The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.
CHICAGO Ė Bill Merchantz founded Lakeview Technology in 1990 to focus on advanced solutions for continuous data and application availability. Lakeviewís technology works to ensure the availability of business information so customers can increase productivity, reduce costs and satisfy service level and compliance requirements.
In part two of a three-part Q&A, he sat down with international expert Michael Muth to discuss attracting and maintaining international partners.
Michael Muth: When did you open in Belgium? Is this a result of the acquisition of HIT?
Bill Merchantz: Our European headquarters are in Leuven, Belgium. In 1994, we acquired European competitor HIT. HIT was a very old and well-respected company that managed container cargo traffic in and out of Antwerp. They developed software that helped manage where the shipping containers are placed inside the ships and sold the software to port operators around the world.
As that software became business critical for port operators, HIT realized they needed a real-time backup system to protect their IT assets. Enter Lakeview Technology and MIMIX. HIT had established relationships with IBM in Europe and it made sense for us to join forces. We did. Learning how to do business in Belgium has been a wonderful experience for us.
What we have learned is that itís a much more socialistic business economy. Their government has significant protection measures for workers. Fortunately, weíre a small business and are relatively unaffected by this.
As we have a very liberal work and pay program, our staff has remained with us. They appreciate our strategy. Another notable difference is there are certain fiscal-friendly programs for tax reasons. Their tax code is very different. While the social tax is very high, people get tax breaks on lunch tickets and auto leases. When you add it all up, the cost of doing business isnít all that much more expensive in Europe.
MM commentary: My experience in Germany, Sweden and Poland mirrors his in Belgium. The U.S. is the most capitalistic-developed country in the world and every other country is socialistic compared to us. Our economy revolves around serving consumers. Europeís revolves around understanding for workers.
While Iím not sure doing business in Europe isnít much more expensive than doing business in the U.S., Belgium has recently introduced some new tax incentives that lower rates to those of Ireland. While corporate tax rates have dropped in a number of European countries, personal income taxes havenít fallen. While workers have more job security, they pay more taxes and give up some earnings potential for that security.
MM: When did you open in Hong Kong? Whatís the difference between your offices in Hong Kong and Singapore?
BM: We opened our office in Hong Kong in 1998. It was a month after the British handoff. We picked China so we could establish a base where we could deliver service, support and training for our customers and partners in Asia. It was a great place for us to start because thereís a lot of English spoken there. We also have quite a few banking customers in China, which is a customer group thatís steadily growing. Weíll most likely be hiring additional staff in this location.
We expanded our Asian operations in September by opening a satellite office in Singapore. We will eventually have staff in Japan as well. Japan was the first country we were able to penetrate with distribution partners.
At the time, as we werenít prepared to invest in our own office and people, we found a very strong distribution partner with multiple subsets of distributors. Weíve been very successful in Japan for many years and have a strong relationship with our Japanese IBM connections. Japan is currently the only country in which we have localized our software. Our strategy is not to go direct in Japan because we donít sell the hardware thatís part of an availability solution.
MM commentary: Despite being annexed as a special economic region of China, my impression is the Chinese have not dampened the enthusiasm of Hong Kongers for business much at all. Iíve been to Hong Kong and Singapore in the last five years and they are very high-tech and innovative. Though itís changing slowly, Japan still will take time to break down its old-world distribution channels.
MM: Why no development abroad?
BM: We just havenít reached that stage of maturity to offshore. While we tried a very small outsourcing project to India a few years ago, it just didnít make sense. It didnít work well at the size we were executing. We established staff in Poland in 2005. Weíre in Hong Kong and Singapore. We have opportunities where we have established our distribution presence.
We have people on the distribution side who can help quite a bit in growing that local presence. Itís a matter of taking a step back and determining our investment and where we want to go next. Though it sounds pretty easy, youíve got to have the internal discipline to spec it out as well as the right planning and training process. Thereís a maturing process and thereís discipline required with outsourcing. There is also some risk. You have to offshore in the right way.
MM commentary: Hereís a 16-year-old company thatís not mature enough to offshore software development and some VCs are saying itís a requirement for funding. It kind of makes you wonder. Lakeview has the great advantage of filtering potential supply partners directly through pre-existing distribution partners, which greatly minimizes the getting-to-know-you risk and costs.
MM: How and where do you localize?
BM: The translations have only been into Japanese at this point in time. We prepared the product to be able to support the double-byte character set and contracted outside to have the translations done.
MM commentary: Because Lakeview offers infrastructure software, I assume user interfaces are only for system administrators and not for all office users. The Japanese are more discerning than most in asking for localization.
MM: How many international partners do you have?
BM: Hundreds. We have multiple partners in some counties (such as in England and China). We have a master distributor in Japan and he has hundreds of partners he distributes through. As we adjust our business from relatively high margins on low volumes (which is where we began) to low margins on higher volumes, we need to reach and distribute through larger entities.
MM commentary: It appears that one partner (IBM) has been particularly helpful (especially internationally). Piggybacking upon the shoulders of an already global partner is a great way to get pulled into foreign markets. While there can be conflicts with multiple partners in one country, they can be managed.
MM: How many countries do they cover?
BM: More than 70 countries.
MM commentary: Lakeview is a real, Chicago-based international success story.
MM: How do you manage all these partners?
BM: We have a business development team that recruits, manages and structures our business relationships. We organize into partner groups (some are hardware resellers and some are systems integrators). Business development then makes sure everyone is lined up for training and certification programs. So far, this model has worked very well for us in terms of how weíve organized and how we go to market with our partners.
We treat our partners as a virtual extension of staff for Lakeview. Many partners are entrepreneurs who have started businesses in their own countries. We want it to be a win-win deal for everyone (all the way down to our customers). There has to be profit for that entrepreneur to want to do business with you. IBM distributes for us in many countries on a worldwide agreement. Thatís also win-win. It takes a lot to win over a customer and you want to do all you can to keep them as a customer.
MM commentary: It is difficult to navigate so many partners in so many countries. Companies organized around product groups with global responsibilities tend to ignore former U.S. companies because the U.S. comprises a much greater percentage of the revenues. This doesnít appear to be happening at Lakeview. With so many partners, I questioned how close the relationships can be. After extensive training, though, it can work.
Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at firstname.lastname@example.org.
Click here for Muthís full biography.
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