It’s a natural consequence of growth that an Australian ISV will reach critical mass locally and look to expand into overseas markets.
However, expansion can be a big risk. Establishing yourself on the global stage is an expensive and time-consuming exercise. If it’s done poorly, it can even break an organisation.
In more mature markets, good foreign companies unable to sustain themselves through an initial establishment period are so common that customers will refrain from making purchasing decisions for up to 24 months. As a result, an ISV looking to build an international presence needs to ensure it has the resources and patience to see through the initial holding period.
“In the US for instance… they’ve seen it so often, they’ve started to put down a holding pattern to see if people are sustainable or not,” Zap Technologies president, Garth Laird, said.
Trade and investment adviser, Austrade, quotes 18 months as the period of time it will take to gain some traction in a market. During that time, it recommends organisations should be actively setting up partnerships and considering additional offices in hub areas.
Mature versus emerging With that in mind, is it any easier to establish yourself as an ISV in an emerging market? Austrade claims there are plenty of opportunities in emerging markets and singled out ASEAN economies close to Australia. For example, Indonesia has a rapidly growing mobile market, the Philippines offers prospects around financial services, Thailand has seen an increasing demand in health solutions, and Vietnam is in need of support for a booming software development industry.
Malaysia, meanwhile, is on the cusp of being identified as a developed economy and has commenced a broadband rollout, showing particular interest in e-security, e-learning and solutions for the outsourcing industry.
Overall, ASEAN is on par with the European Union as Australia’s largest two-way trading partner. Forty-two per cent of the local export base trade comes from within the region, and it is Australia’s fastest growing source of foreign investment ($15.4 billion), outpacing investment growth from the European Union.
ISVs are still going to need to prepare the ground and develop their brand in an emerging market, but there’s less threat from incumbents compared with the US.
Emerging markets aren’t always the way to go, however. It’s just as important to remember the product and services you’re bringing to the table, and select a market appropriate to that. QSR International, a developer of qualitative research solutions, is one such case. It chose to focus heavily on the North American and European markets first, and has held off from building a presence in regions closer to home while the market grew.
“Having become well established in those markets, we’re starting to see this type of research growing in importance and quantity in Asia and South America,” QSR CEO, John Owen, said.
“We’ve since translated our product into six different languages – we’ve got the English, German, French and Spanish – but we’ve also now got Japanese and Chinese, and we’re looking at Portuguese as well.”
Looking further afield
The ASEAN region, the US and Europe are all logical first steps for an ISV entering the international playing field, but they’re not the only options. Investing in alternative markets might even prove more lucrative in the long term.
Brazil and parts of the Middle East such as Qatar, the United Arab Emirates and Turkey, are other examples of economies sprouting many opportunities for foreign investment. These are potentially more difficult for an Australian ISV to break into on account of geographical distance or language barriers, but are worth considering nonetheless.
“The Middle East for instance, has a high regard for Australian technology, so I think there are great opportunities there, but again, it’s a much harder market, and you really do need to work with a good consultant or the Austrade team,” Austrade industry network leader, Janelle Casey, said.
“What we try and do is look at group marketing opportunities so we can form clusters – there’s strength in numbers so to speak.”
When it comes to the Brazilian market, an ISV should consider piggy-backing on opportunities to engage with the nation’s abundant resources sector, or other non-technology based Australian organisations operating in the field.
Once established, doing business in these emerging economies is nowhere near as mystifying as the cultural differences might suggest.
“As long as people are aware that there are culture differences, and as long as they do their homework, are prepared to learn from peers and are careful not to offend people, I don’t think Australians encounter difficulties in doing business offshore,” Casey said.
Overall, Australian ISVs are received well by all international markets, Austrade claimed. Intelledox CEO, Phillip Williamson, said organisations should nevertheless expect some uncertainty when it comes to Australian IT exports.
“One of the challenges for an Australian ISV is being an Australian ISV,” he said. “People don’t expect that Australia produces top quality software – we’re seen as a mining country, or an agricultural producer. The challenge is in getting customers to understand that the technology we have is quite sophisticated, that it’s competitive and it’s cost effective.”
To that end, Intelledox takes measures to dampen its international branding as an Australian ISV and maintains a .com website rather than a .com.au domain to appear a nationally-neutral entity. It also maintains its website with English-only language options. The markets Intelledox plays in, including its Asian interests, tend to be English-speaking and prefer American-style websites and organisations.
Battling against Australia’s reputation as an IT importer, rather than exporter, is something Zap Technologies’ Laird also encountered when approaching mature technology markets. He advised ISVs to be aware that customers in the US, for example, were used to consuming IT produced and developed within their own borders.
It’s a phenomenon that should also be considered when moving into other high-technology economies, such as South Korea, Russia or Japan.
A helping hand
Something almost all ISVs will agree with is that partnering is critical for success when it comes to overseas expansion. Few start-up organisations will have enough resources to build market awareness in another country.
QSR’s Owen said a good partner relationship should align strategically with what you’re trying to achieve in a given region.
“We may develop a direct business in time, but the amount of resources to do that is extensive. Plus, you won’t have a very good understanding of the market you’re entering,” he said. “You can do a lot of research, but it’s never going to be quite as good as people who are already operating there from one of the local companies in those markets.”
For those ISVs looking to move into international markets and find the right partners, there are plenty of organisations and tools available to help. Austrade has in-market specialists and contacts that can provide advice and guidance, and there is also state government and industry associations, such as the Australian Computer Society and Australia Information and Industry Association that can provide guidance.
Finally, it’s worth considering regional trade events such as CommunicAsia (which commenced on June 15), which organisations can – and should – use as a platform to introduce their solutions to key players in the region.