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Why do you want to export your software

We have come across three main reasons why companies want to start working internationally. The first one comes from the necessity when the current market is drying up. The second one comes from a believe that many more opportunities can be found abroad. The third one is a strategic choice. In rare cases current clients of companies who work internationally or start working internationally can demand to start working abroad as well. The next paragraphs will clarify the first three scenarios.

Opportunities

Let’s take a look at the market in the Netherlands as an example of what opportunities could be abroad. The Netherlands is home to a total of 1.9 million enterprises. There are 8 thousand enterprises in the Netherlands with 100 or more employees. 20 of the 2000 largest companies come from the Netherlands. The Dutch economy is the sixth-largest economy in the EU, the fifth high average income in the word and the fifth most prosperous country in the world. Bloomberg names the Netherlands world’s ninth most innovative country. The Dutch market is full of potential clients with a lot of money looking for growth and innovation. Later on will be explained how the potential can be determined.

A Strategic decision

Grabbing the opportunities abroad can be a good motivator for going abroad. It can be a strategic decision as well. Multiple strategic reasons can apply and in these paragraphs, we mention some of them.

Risk reduction by taking opportunities abroad

Are opportunities abroad a nice to have or a need to have? In different countries the economic cycle of the industry you service can be out of phase. And this is a good thing. Potentially this means that while the economic cycle of the industry is going down in your country, it could be going up in another country. The foreign market could provide good opportunities and prove to be a life saver for your company.

There are several reasons why the economic cycle of an industry can be different in two countries. For example: The Dutch tax law states that software can be depreciated in 5 years. In German this (Nutzungsdauer) is 1 year.

Another explanation is trend like behavior of the market. When the industry you service is a competitive market, companies tend to react to what the competition does. “When they renew their software, we have to keep up”. This can lead to a trend like behavior of the market. It is very well possible that this trend is not going on in your current market. Especially when the foreign and home markets are not in contact with each other. Contact us to find out what trends are going on.

Reducing the average development costs and free up development capacity

There are two ways of reducing the fixed costs per client of software development. One is to reduce the costs of software development itself. The other one is to spread the costs over more clients. Increasing the market abroad will open the opportunity to find extra clients. Partnering can be a way to reduce the cost of software development itself. The partner could even start selling and/or servicing your product. We can both help you find clients and partners and are experienced in a variety of partner models.

  • When a partner has the extension to your software available, development capacity can be used for other development. When the extension is used by solutions of multiple vendors the average development cost will be lower compared to the “make” option.
  • Some parts in software are identical to software that is used for totally different purposes. For example, a customer relation management module. Instead of two companies both developing their own CRM building block, alternatively they could join forces to free up capacity and lower the average development costs.
  • Like joint development with a partner there could be an option to do the development together with a competitor abroad. It will free up development capacity and lower the average development costs.

 

Later on in an assignment you will be able to note your strategic motivations.

A falling market

When a company wants to start with exporting due to a falling market, this typically happens when the product life cycle has entered the late majority phase.

The tasks like product development and service that come from the local/current market have upto this phase consumed all time, capacity and has kept the minds of management busy. Perfectly understandable. However, it has provided the competition the time to catch up. Meanwhile the companies with the most pressing urgency to find a solution to their problem have become clients. As a result what is left is a group of clients with less urgency to buy and competition with a very similar solution. Some companies prefer to say that they are in a replacement market.

How can going abroad help in this situation? By applying the cost reduction strategies as mentioned in the previous paragraph. Meanwhile it is necessary to develop new blue ocean product. A Blue Ocean Strategy program can help these companies.