So, what should Taiwan manufacturers do to survive amid the competition? Lee points out that the China-US trade war has forced Taiwan manufacturers to change. Taiwan companies must learn the lesson: in addition to investing more resources in R&D, perfecting their service is a top priority. This is easier said than done, as only a few companies have really done it. What is certain is that in the future, the path from system to service provision will be critical; whoever does this right will be the winner.
Looking forward to 3S System’s next step, Lee is confident: "In the beginning, we took a ‘platform-centric’ approach, which was the right direction from which we got plenty of nourishment and ammunition. Now we’re fully ready to charge ahead with a systems integration business model.”
The migration from 3S Pocketnet’s pure manufacturing model to an innovative service-provision model has given 3S System confidence to gain a strong competitive edge. Now, 3S System is flexing its muscles, ready to show its skills and fly high.