In focus: Expanding overseas

In focus: Expanding overseas

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.

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