Local IT companies wanting to export their technology products need to be aware of the many challenges they face before embarking on an export programme, says Doug Franke, partner and e-business leader at PricewaterhouseCoopers (PwC) Southern Africa.
Although South African IT products are often priced at as little as a fifth of the price of competing foreign products, too many domestic companies that develop technology and try to export it fail to maintain a sufficient South African cost base.
He cites as an example a company PwC is helping to roll-out its SA-developed solutions in Europe and Australia. The software development and support team lives and works in SA, but the sales team operates in the UK, where costs are substantial.
"Unfortunately the reality is that once the software or service is developed it usually needs to be sold face to face. Frequently, these selling costs soon become the lion`s share of operating expenses for a young company."
Although some companies have tried to solve the problem by relocating South Africans, people overseas want locals to do the selling.
More hurdles
Selling via the Internet is only a partial solution to the cost problem. "Although the prices are one-third to a quarter of the overseas prices, we are finding that it is first necessary to develop a relationship that is founded on trust. That`s more often than not a mountain to climb over a long period of time."
It has been suggested that SA call centre facilities could overcome the foreign cost obstacle, but there is a problem with the high cost of bandwidth.
Franke says although there are stumbling blocks in the way of export success, he believes the goal can be achieved through an awareness of the problems and a strategy to meet and beat the challenges.
In addition to the cost issues, he lists the following as challenges: identifying the most appropriate place to register the technology; putting the company`s offshore structure in place; tailoring the company`s management structure; raising the necessary finance overseas, without giving away too much equity; negotiating mutually beneficial territory channel partnerships; real-time support; transfer pricing; and pricing software for a global market.
Related stories:
SA-developed software: From isolation to inspiration
Share