So You Want to Take Your Enterprise Software Product to Europe?
With all the extra time for thinking right now – no commuting or business travel – I have been reflecting on the topic of global expansion for enterprise software companies. Having been part of the early stages of expansion for several American, Canadian, and Australian firms entering the European market and seen both success and failure, I hope that experience may be of use to others.
Why Come to Europe (or any other overseas market)?
Even in a large domestic market such as the US, any enterprise software company wishing to continue to grow will eventually run out of market opportunity and need to start to look overseas for additional opportunities. But even before that, in today’s global market, it is quite possible that your own customers will have overseas operations and ask you to help them outside your home base.
As a target market, Europe has many attractions. The European Union alone is the second-largest economy in the world, the world’s largest trading block, and home to 500 million consumers. Half of the 10 largest national economies are in Europe.
However, Europe is not one homogeneous market. Comprising some 50 independent nations, around 45 official languages, and 25 different currencies, there are multiple challenges to being successful.
Where to Start?
With this level of diversity, choosing the right foothold and focusing on early success is important. The three most important factors to be considered are:
- Market Opportunity – take into account not just the raw size of the potential market, but factors such as ease of doing business and the competitive landscape.
- Cultural Fit – particularly if you are planning a direct entry (see below) think carefully about aspects such as language and cultural norms. I have seen a Quebec-based Canadian company successfully tackle the French market, but really struggle when it moved onto the UK.
- Existing Customers – if you already have European subsidiaries of your customers using your product then that can provide ready-made references for you when you enter the market.
Which Business Model?
There are three principal ways of starting to do business overseas – each has its pros and cons:
- Partner – you may be able to find a local supplier that already understands the market and has the appropriate skills and experience to resell your product. This often works well if the reseller already markets a product that is complementary to yours and so has a customer base into which they can upsell your product. A downside of this approach is that you will only receive a royalty for your solution, rather than the full value, and you do not have full control over the sales, marketing, and implementation of your product.
- Acquisition – taking the partner approach one step further allows you to gain complete control, but as with any acquisition there are other challenges
- Direct – most companies choose this route because it gives you complete control at the lowest initial cost, but there are many issues to overcome such as acquiring the local knowledge (not just of your market but legal, financial and other overheads of doing business) and finding the right resources.
What About the Product?
The topic of software globalization and localisation is worthy of its own discussion, but it is worth pointing out that you need to think about a lot more than translation. Unless your product was designed to be global from the start (and very few were), significant investment will be needed to adapt it to local business and cultural requirements.
I hope that this introduction to the topic of ‘going global’ is of use and future articles will dig deeper into each of the topics introduced above.