Abroad Band
This story appears in the September 1999 issue of Entrepreneur. Subscribe »
If your information technology business has been growing for several years, it may be time for you to take the next step--a huge stride into another country. Why? The IT industry is ripening all over the globe. According to the American Electronics Association, overall U.S. IT exports to the world totaled more than $165 billion last year.
Of that bonanza, Canada and Mexico were the two largest individual buyers, accounting for approximately $25.9 billion and $18.3 billion, respectively. Japan purchased some $15 billion-worth, and the 15 members of the European Union spent a collective $40.6 billion.
Options on where to find good people and set up shop are also limitless, with a number of industry experts pointing to Israel for the former and Scotland for the latter. Israel is hot due to its burgeoning technology industry. Another plus is the talent it offers courtesy of defense department spinoffs and Russian immigrants. Scotland, meanwhile, has set up a "Silicon Glen" to attract high-tech businesses to its lush countryside.
So much is happening in so many places that at least one venture capital provider claims IT potential isn't limited to big-time players. According to Steve Baloff, a general partner of Advanced Technology Ventures in Palo Alto, California, "There are better and more opportunities for smaller and newly formed companies in information technology, especially software, because of the tools available."
Christopher D. Lancette is an Atlanta-area freelance journalist who covers international business for a variety of local, national and international publications.
New Or Improved
Gigabyte-brained entrepreneurs seeking to tap foreign markets indeed have many tools at their disposal; ever-improving Web-based architecture is one that Baloff suggests keeping a particularly close eye on. Net hardware can also open the door for a variety of companies wanting to make an international name for themselves by introducing a new technological concept.
Introducing cutting-edge technology to a foreign market is exactly the path Ofer Gneezy, president and CEO of Burlington, Massachusetts-based VIP Calling, decided to take when he co-founded the company with Gordon VanderBrug in 1996. VIP Calling created software that allows it to transfer calls to a public telephone network and offer substantially cheaper rates than traditional carriers. In 1997, the company began using that technology to route international long-distance calls over the Internet. Now, it completes calls for major U.S. carriers and has established partnerships throughout Asia and Latin America, as well as offices in Korea, Taiwan, Singapore, China, Hong Kong, Texas, New Jersey and California. In May alone, Gneezy's company handled more than 10 million minutes-worth of calls.
"The hardest part of getting started was convincing the companies our technology worked," says the 41-year-old. "There was a question of whether Internet telephony could deliver the quality of the traditional voice connection. We proved it could."
Developing new technology, though, is just one path to success for IT firms. Another is to take an improve an existing mouse trap, which is what Stampede Technologies Inc. president and CEO Gordon Dorworth did when he created TurboGold for Lotus Notes. Since then, the 46-year-old has created dial-up network software geared toward providing faster information access to mobile computer users, with more than 25 percent of his products headed overseas..
On the downside of the IT boom, Baloff and others advise American entrepreneurs to be careful not to repeat common mistakes, such as rushing into a foreign market before gaining enough experience at home, underestimating how much money they'll need, and trying to develop products for industries they don't really understand.
Next Step
Information technology consultant Harry Sellow says IT entrepreneurs going global should start the process with these steps:
1. "Find someone abroad with whom you can form a partnership," says Sellow, president of Harry Sellow & Associates in Menlo Park, California, which helps business owners penetrate foreign markets. "Regardless of what type of partnership you create, find one that can add value to your product for the marketplace you're going into. That might mean a company that makes the product work in a particular language or within a country's engineering and cultural habits. That can also create tariff breaks by enabling you to enter that market as a local company rather than an American one."
2. Go to the most specialized trade shows you can find. "Use them to hunt for partners and find out everything you can about your industry," says Sellow.
3. When you go to a trade show, have your product ready for sale. "Trade shows have a much higher status [overseas] than they do in the United States," Sellow says. "Europeans in particular expect you to come with a final product. They're suspicious of Americans using the show as a barometer to gauge reaction to a product that's still being refined. Entrepreneurs abroad are ready to make sales on the spot."
Christopher D. Lancette is an Atlanta-area freelance journalist who covers international business for a variety of local, national and international publications.
Contact Sources
Harry Sellow & Associates, fax: (650) 854-8882, hsello@aol.com
Stampede Technologies Inc., (800) R-OFFICE, http://www.stampede.com
VIP Calling, (781) 505-7500, dseuss@vipcalling.com
