Milestone Group Quarterly: July 2003
Articles
European Tech Perspective:
Renoir Partners' Ben Andersen
By Ben Andersen, Managing Partner at Renoir Partners.
The economic climate over the past two years has been tough, and nowhere has it been tougher than in Silicon Valley. Yet many European companies continue to include entry into the US market as a core focus for their strategic growth.
There is a strong argument for presence in the US. Any serious technology company must eventually succeed in the US market due to its historical position as global hub for technology development and investment. The US is considered critical to prove the value of a new technology, and as the saying goes, ‘if you can make it there, you’ll make it anywhere’. Certainly for companies in sectors of technology where the US accounts for nearly half or more of the world technology spend, entry into the US is an unconditional requirement for success.
All companies, however, who consider expansion into the US need to have a good understanding of the buying cycles of potential clients today - proven technologies most frequently experience six- to nine-month selling cycles in Fortune 500 companies. Truly new technologies with a limited track record in Europe may experience even longer selling patterns. Most important, corporate buyers are currently unwilling to invest in new technologies unless there is demonstrable evidence for very rapid return on investment. Buyers look for technologies that leverage existing assets - IT investments and information, and that readily fit within their existing infrastructure. Companies that can prove this are in a strong position irrespective of which markets they compete in.
On the upside, it is easier today for successful companies to gain visibility and traction in the US in several respects.
This may seem counter-intuitive, but the market has changed in more ways than simply a softening economy.
Foremost, the talent market is more open, and office space is up to 70% cheaper than twenty-four months ago. Second, with the collapse of so many tech firms that germinated in 1999 and 2000, real companies with real product and real value propositions can be noticed. Most interesting, the traditionally more conservative, consultative nature of selling to European buyers is a successful method in the US with the slowdown of the economy and the return to basics. We see corporate IT purchasers stateside behaving more like their European brethren. The argument can be made a thoughtful ‘European’ approach to the market is the right approach to a US buyer in this climate.
The tough question remains: should we enter the US now while the economy is weak? Conventional wisdom says, ‘wait a while’. From working with a variety of firms since the US economic slow-down, we believe conventional thinking is sometimes a mistake for well-run tech companies that have good operational skills, have proven financial discipline, and can be patient. If entry into the US is managed prudently with appropriate financial controls, now is a good time to capture market attention and space. The prerequisites stated earlier about needing a strong product and proposition clearly remain primary issues in a company’s decision. With these fundamentals, entry into the US can be managed successfully.
The bottom line is that companies that must come to the US to be successful globally should seriously consider entering now but need to be realistic about the investment required to do so properly, and the level of success they are likely to achieve in the short run.
This article was contributed by Ben Andersen, Managing Director, UK and Europe at Renoir Partners - Renoir Partners is a leading global executive search and human capital management firm for the emerging technologies market in Europe and America. www.renoirpartners.com
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