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Thursday February 17, 5:15 PM
CORRECT: eBaoTech Investor Is Charter Venture Capital
   By Jeff Meyer
   Of DOW JONES NEWSWIRES
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SHANGHAI (Dow Jones)--Shanghai-based insurance software provider eBaoTech Corp. is aiming for $20 million in revenue this year and double that in 2006, as it expands into Japan and North America while continuing to grow in Asia and Europe.
A growing number of insurers are choosing eBaoTech to update their aging computer software because of its low costs, and this will fuel the company's growth, said eBaoTech president and chief executive Woody Mo.
We run our operations mean and lean, Mo told Dow Jones Newswires in a recent interview. All our coding work is done in China, which is cheaper than (in) other markets.
Mo estimates software development in China costs one-fifth of what it costs in the U.S.
He declined to give details on eBaoTech's earnings so far, but said that for the next few years we will certainly aim to double (revenue) every year.
As it pushes to boost sales, eBaoTech may increase its workforce to about 1000 employees by the end of next year from close to 500 now. Currently, 70% of the company's employees do research and development, such as designing software, Mo said.
In 2004, eBaoTech, which counts insurers Swiss Life Holdings (SLHN.VX) and Singapore's Great Eastern Holdings Ltd. (G07.SG) as clients, derived 70% of its revenue from clients outside China. It aims to begin signing clients in Japan this year and North America in 2006, Mo said.
eBaoTech, which became profitable in 2002, gets half its revenue from licensing software and the other half from customizing and maintaining software. Since eBaoTech designs its own line of software products, its business model is different from firms that primarily code software to customer specifications, Mo said.
Mo co-founded eBaoTech in 2000 after working at consulting firm McKinsey Co. (MCK.XX) in China, where he focused on consulting for the financial services industry.
The company raised a few million U.S. dollars in its first round of financing from investors including GE Commercial Finance-Equity, part of General Electric Co. (GE), Softbank China Venture Capital, and U.S.-based Venture Capital, Mo said. He did not elaborate.
eBaoTech is planning to raise more funds, Mo said, declining to offer details. The company, which is registered in the Cayman Islands, is aiming for an initial public offering in two years, probably on the Nasdaq, he said.
Mo said he believes software products will be the third wave of industries to move to Asia from advanced markets including the U.S. He identified the first two waves as manufacturing and services, such as call-centers and other back-office operations.
The cost structure in the U.S. can't sustain software product companies, Mo said.
Customers now are more demanding and will drive the margins down, forcing vendors to substantially reduce costs or die, he added.
Yet Mo says it's sometimes challenging to convince potential foreign customers to give eBaoTech their business since the China-based company is smaller and less-experienced than many foreign competitors.
   
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