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Augmentum CEO Leonard Liu

Birthing a Trans-Pacific Start-up


Instead of retiring, former IBM exec Leonard Liu has started a software firm, and is already outsourcing for Microsoft, Intel and Motorola. But according to his vision, this is just the beginning…



Birthing a Trans-Pacific Start-up

By Liang-Rong Chen
From CommonWealth Magazine (vol. 384 )

Clad in a T-shirt, short pants and running shoes, sixty-six year old Leonard Y. Liu, chairman & CEO of Augmentum, excitedly watches the proceedings unfold at an athletic stadium in the Pudong district of Shanghai. This is the first time in his long career that Liu has presided over an employee athletic meet.

For those in the know in the high-tech industry, Leonard Y. Liu is a familiar name. Twenty years ago, he was the managing director of the IBM laboratory in Santa Teresa, California, in charge of thousands of employees worldwide. He was the highest-ranking ethnic Chinese in IBM history.

Afterward, Liu served as a CEO and managing director of a number of important companies in Taiwan and the United States. One of his most recent successes was helping the Advanced Semiconductor Engineering (ASE) Group to become the world's number-one independent provider of semiconductor packaging and test services.

But many people remember him as the man hired by Stan Shih in 1999 to come back to Taiwan and serve as the president of Acer. Upon taking up his post, Liu embarked on a radical restructuring, laying off a number of employees. He left the post in the end, however, due to slumping sales in the US market. Afterward many in the Taiwanese business world lampooned Liu as “a monk from far away who cannot read the local scriptures.”

When you ask Leonard Liu how this company is different from the ones he previously ran, he is quick to assert that it is very different. Not taking his eye off his young employees battling it out on the athletic field, he says, “The employees I had before in those other companies were just students. These employees are my children.”

Desire to Be World-class

In 2003, at an age when most people contemplate retirement, Leonard Liu founded a high-level software outsourcing company, Augmentum, based in Shanghai and California, that already employs one thousand workers today.

According to Liu’s ten-year plan, Augmentum should double its growth every year to year and a half (similar to Moore’s Law) and should reach 40,000 employees after 2013. He quips, “So far, we have kept up our tempo.”

Through software outsourcing cases for Intel and Motorola, Augmentum is cultivating a young crop of employees. At the center of the picture is Roy Shao, director of software development in Augmentum China.

A relative unknown in Taiwan and China during these initial stages, Augmentum has relied on Liu’s connections in California’s Silicon Valley to get orders from such industry giants as Microsoft, Intel and Motorola. American publications Newsweek and USA Today have written extensive introductions about Augmentum, calling the company a rising symbol of how the Chinese software outsourcing sector is nipping on the heels of India’s industry domination. USA Today described Augmentum as “a phenomenal company.”

The renowned technology industry magazine Red Herring also named Augmentum one of the top 100 private companies in Asia.

Yet Indian outsourcing giants such as Infosys and Wipro are already large-scale groups with tens of thousands of employees. How can Augmentum compete?

“We can’t compete with them, nor do we want to,” Liu says with a profound smile.

He stressed that Augmentum is presently a software outsourcer, but this role is only temporary, for the purpose of “training the troops” for the real battle. Augmentum’s ultimate goal is in developing its own products and creating a world-class software company in China. This process – going from an outsourcing company to creating your own brand name – is familiar to many in the Taiwanese manufacturing sector. Liu remarks, “You could say we are presently a software industry foundry.”

Moving American Corporate Culture to China

Not long ago Apple Computer CEO Steve Jobs told The Wall Street Journal in an interview that Apple was able to time and again come out ahead of Sony and other Japanese consumer electronics companies because Japanese companies were weak in the software development sector.

But it’s not just Japan. All East Asian nations, including Taiwan and South Korea, are weak when it comes to software development. Many feel this can be explained by cultural factors. Leonard Liu agrees with this assessment, but then takes the situation from its reverse angle: “So we just move the American corporate culture to China,” he says, adding, “Who says that we have to uphold a Chinese corporate culture in China?”

This has resulted in an “American environment” at Augmentum. In the placid surroundings of the Zhangjiang Hi-Tech Park, young engineers averaging about twenty-four to twenty-five years old – graduates from key universities throughout China – converse in English on the job. More importantly, ninety percent of Augmentum’s customers are American companies, making their demands the best test of the new company’s mettle.

One example was a top tech company that gave Augmentum a complete corporate software package to research and develop. During this stage, the one hundred eighty employees assigned to the case all became the company’s R&D team. “When you do outsourcing, you develop both deep and wide-ranging capacities,” Liu says, adding, “This is only one stage of the process.”

But why would big American companies be willing to run the risk of giving young engineers important cases to cut their teeth on? Even though Augmentum’s costs are just a third of their American counterparts’, the risk is still considerable.

Indeed, Liu prepared in advance to ameliorate such concerns, by recruiting some of the top Chinese-American software engineers to form the backbone of the company in the United States. These are all experts in their own fields. As one principal Augmentum member was sought by a large American corporation to develop the above-mentioned case, he said he would spearhead the efforts and convinced them to give it to Augmentum.

These distinguished experts were willing to throw away stable and high-paying jobs to go in with Liu in his start-up, mostly because they could “learn things” working with him.

One financial affairs director who worked with Liu at ASE says, “It’s very hard work, but there’s always growth.”

The Master Founds, the Disciples Follow

Hong Kong-born Augmentum executive VP & CTO Wayne Hom is a technological genius. At twenty-six years of age, he was the chief software architect (similar to a CTO) for the Symantec Corporation. He has worked together with Liu for years now, and calls him “the master,” not so much to aggrandize Liu’s reputation, as because “he is always willing to teach others. Everything he does is geared toward cultivating the next generation.”

This tendency comes from Liu’s early years. During the early 1980s, he served as secretary general for IBM’s top management committee, reporting directly to board chairman Frank Cary. This was part of the system that IBM used to cultivate future leaders. “It was the turning point in my life,” Liu offers.

This was indeed a watershed period as Liu went from R&D work to taking part in important policy decisions for the biggest tech company in the world. His horizons began to expand from there. “It gave me the opportunity to see how IBM fought its battles. I learned how a big company operated,” Liu says with a hint of emotion.

After getting training from IBM and then after leaving Acer, Liu took on two more corporate restructuring projects. He became the operations director for Cadence Design Systems, the world’s largest semiconductor software company, and executive director for the financial software company Walker Interactive. During his service with the two companies, their stock prices rose tenfold and threefold, respectively.

Recruiting Talent Also Takes Planning

What is the secret to instant success? Leonard Liu stresses that there are only two key points to organizing a business: “strategy” and “people.”

“If the strategy is clear, then with the right people, you’ll get your result,” he declares.

One example was when he was the president of the ASE Group in 1999. After discussions with Chairman Jason Chang, they determined that if ASE was to become world number one, it would have to land big customers separately from Taiwan-based TSMC and UMC. They then began to develop the future mainstay of semiconductor packaging technology, the flip chip.

According to Leonard Liu’s old colleagues, he is aiming to cultivate the next generation in everything he does.

To help achieve this end, Liu asked two former colleagues at IBM to come back to Taiwan and help out – current ASE R&D general manager Ho-Ming Tong and current ASE COO Tien Wu.

With strategies and personnel in place, Liu returned to California after his three-year contract with Chang was up, and went into high gear to get Augmentum up and running in both Silicon Valley and Shanghai. Meanwhile, by the end of 2003 – in less than a year – ASE revenues officially overtook those of South Korea’s Amkor, placing it at number one in the world.

Liu employs strategies for big matters and tactics for smaller ones. “He has a plan for everything he does” says Roy Shao, director of software development in Augmentum China.

As the right people are everything to a software company, recruitment trips to well-known universities are an important annual pilgrimage for Augmentum.

Everything was tough-going in the beginning. In its first year Augmentum was starting from scratch, and Liu would sometimes have to borrow classrooms to try to recruit personnel. Often he spoke in front of embarrassingly meager gatherings of only eight or ten people. Liu decided to apply a different strategy – he spoke with an unusual candor. As other companies stressed salaries and benefits, Liu fervently told his listeners that working at Augmentum was not going to be easy, and that they should be prepared to “work sixty-to-eighty-hour weeks.”

Sometimes reverse methods bring about unexpected results, as Augmentum became the topic of many BBS chat rooms in schools throughout China. Many people were curious what this company was all about, “creating a ‘wow affect’” according to Roy Shao. In the end, the numbers and quality of company recruits exceeded expectations.

Leonard Liu’s life has been smooth sailing, from Taipei’s top-ranked Jianguo High School to National Taiwan University’s department of electrical engineering, then on to Princeton, where he joined the first generation of scholars in the United States to earn doctorates in computer science. Thereafter, he commenced his meteoric rise up the IBM corporate ladder.

Throughout Liu’s seemingly flawless first half of life, he “wandered astray” only once. When he first set off to Princeton, he entered the astrophysics program, before switching to computer science two years later. The reason for his initial interest was that a year before, Yang Zhenning and Li Zhengdao had won the Nobel Prize in physics, and the young Liu had caught physics fever. “I was crazy. I wanted to win the Nobel too,” says Liu, chuckling at his own youthful naivet?.

Founding Augmentum may be seen as Liu’s second journey into the wilderness, but his years of business wisdom will probably serve him well in carving out an ample piece of the software outsourcing pie, through his trans-Pacific venture in China and the US.

Translated by Steven Marsh