LINEBURG


<< . .

 29
( 36)



. . >>

first projects if necessary. Companies need to consider alternative sources to fund interna-
tional marketing other than cash ¬‚ows, such as bank loans, or export assistance (which is
discussed later in this chapter). The ¬nancial assessment should consider the ¬rm™s serv-
ice pricing. For example, some providers with sales experience in the US have been dis-
appointed in Europe, because European rates are lower than the prevailing American rates.


Seek business intelligence
As part of your business planning activities, gather business intelligence on competi-
tors from your own country and those from the dozens of other offshore destinations.
Besides visiting their web sites, make a trip to offshore seminars or IT trade fairs in one
of the target countries. In these venues you will have the chance to assess the strengths
and weaknesses of the marketing strategies of other providers from up close. Trade fairs
also provide an opportunity to do market research, to meet people, exchange ideas, and
open up future channels. Do visit the corporate lectures which take place in parallel to
the exhibitions; these are not only informative but also a place for networking.
The following hints can be useful for making the best of business intelligence visits
to trade fairs:
— Some trade fairs are huge: plan your tour carefully.

— Talk to the representatives: a trade fair is the easiest way of meeting people in

person.
— Study the displays and the presentations to help assess how competitive your ¬rm is.

— Collect literature and other promotional material.

— Take careful notes, otherwise you will soon forget many important observations.




De¬ning target markets
No provider will succeed by trying to market to all countries at once. The exporting
company needs to carefully consider its ¬rst target markets.5 We present two key cri-
teria in determining the best target markets.
226 Other stakeholders


The ¬rst factor is market size. The USA is the principal market of choice for many
large Indian providers due to the enormous size of market demand. But not all Indian
¬rms looked at the USA: since its inception in 1982, the focus of Indian-based Mastek
has been the UK and it is one of the few Indian-based vendors whose board members
include a British executive. When targeting the two largest markets for offshoring, the
USA and the UK, some sales managers can generate 3“4 million USD of business per
year. However, these large markets are also crowded with many competitors. In the UK
alone, hundreds of offshore services providers are trying to ¬nd customers.
Although often overlooked by offshore providers, small countries can be attractive
because competition is less ¬erce. An example is The Netherlands, which is a medium-
sized IT market. Dutch companies have been using the services of offshore providers
for more than 20 years and are relatively open to this approach. The Dutch, more than
the French or Germans, have an international outlook and are often willing to cooper-
ate with foreign companies. More than 250 Dutch ¬rms have had their software devel-
oped in India alone. Software contracts have gone to at least 35 other offshore
destinations. Research in 2004 indicated that around 5000 offshore staff members were
involved in projects for Dutch companies. This number is estimated to grow to 50,000
in 10 years; a huge volume for such a small country.6
The marketing factor that has proven most successful for many offshore ¬rms is the
use of linkages. These linkages result from linguistic, historic, ethnic, geographic, or
emigration-related reasons. Based on geographic proximity (nearshoring), the US is a
logical market for Mexican ¬rms; Western Europe is a logical target for Central and
Eastern European companies. Using linguistic links, some Indian ¬rms are using French-
speaking staff in Mauritius to target France. Spanish-speaking companies in Latin
America are focusing on Spain. Linkages are also discussed in Chapter 10.
Another linkage is the diaspora. Many nations have sizable diasporas in key target
markets. These diasporas can play critical bridging roles in the early stages of business
development. A study on small- and medium-sized American companies that offshored
to countries other than India revealed that in nearly every case, it was a Pakistani,
Indonesian, Vietnamese, or other foreign national working in the client company who
pointed to the offshore partner.7 Similarly, in nearly all cases of successful Iranian soft-
ware exports, there was some involvement of Iranian expatriates.8 Not all offshore
providers are taking advantage of such linkages. For example in The Netherlands,
which has a large Turkish community, one ¬nds a number of Turkish-born people in the
IT sector, yet no Turkish companies have yet mobilized them to foster business links.


A local base is desirable
It is extremely dif¬cult to ¬nd clients if a company is located on another continent,
thousands of kilometers away. Even in Europe, establishing a foothold in one country,
such as the UK, will not give easy access to other European countries. Most clients feel
227 Marketing of offshore services: the provider perspective


more comfortable communicating with their offshore provider with a simple local tele-
phone call rather than having to arrange communications across time zones. A local
base is therefore a marketing base, a base for relationship building, as well as a base for
liaison activities once the work is underway.
The most effective way for an offshore provider to achieve proximity to markets is to
go all the way and open its own sales of¬ces abroad. Only with a local presence, ideally
with local staff, can marketing and sales be most effective. A local base makes personal
contacts and personal visits easy, and enhances the understanding of the market. It is
also an expensive way of doing business, since of¬ce space must be rented and a business
development manager needs to be paid at Western levels, considerably above any wage
levels of the rest of the offshore organization.
If it is not ¬nancially possible to establish a sales of¬ce, the offshore provider needs
to consider other means of local representation. For example, working with a local rep-
resentative or agent is a less-expensive alternative. A capable local representative
offers market knowledge and has a network of contacts. However, the representative will
usually request a ¬xed fee, in addition to commission, to conduct appropriate market-
ing and sales activities; while the offshore provider will prefer to work on a “commis-
sion only” basis, where the agent only receives money on signed contracts. Finding
foreigners willing to work on such a “no cure no pay” basis is uncommon, although
one of your country™s expatriates may agree to such an agreement.
Some nations have set up a joint of¬ce representing a group of offshore companies,
a consortium of companies, or the entire association company membership. This
approach signi¬cantly reduces the market entry costs for offshore ¬rms. An example is
the Bangladesh ICT Business Centre (BIBC), which was set up in 2003 in Silicon
Valley. The goal of this shared sales of¬ce was to promote and speed up direct contacts
between 30 Bangladeshi providers and potential American clients. Initiatives like this
are promising but have had mixed results: the Brazilian government created Softex (the
Brazilian Society for the Promotion and Export of Software) in 1992, followed by the
opening of foreign of¬ces in the mid 1990s. However, due to disappointing results,
these were closed down a few years later.9 Such collaborative efforts are unlikely to
work unless large-scale and aggressive marketing takes place.
Another approach for offshore providers is to seek a business relationship with a
local IT services company in one of the target nations. Many of these domestic ¬rms
are eager to offer offshore services in order to stay competitive, but do not want to set
up their own captive unit abroad. The local company will handle marketing activities,
reducing the risks substantially. For example, Indian-based HCL Technologies accessed
the Dutch market by partnering with Roccade, a Dutch IT services company, in the
1990s. At that time, it did not have its own Dutch marketing of¬ce.
The offshore provider should also try to establish contacts with offshore intermediaries.
These are consultancies and research ¬rms that provide expertise and services to ¬rms
seeking offshore work. Some of these intermediaries, especially in the US, have amassed
228 Other stakeholders


enormous in¬‚uence. It is useful to make your ¬rm known to these intermediaries,
because clients look at them to select the offshore provider.
Finally, another form of intermediary is the online marketplace that provides pro-
gramming matchmaking.10 Hundreds of offshore ¬rms, most of them small, use these
marketplaces as their primary marketing channel. Many of the projects presented for
bids are quite small. Offshore providers use these small projects to “buy” their ¬rst
clients and to gain experience. But more important, they are buying favorable “reputa-
tion marks” on these sites, which allow them to slowly build relationships and progress
to larger and larger projects. These online intermediaries live up to the promise of giv-
ing “global reach” to every small business.


Conducting a SWOT analysis
When considering a new market, it is useful to conduct a competitive analysis of your
company. A SWOT analysis covers the following:
— Strengths. Where does your ¬rm excel? These are the factors that will catch the

attention of a potential client and persuade it to buy your services. For example,
one small Russian ¬rm was considering entering the US market. “What are your
strengths?” we asked. At ¬rst, the co-founder gave the usual response: that the
¬rm™s engineers have many skills and build web pages. “But how are you different
than all the other ¬rms?” we asked. “We have strong expertise in computer
modeling,” was the reply. Here was their strength.
— Weaknesses. Where is your ¬rm lacking relative to your competition? These

weaknesses need to be addressed before your ¬rm markets internationally. For
example, a common weakness for many offshore providers is small size and
limited ¬nancial resources. If you cannot afford to set up your own sales and
marketing of¬ces, you could consider using expatriates or agents.
— Opportunities. These are external factors of which you could take advantage.

For example, there may be some new market demand for software services,
such as the Y2K remediation need in the late 1990s.
— Threats. These are external factors that could harm your ¬rm if not counteracted.

Most threats are from other competitors “ other offshore providers.

OriginalJava (an alias) is an actual Indonesian IT services ¬rm that considered entry
into The Netherlands (Exhibit 11.2). The company has 200 employees and is located
in the capital city, Jakarta. A SWOT analysis, which is typically depicted as a 2 2
matrix, is shown in Figure 11.2. OriginalJava listed six strengths in the SWOT
matrix, but its management felt that the two most important strengths were its very
low costs and its considerable expertise in Java (the computer language, not the
Indonesian island).
The managers felt that the many opportunities in the Dutch market were real, espe-
cially those that capitalize on the Dutch“Indonesian links. However, they recognized
229 Marketing of offshore services: the provider perspective



Strengths Weaknesses
— Specialized in Java skills. — Completely unknown in The Netherlands

— Very low rates. (or elsewhere in Europe).
— Robust scale of local business (both — No customers (or references) in The Netherlands.

Indonesian clients and multinationals). — No CMM certi¬cations.

— Some nearshore clients in Australia, — Few international business alliances.

Malaysia, and Singapore. — Marketing and sales staff is predominantly

— Stable company. Indonesian.
— Good English skills. — Country branding: Indonesia is unknown in

the ¬eld of IT and its political unrest creates
a negative image.

Opportunities Threats
— Historical links between The — Indian competitors are already active in The

Netherlands and Indonesia (a former Netherlands. Some have their own sales
colony). Indonesian cuisine is the most of¬ces; others operate through agents.
popular foreign food in Holland. — Nearshore providers (from Central and Eastern

— There are tens of thousands of Europe) are also present in the local market.
Indonesian expatriates in The — Several Dutch services companies are also

Netherlands. offering offshore services.
— Dutch managers are under cost pressures.

— Dutch companies need ¬‚exible staf¬ng

solutions.
— Dutch providers are interested in

alliances and other partnerships.
— Dutch companies are seeking offshore

ITES and some Indonesians speak the
Dutch language.

Exhibit 11.2 SWOT analysis of an Indonesian offshore provider considering entry to the
Netherlands market.



that the ¬rm had many weaknesses, particularly the lack of business contacts in The
Netherlands. Although the ¬rm was stable and had positive cash ¬‚ow, management
was reluctant to invest in a full-time local marketing of¬ce, and considered alterna-
tives, such as using the Indonesian diaspora or hiring local marketing consultants as
agents. After much deliberation, the company decided to test the waters by appointing
a member of the Indonesian diaspora as a sales agent. His responsibility was to con-
duct the marketing and sales activities for a trial period of 18 months.



Local marketing activities

Having a local base is often the ¬rst step to successful business development, but even
then, new clients will not come automatically to your door. To win new customers,
230 Other stakeholders




The local
market

Various marketing activities
Trade shows
to meet potential clients

Seminars Public relations

Will result in many
business contacts

Only a small number
will be potential clients

Business discussions with
the most promising
contacts
The result:
one final client

Figure 11.2 The process of ¬nding a new client.

conducting effective marketing activities on the local level is required. In this section
we introduce several important elements of marketing at the local level derived from
our experience.
As depicted in Figure 11.2, ¬nding customers is basically a “numbers game”: the larger
the number of relevant business contacts, the easier it will be to ¬nd the ¬rst client. In most
cases, of the many new business contacts you are able to make, only a small number
will be relevant. These are the potential clients. And business discussions with many of
these promising contacts are needed before the ¬rst client can be found. Making the
name of your company known (establishing name recognition) through marketing
efforts accelerates this process, but identifying and meeting potential clients requires a
lot of time. It can take a long period “ sometimes years “ before a substantial contract
can be signed. Sales cycles are especially long in the banking and ¬nancial sector.
As a provider you are anxious to generate client leads. There are many ways to meet
potential clients, such as the traditional means of gaining access through references,
networking, direct marketing, and cold calling. We focus on efforts that require special
attention by offshore providers: large-scale marketing efforts, speci¬cally trade fairs
and seminars; and separately, public relations.11


Trade fairs
We know some companies that have found most of their clients through participation
at trade fairs, for example at the CeBIT in Hannover, the largest IT fair in the world.
231 Marketing of offshore services: the provider perspective


At CeBIT 2004, a large number of offshore providers participated. They came from
Central and Eastern Europe, but also from Bangladesh, Brazil, Egypt, India, Indonesia,
Iran, Jordan, Lebanon, Malaysia, Mexico, Morocco, China, Sri Lanka, Thailand, and
Tunisia. Companies also participate at fairs such as OutsourceWorld in London and
New York, and Gitex in Dubai. Providers that are specialized should consider taking
part at a specialized (vertical market) trade fair, say, for embedded software, banking
and ¬nancials, or health care systems. Providers that need to minimize costs participate
as part of a country pavilion, which is cheaper than having one™s own stand.
There are only a few seconds to attract the visitors™ attention as they pass by, so the
stand should be professional and attractive. Graphics should be simple and easy to see
from far away; the message conveyed should solve a problem. The provider needs to
qualify the visitor politely before starting discussions. All this requires special skills
that can be learned at specialized seminars on trade fair participation.
Follow-up on all leads after the trade fair is over (remember that marketing is a num-
bers game). You can follow-up by mail, telephone, or personal appointment. Sometimes,
though, well-intentioned follow-up can go terribly wrong. As a friendly gesture, an
Indian provider added a small piece of sweet-smelling incense in the envelope along with
its follow-up letter. This turned into powder by the time it reached the foreign destinations.
The mailing was sent out just after the 2001 attack on America and the foreign letters
containing an unknown white powder caused panic among some of the recipients.
While trade fairs have been successful for some offshore providers, others have
not been so lucky. The fairs are time consuming, extremely tiring, and quite costly.
Contracts are rarely signed at trade fairs. In many cases, the results will not come after
the ¬rst participation. Visitors may see your stand, but it will take two, three, or more
events to generate clients. An Offshore Outsourcing Exhibition in Amsterdam pre-
sented more than 60 ¬rms from Russia, Belarus, Slovakia, India, Pakistan, Jordan, and
Vietnam. The organizers failed in attracting visitors and some participating companies
left the two-day event without collecting even one business card. A lesson from this is
that before you decide to participate in a trade fair, always check on the number of
visitors.


Seminars
Seminars are more focused, smaller, and usually less costly alternatives to trade fair par-
ticipation. Setting up a stand at a seminar may not cost much, while becoming a sponsor
will give your ¬rm visibility by having your company name printed on all marketing
material. Although it will easily cost several thousand dollars, sponsorship will make your
firm known, even among people that will not visit the event. You can also organize brief
seminars yourself, such as a business breakfast, an afternoon seminar or a dinner. These
should be done tastefully and be informative about the offshoring process. Bring in some
outsiders to speak who will give color to the seminar, such as one of your customers,
232 Other stakeholders


a local professor, or a local consultant. These are perfect occasions to meet potential
customers in a more informal setting, and they can also be used to invite journalists.
In all cases, the importance of promotional efforts should not be underestimated.
Promotion is not always fully understood by the providers. A number of offshore sem-
inars have been hosted in The Netherlands, with delegations from countries such as
Bangladesh, the Philippines, or Hungary. However, marketing efforts were minimal
and the foreign delegations were sometimes larger in size than the audience. Professional
Dutch organizers usually send out more than 10,000 notices to announce an offshore
seminar; this large number might result in 50 participants. In order to share costs, you
could collaborate with others, such as local ¬rms or even competitors.


Public relations
In the offshore business, advertising is expensive and is unlikely to generate returns. Free
publicity is a more effective way of drawing attention to your ¬rm. This means that con-
tacts must be made with journalists in the target market. Come up with a newsworthy sub-
ject so the journalist can easily write about your company. You can issue regular press
releases to trade publications and local papers, but these too require a newsworthy subject,
otherwise they will be ignored. The press release may include an invitation for one or two
journalists to visit your country and your facilities. If the local IT association organizes a
press tour, then costs can be shared. The British newspaper Financial Times regularly car-
ries an issue focusing on the Indian software sector. The articles are written with support
from the Indian software industry association and from individual Indian companies.
There are also foreign journalists stationed in many offshore destinations. Although
they do not focus on IT, you could invite them for a visit to your of¬ces: the more atten-
tion in the press the better. Appearing on television can be very effective: a Dutch serv-
ices provider with a Romanian offshore facility gained several clients after it appeared
for 8 minutes on a TV business channel.
Of course, the large offshore providers already bene¬t from professional public rela-
tions ¬rms, which manage their “free publicity.” They are also expanding into more
esoteric branding: Cognizant sponsors players on a British cricket team. TCS and
Mastek created links with local universities to foster research on offshore outsourcing.



Dealing with prospective clients in business discussions

The various marketing activities described above result in business leads and business
discussions. Business discussions are sometimes straightforward and a contract can be
signed in a short span of time. With larger companies, or larger projects, this process is
more complicated. In this section we introduce different client types, client cultures,
and issues of ethics and trust.
233 Marketing of offshore services: the provider perspective


But, ¬rst comes price, namely what rate (the base hourly rate) to charge. After all,
the business discussions are about offshoring “ and offshoring is driven largely by
price. Some clients may say: “your rate is too high.” Perhaps the rate is actually too
high, as some providers have become used to American rates, and they overlook the
lower price levels in Europe. Alternatively, many providers try to penetrate foreign
markets by asking low rates. It indeed makes business sense to “buy” the ¬rst client (or
even the second client) by offering a low rate. But this may send a bad signal. The
prospective client may think “the rate is too low” and therefore the provider™s quality,
professionalism, or productivity is poor as well.


Knowing your client types
There are various types of client organizations which fall along the continuum of the
Offshore Stage Model (introduced in Chapter 1): from those organizations that use lit-
tle to no offshoring to those that are already committed to offshoring.
Regardless of the stage, your task is to identify and interact with the individuals that
are the “offshore champions.” These are the in¬‚uential individuals inside the organization
who are already committed to offshoring as a solution to organizational needs. There
is no need to “sell them” on the offshoring approach. They are already sold. These
individuals are to be found in many organizations “ even the ones that have not begun

<< . .

 29
( 36)



. . >>

Copyright Design by: Sunlight webdesign