Exploring internationalization of Dutch independent software vendors
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In 2013, it was estimated by IDC that IT spending in emerging markets would account for 8.8% of a growing total market of $730 billion, representing 51% of all new growth in the IT marketplace. The growth in new markets presents an opportunity for companies currently focused only on the domestic market outside of the emerging markets. This growth challenges companies to explore the possibilities outside the country of origin. This research has found that Dutch product software companies are interested in selling their products beyond the domestic border. More than half of the case companies included in this research actually skipped the domestic market as an intermediate step, continuing directly to sell internationally. Together, almost half of all case companies researched acquired more than 50% of their revenue from customers outside of the domestic markets. Research estimates that more than 50% of all attempts made by companies to expand their business beyond the domestic market fail, costing valuable resources and time. In contrast to the expectations, almost none of the studied case companies could name the specific country or countries whose markets they would ultimately enter. When decision makers did determine the actual countries, they relied primarily on high-level, generic country statistics – for instance, Internet penetration or number of potential customers. The main challenge facing the CEOs of the software companies was mostly focused on setting up a successful market entry strategy. Current theory makes no distinction between the infrastructure of the software product and the nature of the business model of the company. This research indicated that product characteristics are one of the key aspects influencing the eventual market entry form chosen. When it comes to targeting foreign markets by Dutch independent software vendors, this research found that companies that sell products with low touch sales tend to use a ‘shotgun’ tactic. They create an initial selection of countries based on the number of potential customers, the level of Internet adoption and a basic competitor analysis. Companies with a high touch sales product tend to use their personal network and personal contacts in order to gain new business, combined with the use of content marketing, trade shows and conferences in order to come into contact with potential customers. This research identified the level of personal experience of the management team gained in former jobs, life experience and education as an important foundation for both high touch and low touch sales products. In high touch sales products, the international personal network of the company management is a primary way of building a reseller or partnership network as well as a principal means of contacting and creating international business opportunities, thus avoiding making mistakes that decrease the chances of the product appealing to an international market. Management teams with a lack of international business experience serve as a warning signal.