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Global Expansion for Enterprise Software: don’t wait too long or ignore the subtle signals. October 11, 2013

Posted by Bernard Lunn in Uncategorized.
Tags: , , ,

Enterprise software knows no boundaries. The customers are obviously global, so vendors have to go global to match that. This article describes the “why, when, how” of going global.

Lets start with why and when.

Many enterprise software vendors originate from markets that are relatively small – think
of SAP from Germany, Autonomy from the UK, Business Objects from France, NICE Systems from

(I am using the word “relatively” in relation to America, the biggest market, from where
most enterprise software firms originate).

Companies from these relatively small home markets have to go global early in their life.
In some cases the first customer may even be outside their domestic market.

Even US ventures, which used to wait till late in the cycle, are going global earlier as
they recognize the realities of the global economic rebalancing. McKinsey Research
estimates that “the emerging economies’ share of Fortune Global 500 companies will probably
jump to more than 45 percent by 2025, up from just 5 percent in 2000.” This means that
“going global” no longer just means a quick trip to London, some serious air miles to
“exotic” locations are needed.

So, the answer to when to go global is “earlier than we used to”.

Getting to the how to go global, computers help but humans are still needed.

Yes, the world is getting flatter. We can connect across borders using all kinds of social
media, we are all available on our mobile phones and on Skype. However, while we can
maintain relationships using these tools, the initial job of building relationships
requires air miles and “breaking bread together”. Yes, the Anglo Saxon business culture
rules, but unless you know the local culture, you miss the subtle signals that tells you
whether a deal is on track or heading for a train wreck.

This is the constant push and pull that global brands face between standardization and localization. The American way of scaling through standardization is epitomized by McDonalds, yet even McDonalds have changed menus
in India and sell in Switzerland on buying local beef and potatoes. All good
software now has tools for localization, but there are subtler cultural, human and branding
issues that determine whether the locals see you as trustworthy. You need standardization
to scale, but you win one country at a time and one customer at a time; insensitive, brute
force standardization is no longer a winning formula as it was in the post war years when
American multinationals grew up.

The consumerization of enterprise software changes the rules and enables globalization with
less friction and less cost. The “foot in the door” is now usually a Freemium product
rather than a salesman dialing for dollars. This is a game-changer, the consumerization of
software does change everything. Well, not quite everything! The vision of a world where
all business development is done by software algorithms makes as much sense as all
stockmarket trading being done by High Frequency Trading (HFT).

Machines are very fast. High Frequency Trading (HFT) machines beat human day traders on
speed. Freemium conversions feeding automatically into Marketing Automation (MA) systems
beats lots of sales folks punching feedback into CRM systems. Yet machines can also be very
stupid, as HFT driven flash crashes teach us regularly. The same is true in sales driven
by Freemium and MA algorithms; a data point that is a reliable signal of customer intent in
America or even England, might totally miss what a customer is thinking in India, China,
Turkey, Germany, Switzerland, etc. Humans need to understand these cultures in order to
fine tune the Freemium and MA algorithms. Even in a consumerized enterprise software world,
there are three other inflection points where a human is needed:

1. Early, when even consumer startups “do things that don’t scale”. (The classic story
tells of AirBnB founders going door to door in New York to recruit the first apartment
owners). Network effects need to be seeded; build it and they will come is usually a mirage
that tech founders fall prey to (sometimes build it and they will come does work. there are
exceptions to prove this rule).

2. When your Freemium traction gets you a meeting with the CIO. Dell was the first company
to understand that you “schmooze in person and deliver online”. Get to that CIO too early
and you waste your time. Get to that CIO too late and you risk your early traction being
replaced by a competitor who knows how to balance digital marketing with human selling. You
need just-in-time CIO selling.

3. When you need to understand the whole product in order to move into adjacent spaces and
cross the chasm. That requires the old selling discipline of “two ears, one mouth”, lots of
active listening and open questions that unearth the real drivers of value in your

If Siri still has trouble with something as simple as voice recognition, imagine computers
parsing body language, the twinkle in the eye or the quality of a handshake. Phew, humans
do still have a role to play!

The question then is what type of human? The old way went through three iterations –
distributors to expats to local teams.

1. Distributors used to be the inexpensive way to get initial traction. This is less relevant in the SaaS/consumerization world; there is nothing to “distribute” and the foot in the door is done by Freemium. However something is lost here. There is nobody local saying “try this, yes it is foreign, but it works here, let me explain”.

2. Expats. In 1994 Misys moved me from running the  American region to running Asia. One mission was to replace distributors who had got the early sales in countries like Indonesia, Malaysia and Thailand with wholly owned branches. There were enough sales to make it worth paying an expat package to capture the additional margin.

3. Local teams eventually replace expats as they are cheaper and more likely to stay for a long term mission to dominate a local market.

The new SaaS/Freemium way goes something like this:

1. Ignore the local markets. If it catches on, great, if not ignore the market as there is too much to do in the priority market(s). This lets local vendors win.

2. Buy the local vendors. That works but the acquisitions can be expensive and hard to integrate. Customers, only a click away from an alternative, may migrate to competitors when you attempt to switch your “acquired” customers over to your globally standardized solution. The beauty of Freemium, low friction on entry, works in reverse as well, low friction on exit.

Understanding this, many founding teams are spending a lot more time circling the globe than they had planned. This comes at a cost of founding team management bandwidth.

What ventures going global need is a bridge between the globally standardised ideal and the localized reality. This bridge is built from people who can move easily between these two worlds, who know that a globally standardized solution is the end game but who can bring on the early customers and local teams that are needed to win on a country by country basis. They may also spot the local competitors early and “head them off at the pass” or buy them when they are still young and cheap.



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