The company - which specializes in supply chain management solutions for the high-tech sector and was then known as Webplan - needed an Asian presence to support the growing Chinese manufacturing operations of its European and North American customers.
"One year later, we still weren't driving much revenue," recalled Mr. Lord, Kinaxis's vice-president for the Asia Pacific and Japan regions.
"(But) we doubled down and expanded the team because we saw a great opportunity to sell into those local markets as well."
The Asian market now represents approximately 10 per cent of Kinaxis's global revenue stream, and is expected to grow to between 20 and 30 per cent in the coming years, said Mr. Lord.
Attracted by the simplicity of setting up shop, as well as its strategic location, the initial goal was to use Hong Kong as a springboard into China to fend off competition from industry heavyweights such as Oracle and SAP. However, that presence also allowed Kinaxis to expand and serve customers in Singapore, Malaysia, Thailand and Taiwan.
"If you are based in Hong Kong, you can run to the airport, hop on a plane and go anywhere almost instantly," said Mr. Lord.
Kinaxis is now focused on expanding within China, specifically targeting the privately owned enterprise market. Along with selling to Asian-headquartered companies, it also collaborates with Kinaxis sales teams in other countries to land contracts with large multinational firms, a role that takes on added importance as companies move more executive control over supply chains into Asia.
Hong Kong has traditionally been seen as a jumping-off point for North American firms selling into China. But as the world's second-largest economy matures, companies are being forced to adjust their business models.
"China is becoming very aggressive in terms of developing its own innovative capabilities," said Flavia Leung, president of the Ottawa chapter of the Hong Kong Canada Business Association.
"But to do that, they want to establish partnerships with foreign companies that have moved a little bit faster, that are a little bit ahead of the curve."
Indeed, working with Hong Kong-based companies is a common theme among many companies that have found success in Asia, said Mike Darch, who heads OCRI's global marketing efforts.
He recommends Ottawa companies act as subcontractors and sell to the major integrators that are winning contracts with the Chinese government, rather than trying to bid on such jobs themselves.
He adds many project management companies that are winning Chinese contracts are actually based in Hong Kong, making it an ideal location for Ottawa companies to set up shop.
Mr. Darch is not alone in his assessment.
"It is a great place to get a foot in the door," said Steve West, CEO of medical isotopes maker Nordion Inc. and a former Hong Kong resident. He concedes, however, that "the ultimate prize is a bit further north."
For life sciences companies such as Nordion, the regulatory landscape is still somewhat opaque, said Mr. West. But with spending on health-care delivery infrastructure expected to surpass $100 billion over the next decade, the opportunities remain enticing as the entryways to the market multiply.
"The old strategy was that Hong Kong was the gateway to China. That isn't the case today," said Mr. West.
"There are many gateways to China, and sometimes you don't need a gateway. Sometimes you need to go knock on the door."
Yet Hong Kong officials point out that the region remains an international financial centre, and that its economy withstood the worst of the financial crisis.
In a breakfast speech at the Chateau Laurier this summer, John Tsang, the financial secretary of the Hong Kong SAR government, noted inflation is largely under control, and regulators are taking proactive measures to cut speculation and ensure banks are not overleveraged.
Mr. Tsang told the small audience that it is an favourable time for Canadian businesses to diversify beyond the U.S. market - if they are willing to seize the opportunity.
"Canadians are not overly aggressive ... (and) are a bit complacent. Things have been easy - you didn't have to look beyond the continent for markets," he said.
Globalization has changed all that.
"It is an opportune time for Canada to look to the east ... (but) you need to get in there quickly," he said.
TAX TALLY
Taxable income: Profits tax is levied on the Hong Kong-source profits of businesses carried on in Hong Kong. In determining the source of profits, Hong Kong generally adopts the "operations test," which involves identifying activities that are the most important in generating the profits and the place at which these activities are carried out.
Expenses are generally deductible to the extent they are incurred in the production of profits that are chargeable to tax. However, domestic and personal expenses, capital expenditure and losses, taxes and other expenses not used for the purpose of producing profits, are not deductible.
Taxation of dividends: Dividends are exempt from profits tax.
Capital gains: Capital gains are not taxable. However, gains on the disposal of assets may be subject to profits tax if the disposal constitutes a transaction in the nature of trade (a factual determination).
Rate: Profits tax is levied at a rate of 16.5% (15% for unincorporated businesses) where the company is carrying on business in Hong Kong and the relevant income is earned in or derived from Hong Kong.
Foreign tax credit: Where there is a double tax agreement, foreign tax paid may be credited against profits tax on the same profits, but the credit is limited to the amount of Hong Kong tax payable on the same income.
Source: Deloitte
