The Accidental IT Guy, Malaysian Business, March 2003 By S. Jai Shankar

A broken personal computer led Karensoft founder Chee Chong Hwa to establish one of Malaysia’s best technology start-ups. QUIRKS of fate have their own inimitable way of changing men’s lives. The life story of Chee Chong Hwa, the executive chairman and chief executive officer of KarenSoft Technology Bhd (KarenSoft), is one such example. All that the 45-year-old wanted to do in life was to become an accountant. Instead, he became the founder and head of one of the country’s most successful technology start-ups.

He stumbled into the world of technology through sheer coincidence. A cloned personal computer (PC) at his office broke down within three months of purchase, although it had a three-year warranty. An attempt to fix it became a journey of self-discovery. It became clear to Chee from the first day of reading the PC manual that he had a gift for all things computing. Not only did he fix the PC but also, in a short span of time, built up enough competence to develop a Lotus 123 macro template to prepare and print audited accounts and tax computations for customers. By 1989, he had established two IT companies, both focusing on accounting software. One of the companies — KarenSoft — was recently listed on the Kuala Lumpur Stock Exchange’s MESDAQ exchange. The listing attracted good support from public and institutional investors. This is not surprising, considering that the company has been going great guns since its inception. "The icing on the cake must have been the eight sen premium that our IPO achieved on being first quoted on the back of more than 3,000 lots."

Very happy with the market's response towards the listing exercise. For example, KarenSoft was recently placed number six among 13 Malaysian IT companies that were adjudged as among the fastest growing tech companies in the Asia-Pacific region by Deloitte Touche Tohmatsu Asia Pacific’s Technology Fast 500 survey. Rankings are based on three-year percentage revenue growth and KarenSoft grew 177 per cent during this period. KarenSoft was also ranked 119th out of the top 250 technology companies in the Asia-Pacific region. KarenSoft’s revenues for 2002 are expected to grow by more than 100 per cent over its 2001 revenues.

Chee’s success is all the more remarkable considering that he did not have the support of material trappings to smoothen his way to the top. His father retired as an administrative executive while his mother was a housewife. In fact, in 1978, Chee had to refuse an offer to study a degree course in business management at the National University of Singapore because of financial constraints. But perseverance and fortitude eventually prevailed. Chee, who is a council member of RosettaNet Malaysia Bhd, recently shared with mb-e not only his trials and tribulations but also his vision for the company.

How did you make the transition from an accountant to a technopreneur?

In 1984, I qualified as a Certified Public Accountant of the MICPA and was admitted as a Chartered Accountant of the Malaysian Institute of Accountants (MIA). By 1988, I had mustered enough courage to open up my own practice. I started from scratch with zero clients. Within a year, I had 100.

In 1988, the Copyright Act came into force and as a professional firm, we wanted to use legal software. At that point in time, most foreign accounting software was simply too expensive. I then read in a local newspaper about local accounting software. I became its dealer as a means to continue doing computerised bookkeeping for our increasing number of accounting clients. We sold a few copies of the local accounting software and that’s when customers started to call for technical support. I called the dealer for assistance. He had none. But he did inform me that the software was written in Clipper, then the best programming tool for the DOS platform.

That’s when I went to town and bought all the reading materials I could find on Clipper programming. I was thoroughly fascinated and within a short time could solve my customers’ technical problems. I then decided to make good use of this newfound skill and in June 1989 developed the KarenSoft Fixed Assets Register (FAR). Three months later it was released to Taiwanese companies that are still using the product till today. The FAR was chosen as the first KarenSoft commercial project as it solves one of two important auditing issues, i.e. stocks and fixed assets. What are the challenges you faced to ensure survival in the initial stages?Major challenges include a severe lack of funding and the consequent lack of human resources.

Although KarenSoft was one of the companies that were reported as possible candidates for a listing on the MESDAQ back in 1997, this did not materialise. MESDAQ was then looking to list companies that wanted to raise RM10 million. We definitely were not worth that much then.
Being the stubborn (some people call it perseverance) Taurean, I was very determined to list on the MESDAQ no matter how long it was going take me.

I realised then that KarenSoft was then clearly a one-man show and needed to be transformed into a professionally managed outfit.To achieve this, in 1997 I started to dump all my spare cash into the business and even charged all my properties secure banking facilities for KarenSoft. By the middle of 1998, we had run out of money.


To strengthen our financial situation, we turned to angels and venture capitalists. An angel invested RM1.2 million in us in 1999. In 2001, MSC Venture Corporation Sdn Bhd plunked in a further RM2.3 million in us. Of course, finance is no longer an issue today as our IPO generated RM9 million.We also had to overcome the 'foreign products are better' syndrome'. Through dedicated R&D work as well as commitment to customer service, we have managed to prevail over this mentality. Our MESDAQ listing has further solidified our reputation as a credible player in the market.

Were you happy with the market's response towards KarenSoft's MESDAQ listing exercise?

Definitely. Our public issue for one million shares, which in the words of some market observers came at the worst possible time, were over-subscribed by 17.5 per cent while the pink forms for 1.85 million shares to eligible directors, management and staff were also fully subscribed.In addition, the private placements for 14.45 million shares were fully subscribed by institutional funds such as Amanah Saham Johor, Dana Johor and Amanah Saham Pahang, customers, business partners and associates. As I recall, the Kuala Lumpur Stock Exchange's Composite Index dropped by six points on our listing day. The icing on the cake must have been the eight sen premium that our IPO achieved on being first quoted on the back of more than 3,000 lots.

As a tech outfit, where does your competitive edge come from - product development, marketing expertise or operational efficiency?

Our competitive edge clearly comes from dedicated product development in that we have been able to deliver cutting edge enterprise-class products.A good example is our best-selling product, the KarenSoft ERP2 (ERP+CRM) which is a major enhancement over the KarenSoft ERP2000, which itself was both a finalist for the 1999 Pikom Computimes IT product of the Year Award as well as the Asia-Pacific MSC IT & T Awards (APMITTA). In Malaysia, we are positioning KarenSoftERP2 as very appropriate for SMIs to meet the challenges of the Asean Free Trade Area (Afta).

How much of your personality and character traits have been imprinted on the company's management philosophy?

I personally believe in integrity and the need to put our money where our mouths are, i.e. delivering what we promise not only to our customers but also to our investors, employees, business partners and associates. This is clearly part of KarenSoft management philosophy. This is, for example, reflected on how our team is selected. Knowledge is vital but can be taught internally and externally. However, integrity means everything to me. With integrity comes the sense of responsibility and the desire to deliver.

In addition, I also believe that KarenSoft's human resources are our real assets and this is also clearly reflected in our management culture.For example, before KarenSoft's IPO, key management staff, including operational staff, were rewarded with free shares. This was followed up with generous pink form allocations as well as an ESOS scheme that was part of the listing structure.

What would you have been if you had bypassed the tech revolution in Malaysia?

As a trained Chartered Accountant, I would probably have been a senior partner in an international accounting firm or the managing partner in a mid­sized local accounting firm practicing accountancy, auditing, taxation, corporate secretarial services as well as corporate consultancy.One of my specialisations is in fraud investigation and one of the highlights of my auditing career was being the team leader of an investigation team that investigated the nation's third largest deposit-taking co-operative in 1985. 1 can still remember working 18 hours daily in order to prepare a report that was eventually tabled in Parliament. By S. Jai Shankar

Early struggle pays off for KarenSoft By LEE CHUI YU, The Edge Malaysia, Monday, October 14, 2002

The Edge Malaysia, Monday, October 14, 2002

For a guy who didn't go to university, soon-to-be-listed KarenSoft Technology Bhd's chief executive Chee Chong Hwa has come a long way. He became an accountant, and then, an entrepreneur. "I didn't go to university; I didn't want to," Chee says with a booming laugh, recounting the beginning of his career. Instead, he did an articleship and became a member of the Malaysian Institute of Certified Public Accountants and later the Malaysian Institute of Accountants (MIA). He started off with a mid-sized accounting firm in Penang, and left when there "was nothing more I could attain". According to Chee, the transformation from accountant to information technology (IT) guy was by accident.

Chee came up with a prototype programme in June 1989, which solved many audit problems he encountered at work. A "small-town boy" by admission, Chee has studiously avoided working in Kuala Lumpur. He even quit a job "because they wanted to promote me and transfer me to KL. I was there before [in KL] for about a year, and didn't even have the time to go to Genting [Highlands]", he recalls.

The decision to strike out on his own came in 1987 when Chee was given the opportunity to buy out an accounting practice. The deal, he says, gave him "the courage to quit" although he had never thought of himself as an entrepreneur. But when the deal fell through, he decided to continue on his own and started CH Chee and Associates in February 1988. "A lot of people called me and said, 'Are you mad? Why are you throwing away your career particularly in the middle of a recession?'," he recounts.

This, it turned out, was a blessing in disguise.CH Chee and Associates was a lean operation with no secretary and a borrowed personal computer (PC). "Three months later, the PC died," he says. But watching the technician poring over the manual to find a solution for his PC motivated Chee to learn more about computers. The copyright laws of 1988, the high cost of basic accounting software and the lack of customer support pushed Chee to find accounting solutions for his company, thereby marking his first steps into IT. "We were doing a lot of book-keeping work and we computerised it for our clients," he explains. But this became a problem as licensed software was expensive and support hard to find. He decided to take matters in his own hands. " I went to town to a bookshop and bought every single book available on Clippar [the leading programming tool for DOS based PCs at the time]". This, it turned out, was the beginning of his beautiful relationship with enterprise resource planning (ERP) software.

After many months of working a "seven-day week" during which he "slept less than six hours a day", Chee finally came up with a prototype programme in June 1989, which solved quite a few audit problems that he had encountered at work. A Taiwanese company liked his product and by Sept 1989, the KarenSoft Fixed Asset Register was delivered, costing the consumer RM5,000. It wasn't long before KarenSoft's intellectual property was strong enough to stand on its own, and in August 1991, CHH Software Solution was established to own the product. CHH Software was later re-named KarenSoft Solutions, which will become one of two major subsidiaries of the listed company. "We put in about RM200,000 over a period of time to develop product... [but] in the early day we didn't market the product aggressively" he explains. "Our main activity was accounting, and [the software] was the cream."

KarenSoft, which will be listed on the Kuala Lumpur Stock change's Mesdaq Board, grew but not without a struggle. "We had no money, no proper budget. We had zero budget for advertising, and at that time the product was sold word of mouth," Chee says. But soon it became the "cream" that was bringing in the moolah, and the company was able to make profits to the tune of RM400,000 on a turnover of RM500,000. "That was how we bought these offices [in which KarenSoft Tech resides]," he quips. "In the early days, we didn't have much overheads; we were sharing premises with my accounting firm." More solutions were added to the KarenSoft suite of products and soon it was able to call itself an ERP solutions provider.

The year 1997 turned out to be a watershed year for the company, but not because of the economic crisis. "We were cash-rich in early 1997, I was even thinking of buying a yacht," recalls Chee. "I was reading an article on Mesdaq, and based on the criteria mentioned, 1 thought, 'Hey! That's us'." That inspired him to list his company but it also became the year he "started becoming poor". While at that time KarenSoft was too small for a Mesdaq listing - compared with the expected market capitalisation of RM40 million, the company was only worth about RM6 million - it didn't dampen Chee's determination to list. "All the money I had, I put it into the company. All the property I had, I re-mortgaged, " he says. In addition, he looked for financial help outside. He found an angel investor who put in RMI.2 million at the end of 1998, and by 1999, the company started growing in a big way. MSC Ventures put in further financing to the amount of RM2.3 million in 2000. According to Chee, both the angel investor and MSC Ventures will become substantial shareholders in KarenSoft Technology when it lists. MSC will hold less than 10 per cent, while Chee will have a stake of slightly less than 50 per cent.

Chee says that a listing on Mesdaq was necessary as the company "needs the money". Mesdaq was the chosen board because KarenSoft is "a small company in the technology sector, [which] will be lost on the Second Board". The raised funds, which should go a long way with this frugally run company KarenSoft's office has no receptionist, and Chee is still without a secretary and drives around in a less-than-new Peugeot - will be used to expand KarenSoft's business.

KarenSoft's ERP2 product today is designed for both the industrial and commercial sector. This includes solutions for sales distribution, materials requirements planning, logistics management, planning and production, financial accounting and fixed assets, human resources information and customer relationship management (CRM). In short, almost everything a company needs electronically to manage its people, products and finances. At present, its main custom is to the manufacturing sector (80 per cent) and to customers concentrated in the middle tier of the market. This means big-medium, non-small-medium industry (SMI) companies willing to pay around RM500,000 for ERM software. It pits itself against foreign ERP companies like Exact, Baan, IFS and Interbiz and away from the marketplace of the higher-end players like SAP, Oracle and Peoplesoft. His segment is populated mainly by foreign-based players, but it is a growing segment with decent margins. "Tier 2 customers are willing to pay... [we decided on this segment because] everywhere we went, there were no players in Tier-2,"

Chee explains. Bigger players like SAP and Oracle, which make obviously bigger margins than KarenSoft, do not see the latter as a threat, making life a little easier for the local ERP player. Industry observers estimate that the ERP market in Malaysia is worth about RM270 million, and this is expected to grow an a compounded annual growth rate of 9.4 per cent from last year to 2005.

KarenSoft's competitive edge is that it is "just as good as the rest but more affordable", Chee says. And plans are to expand its market base to China soon. "It will be our first venture overseas," he adds. "The upside is very clear because in China every province is like a country." Still, the company is playing it cautious because "it is a dangerous place to be in". The strategy for now would be to "follow the customer in", and to get a base going by setting up a KarenSoft Institute of Technology where users, trainers and partners can be trained to use the software. Already a RosettaNet solutions partner, it is also bundling its software as a solutions partner with IBM. The company hopes to ride on its reputation of giving good backup service, a feature that its original clients still appreciate. KarenSoft has just attained MSC status. KarenSoft Technology has been making gross margins of more than 80 per cent for the last three years, but made a net loss of RM531,000 last financial year. It reported a net profit of RM633,000 for the first six months of financial year 2002. Expectations are for the company's prospectus to hit the streets near the end of this month. By LEE CHUI YU

It all began with a crash by David Tan, Star, 12/10/2002

The Star Newspaper, Saturday, October 12, 2002

KARENSOFT Technology Bhd, enroute to a listing on the Kuala Lumpur Stock Exchange Malaysian Exchange of Securities Dealing and Automated Quotation (Mesdaq) next month, might not have come about had it not been for a three-month-old computer that crashed. Executive chairman and chief executive officer Chee Chong Hwa, who had no formal training in systems programming and became acquainted with the world of information technology only at a later stage, had in 1988, bought a computer to help in his then company’s work. Penang-based CH Chee & Associates (CHCA), offered services in bookkeeping, audit, corporate secretarial work, and taxation.

Chee trimming the plants in the office“Although the computer had a three-year warranty, it crashed within three months,” Chee recalls. “The technician sent in for support spent a few hours reading the manual before he could fix the problem. “As I was used to self-study during my accountancy days, I picked up the manual and started to read. Before long, I had taught myself how to operate the PC and discovered to my delight that I had an aptitude in computing. “I even learnt how to write DOS menus and developed a Lotus 123 macro template to prepare and print audited accounts and tax computations for my customers. I was fascinated with the computer and spent so much time with it that my friends used to tease me about it.”

According to Chee, when the Copyright Act came into force in 1988, he took up a dealership in a locally-developed accounting software to continue doing computer-based bookkeeping for the company’s growing number of clients. “We actually sold a few copies of the local accounting software and that’s when customers started to call for technical support. Being a non-programmer then, I called the dealer for support,” he remembers. “But after a while, I was forced to track down the developer. He told me that his software was written in Clipper, then the best programming tool for the DOS platform. “I then visited an old friend, Andrew Choong, who explained to me that to write a Clipper software, one must write source codes, compile the source codes into object codes and then link them to an executable file. Honestly, I had no clue as to what he was talking about. “That was when I went to town and bought all the reading materials I could find on Clipper programming. I was simply fascinated and within a short while, I could solve my customer’s technical problems.

By the way, Andrew always complained that he spends a lot of money on programming while I actually make money from programming,” he says Chee says with the programming skills acquired in 1988, he developed the Karensoft Fixed Assets Register (FAR) software in 1989. “FAR was released to a Taiwanese company, and it is still using the product till today,” Chee proudly says. According to him, the name Karensoft was chosen as a brand name to reflects the following values: K - Killer A - Applications, which are R - Robust E - Elegant (user-friendly but powerful) N - Network-ready (Internet, extranet and intranet).

Karensoft has come a long way since. In 1996, Chee developed the Karensoft MRP2 (Manufacturing Resources Planning 2) software for DOS, which was awarded pioneer status by the Malaysian Industrial Development Authority, Ministry of International Trade and Industry, and Ministry of Finance. Chee says: “In 1999, the Karensoft MRP2 for DOS was written for Windows under the name Enterprise Resources Planning (ERP) 2000. “Our latest product is Karensoft ERP2, which comprises e-biz solution for sales distribution, materials requirement planning, logistics management, planning and production, financial accounting and fixed assets, human resources information, and customer relationship management,” he adds. Presently, Karensoft has shareholders’ funds of RM 6.6 million as compared to it’s share capital of RM 3.9 million as at June 30 2002.

Chee's favourite past time is bowling. 'I started bowling in 1984 and I am a past vice-president of the Penang Tenpin Bowling Association'

It owes its impending public listing to an angel investor and MSC Venture Corp Sdn Bhd (MSCVC), a subsidiary of the government-owned Multimedia Development Corp. It was the source of funding from the angel investor and MSCVC that enabled Karensoft to apply successfully for a listing on the Mesdaq, says Chee. “I had wanted to take Karensoft to listing on the Mesdaq in 1997,” he says. “At that time, I had even drafted a five-year plan to meet the listing requirements. But because our paid-up capital was too small, our merchant bankers advised us not to waste our time.” Chee then mortgaged all his landed residential properties to raise funds for Karensoft. “The capital injected into Karensoft, however, was still not sufficient,” recalls Chee. “In 1999 I managed to rope in a total of RM1.2 million in investments from a Penang-based banker, who had earlier expressed interest in investing in Karensoft. “In 2001, MSCVC took note of the fact that Karensoft was one of the finalists for the Asia-Pacific MSC IT Awards. “Its chief executive officer, Sarina Karim, then approached us with an interest to invest in Karensoft. “We, of course, seized the opportunity and said yes,” Chee says, adding that MSCVC poured RM2.3 million into Karensoft.

The funding from the angel investor and MSCVC enabled Chee to establish, in April 2000, the KarenSoft Institute of Technology which was set up to train users, trainers, and business partners known as Certified KarenSoft Solutions Providers (CKSPs). CKSPs are either systems integrators or mid-sized accounting firms. They have to be certified in KarenSoft products before they are allowed to market, sell, and implement KarenSoft enterprise resources planning software. Karensoft presently has 12 CKSPs, mainly located in areas where there are no Karensoft regional offices, such as Kedah, Perak, Kelantan, Malacca, the Federal Territory, Selangor, Johor and Sabah.

Chee says the funding also gave Karensoft the opportunity to participate in occasions such as SMI Malaysia’s One-stop Solutions Event, take part in the MSC-Multimedia Expo 2001/02, and go for aggressive national advertisement to promote Karensoft products. “The strategies, implemented as a result of the capital injections, had a significant effect on Karensoft’s performance for 2001. “Despite the slowdown in the electrical and electronic products trade last year, we still managed to increase our turnover by more than 50 per cent over that achieved in 2000,” Chee says, adding that the turnover for 2001 was RM2 million, compared with RM1.3 million in 2000.

He credits Karensoft chief operating officer Khoo Ping Ping with playing a key part in the success of the company. “She is primarily responsible for the high customer retention rate of more than 90 per cent,” he adds. Khoo, a pioneer staff of the company, is responsible for the day-to-day operations, which include managing human resources, software support, and customer relationship.

Chee says Karensoft will focus on medium- and large-scale enterprises that have a budget of between RM100, 000 and RM1 million for upgrading their information technology infrastructure. “Many companies are realising that with the Asean Free Trade Area around the corner, the only way for them to lower their cost of production is if they equip themselves with enterprise resources planning software,” he adds.

“As a leading software solutions provider in the country, our market share is expected to increase due to the awareness of the importance of enterprise resources planning software.” Chee says the RM150 million e-manufacturing grant introduced in Budget 2002 has also spurred small- and medium-size enterprises to purchase enterprise resources planning software. “Following the implementation of the 2002 budget, we received a substantial number of orders for our software from medium- and large-scale companies wishing to make use of the e-manufacturing grant.”

Surfing the internet during his leisure timeKarensoft’s enterprise resources planning software costs between RM100, 000 and RM500,000. “We provide after sales services on training and use of the software,” adds Chee. Married, with four daughters, Chee’s favourite past time is bowling. “I started bowling in 1984 and I am a past vice-president of the Penang Tenpin Bowling Association in 1997 and 1998. “I even have a bowling web page, How To Bowl A Perfect Game, set up in 1996 at www.jaring.my/cch/people/cch/wh03000.htm,” he says. By DAVID TAN