Exporting Technologies Not As Hard As It Seems

By Margot Carmichael Lester

Despite declining exports (U.S. Technology Exports on a Decline), many industry observers say international business abounds for U.S. technology exporters with the right products and partners.

U.S. Free Trade Agreements are designed to encourage the exportation of information technology, both hardware and software. Recent agreements with Singapore, China and Australia allow U.S. exporters to get into these lucrative markets without enormous import duties. Tariff barriers are reduced significantly, sometimes to zero.

Additionally, the agreements address non-tariff barriers such as standards and testing requirements that many companies find excessive and unnecessary. FTAs also include language protecting American software from piracy, prompting importing countries to strengthen their intellectual property laws and fortify enforcement.

"There are great opportunities for U.S. technology companies," says Takahiro Susaki, President and CEO for Itochu Technology Inc. (ITI), the business development and venture investing arm of ITOCHU Corporation, a large Japanese trading house.

"International customers aren't looking for products," he says. "They're looking for solutions." To meet that need, ITI has forged successful business relationships with U.S.-based technology companies including Sun Microsystems, Cisco Systems, Oracle and Siebel Systems.

International Rules

While there is a worldwide demand for solutions that address complex business problems and enhance productivity, doing business in the international market isn't a sure thing.

Experts offer these basic tips for any American company, tech or otherwise, considering entry into the international marketplace:

Be careful with whom you partner. Make sure interests are clearly aligned or you will be bogged down with constant management problems.

Secure accurate and meaningful business intelligence. Find resources actively working with end-users.

Do your homework. The Department of Commerce publishes regular reports that provide technology-specific market data. Recent reports include Argentina and Brazil, Western and Eastern Europe and Japan. A report on China will be published later this year.

Pay attention to financials. Exchange rates, tariffs and other items should be considered before setting a pricing structure.

Attend trade shows and expos in the countries that interest you. This helps you build alliances and gather "ground-level" market and cultural data.

Apply for local, state and federal international trade missions to expand your knowledge of the global marketplace

Know customers' pain and be prepared to make the case for why they should import technology to alleviate it.

Establish staying power and a commitment to customer service. After the economy crashed, many U.S. companies left international customers without local support. Be ready to allay fears that you will do the same if there's an economic upheaval or other trade disruption.

Test-drive everything. Learn all you can about how business is actually done in your target country, from accounts payable to shipping to regulations. Not knowing can cost you.

Support In-County

Several U.S. tech concerns are big winners in the export game. Consider mobile technology developer Openwave.

Mobile device use in Europe and Asia is far more robust than in the U.S. About 35 million people in Europe use mobile devices, primarily phones. However, Japan is easily the world's most mobile nation.

According to the Japanese Telecommunications Carriers Association, there are about 76 million mobile phones in use in Japan today. The Japanese Ministry of Home Management estimates that approximately 60 million of those subscribers surf about 60,000 web pages on their wireless devices.

Those numbers prompted Redwood City-based Openwave to consider entering the Japanese market with its mobile Internet browser. The solution, based on WAP 2.0, allows mobile carriers to take advantage of advanced networks and new devices with enhanced graphical user interfaces.

"It's very hard for a U.S. technology company to go it alone, especially in today's market," Susaki says. That's why Openwave sought out ITI in 2000 to help it gather market intelligence, secure a business partner and create a distribution/fulfillment chain.

ITI analyzed Japan's leading mobile carriers and determined Tokyo-based KDDI Corporation to be the most promising partner. ITI used its reputation in Japan to set up meetings and assist in negotiations. KDDI agreed to use Openwave's technology to deploy its next generation au service. Once the deal was sealed, ITI began assembling the supply chain.

Today, Openwave is a $250 million company. "Their biggest revenue source is overseas," Susaki says, adding that $4 million of the company's first $6 million in sales was from ITI-related export deals.

Domestic Support

While firms like ITI help some tech companies navigate international exporting, there's plenty of support stateside provided by various government agencies.

The Department of Commerce (DoC) is the best place to start. There you can receive information and counsel on tariff and non-tariff barriers, business conditions and political factors. The Department's Trade Development Office, based in Washington, D.C., is designed specifically to serve the needs of small and medium-sized businesses wishing to export goods and services.

Other departments and agencies provide free services to domestic companies, such as the DOC's Commercial Service and the Office of Information Technology and Electronic Commerce. Additional resources are available through the Small Business Administration, particularly for start-up companies seeking early funding.

San Diego-based Urchin Software Corporation turned to the DOC when it decided to grow its business by going global.

"Our software provides business and marketing intelligence that helps companies make decisions, so both domestic and global markets represent a tremendous amount of opportunity," explains Brett Crosby, Urchin's vice president of business development and marketing. "Just to service the U.S. market, we made Urchin available in 10 languages. So, taking our products global was the natural extension and has been in our plans for some time."

Urchin used the DoC to create and execute an export strategy. "It has been extremely helpful for us to receive guidance from … Carrie Brooks at the San Diego DoC [office]," Crosby says. "She has relevant industry experience from her previous employment in Qualcomm's Eudora division that has helped guide us in just about all of our significant efforts overseas."

Before working with the DoC, finding the right people and partners was a challenge. "Our friends at the DoC have helped us obtain several new customers, resellers, foreign business partners, translators, a master distributor, an invitation to JETRO - which we accepted - and help opening our first foreign office in Japan," he recalls.

JETRO, the Japan External Trade Organization, hosts international business expos several times a year. Its Techno Business Forum helps non-Japanese IT and biotech firms explore opportunities for business partnerships with Japanese firms, including joint ventures and sales alliances. Thirty IT and 10 biotech companies will be selected to participate in the next forum in Tokyo in January 2004.

Today, Urchin's products are available in roughly 100 countries via hosting partners, resellers, or master distributors, and anyone can buy product off the web. "Since many of our large data center customers are global, expanding our presence internationally helped them justify implementing Urchin in all of their facilities, not just their U.S. operations," Crosby notes.

The privately held company doesn't disclose financial information for competitive reasons, but claims to have revenues in the $2 to $5 million range. Exports currently make up about 25 percent of the company's bottom line.

Crosby encourages tech companies wishing to enter the export game to proceed, but with caution. "Companies should consider entering the global marketplace for the same reason they would enter any marketplace: to expand their reach and increase their bottom line," he says. "However, it isn't something to rush into. It can be very expensive if done wrong, but if done right, it can be very rewarding."

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