Growing an International Technology Business

The key success factors

Many US high growth companies have invested significantly in their International businesses, while at the same time managing high growth in their domestic US operations. Successful mature companies are generating as much as 50% of their business from International. In the earlier stages of development, successful companies can still generate 25% of their business from International.

Whilst International is an area rich in potential, there are a number of complexities and pitfalls which cause barriers to profitable entry. These mean that many companies investing in International do not achieve anywhere near their potential. Indeed it is sometimes a real burden on their growth and profitability.

The key success factors in the early stages of development are as follows:

Recruitment and Retention of Key Personnel

Whilst hiring the right people is fundamental to the success of your International operations, of equal importance is the ability to retain them and maintain their motivation and contribution.

Successful hiring is more difficult in International than in the US, due principally to cultural and language issues, an additional factor is the impact of legislation in favour of the employee, when a hiring error has been made!

The key members of the team should be compensated based on the growth and success of the International business. In a high growth business you should generally hire people who have flexibility and adaptability and can operate on a "broad band-width", enabling them to grow in line with the development of the business.

Control of Remote Operations

There is a difficult balance here. If you have appointed the right people, they will probably want the autonomy to demonstrate their ability to grow the business in their own way. You will however wish to remain in close control to ensure you can measure their success and take action if necessary.

The very nature of a "start-up" phase means that long lead times and complex business milestones make it more difficult to judge the success and failures in your International team, especially as you have less contact with them.

Therefore critical to success is the ability to establish realistic and informative business metrics, which should be both fiscal and non-fiscal. Some of these metrics would be lead indicators that would enable US management to more effectively control and manage their overseas investment.

Phasing of Investment

Investment in International should be phased. Further investment is driven and triggered by the attainment of these business metrics. Focus and flexibility is the key to success here.

Companies often invest too heavily initially and accept "start up losses" for too long. There are sometimes fundamental business reasons behind the failure. A common mistake is spreading investment (both management and cash) too thinly across a number of countries at one time.

Cultural/Languages/Legal/Business Practices

Despite the recent introduction of the Euro in most of mainland Europe, differences in cultures, languages, legal systems and business practices create a fundamental difference between the US and the "United States of Europe". At this time Europe is politically and commercially in transition, which means that each country still needs to be considered separately. However, this is generally best managed centrally within Europe.

Which Countries for Investment?

Specific needs will dictate different country coverage, but one can make some general statements. Based on IT spend the best markets should be Germany, UK, France, Holland in that order. However due to cultural and language barriers it is suggested UK, Germany, Holland and France in that order.

Thought should be given to promoting into some markets using staff based in other countries. This is due to employment conditions and tax situations found in some countries. The variability of employment law and tax schemes across Europe continues to surprise many companies investing in Europe.

Benelux/Scandinavia is a relatively easy market in which to sell English language product. France is a very difficult market for a start up company to break into.

Where there is no direct presence, you should build up a reseller/distributor network managed from within Europe.

Experienced Local Financial Guidance

In the early stages of growth it is vitally important to have experienced local financial assistance. This resource should act as a business partner to the Region VP and to US management.

A full time resource may not be the solution, as it would not be cost effective or sufficiently challenging to attract the right calibre of individual. Consequently often no investment is made in this experienced local financial resource, which can result in the following:

• F&A tasks maybe split between a clerical resource and the Region VP. The clerical resource is often inexperienced and the Region VP is therefore distracted from their key tasks. The Region VP can often spend as much as 25% of their time on F&A tasks. This is a waste of their skills and slows down the potential growth of the business.
• Financial Reporting is often "out-sourced" to a firm of accountants. They competently report the numbers but rarely "add value" to the business, ignoring the lead indicators at a critical time for the business.
• Results are therefore often unpredictable, reported late and are unreliable.
• The CFO in the US will often concentrate mainly on the US, as it is where the majority of revenue and profit derives from. They are often surprised that a disproportionately high percentage of their problems derive from International.