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8 tips for organising your IT and IT-enabled services exports to Europe

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While IT and IT-enabled services export to Europe is not “export” in the traditional meaning of the word, there are several things to take into consideration when you start exporting your product or service. This document consists of eight tips to successfully get your product or service on the European market. Most tips revolve around the paperwork needed for exporting, but there are also tips for getting a competitive edge on this promising market.

In this module, we mention a few documents that are needed for exporting IT and IT-enabled services to Europe. It is important to keep in mind that these documents are normally prepared by lawyers. You might come across these documents, but you do not have to be capable of drafting/writing them. You should be aware of the basic terms and implications and get a lawyer to draft them or check them.

1. Certification

There has always been a debate within the sector on whether or not quality certification is important. If anything, it can show your commitment to your product or service and proves that you are a serious service provider that focuses on your clients’ needs, quality and continuous improvements.

The type of certification that is appreciated depends on the type of product or service you offer. For example, for software development in the automotive industry, ISO 26262 Part II and ISO/PRF PAS 21448 are very important.

Tips:

  • When you are considering a particular quality certification, ask yourself three questions before working out the details: Is it good for my company? Is it good for my clients? Does it have marketing value?
  • If you (aim to) specialise in offering IT or IT-enabled services for particulars sectors, find out which certifications are relevant.
  • Check if resources are available that might provide your company with financial support to achieve quality certification. Contact your national IT association (for example, TAG Georgia, AIBEST in Bulgaria, ITIDA in Egypt or BPESA from South Africa) or one of the business support organisations in your country responsible for (IT) export promotion. There are also regional outsourcing associations, such as CEEOA, which is active in Central and Eastern Europe.
  • If you are an African IT or IT-enabled service provider, take a look at the #FastTrackTech Africa Initiative by Intracen.

2. Long sales cycle/trust

As an exporter to the European IT outsourcing market, you will have to be prepared to sustain long sales cycles, often 8 to 12 months, between first contact and signing a contract. Moreover, European IT services buyers are usually quite cautious of selecting an IT service provider offshore. They will consider various risk factors, business continuity, security, intellectual property protection, communication and references even before talking about the price. Building trust is very important.

Tips:

  • Be there. It is very important that you meet face-to-face with your prospects and clients. Combine European trade event participation with meeting your clients and follow up on any leads that you have already developed.
  • To shorten the sales cycle, truly connect with new leads and try to spark a relationship quickly. If you have a mutual acquaintance, ask to be introduced.
  • Show your capabilities and provide the best possible references you have.
  • Know your clients’ needs or problems and tailor your offer accordingly.
  • With a long sales cycle, it is important to keep in touch with your nurtured leads through the entire process; this makes it easier to make the sale when they are ready.

3. Offer the right price

For IT and IT-enabled services outsourcing, price is often not the most important selection criterion, but the price has to be right and competitive. When you make your prospect an offer, include the price. Be transparent about the number of hours you (expect to) work on the project and the hourly rates.

You must also choose a price model for your product or service. There are three popular working models: Fixed Price Contract, Time and Material Approach and Dedicated Team.

Tips:

  • Develop your pricing strategy. Research the average salaries in your European target country, for example via Payscale, a global database for salary profiles. Collect pricing information about your competitors. Market reports are available online to get an idea of the pricing situation in your product/market combination. To find pricing information, please have a look at the blogs of Yalantis, Cleveroad or Social Shorthand.
  • Go beyond setting the right price. You should work out your pricing strategy, including your (and your clients’) preferred pricing model, payment terms/expectations, how and when you provide discounts and so on.
  • Create the “ideal” client persona. This will help you tailor your offer. An example of a buyer persona is “a software development company with fewer than 200 staff in the Munich area, specialised in ERP development/customisation by using Microsoft Dynamics AX”.
  • Choose a type of price model for your outsource contract.

4. Make a memorandum of understanding

A memorandum of understanding (MOU) is an agreement between two or more parties outlined in a formal document. It signals the willingness of the parties to move forward with a contract. It can be seen as the starting point for negotiations. An MOU is not legally binding (like a service contract or a Service Level Agreement (SLA)).

Tips:

  • Look at templates of MOAs to get an idea of how you want to shape your (future) MOA. You can include binding and non-binding provisions.
  • Communicate to your (potential) client that you wish to draw up a memorandum of understanding.
  • Work with a lawyer in drafting the MOU.

5. Intellectual Property Protection

Service providers that want to export IT and IT-enabled services to the European market have to comply with legal requirements regarding intellectual property protection (IPP), data security and privacy. The European Union has established specific rules covering these areas, but you also need to take into consideration each Member State’s own regulations and specific laws. Contracts often contain clauses related to IPP.

Copyright is the most common form of IPP in software. Copyright is a legal way to protect an author’s work. It is a type of intellectual property that provides exclusive publication, distribution and usage rights for the author. This means that whatever content the author created cannot be used or published by anyone else without the consent of the author.

A Non-Disclosure Agreement (NDA) is a basic measure that protects customers’ intellectual property. The NDA has to be signed by both you and your client, but also (when relevant) by the developers that will work on the project who have access to the code/technology.

A Non-Compete Agreement (NCA) prevents the parties from revealing ideas and/or innovations to competitors. The idea is that, as an agency or developer, you cannot enter a partnership with a potential competitor of your client for an agreed amount of time. It can be signed by both companies and individual developers.

Tips:

  • If you are dealing with personal data, make sure that you familiarise yourself with the European laws on personal data protection to avoid (unknowingly) damaging your business. Read more about data protection legislation on the website of the European Commission.
  • Make sure you have effective security processes and systems in place. These can range from business continuity and disaster recovery to virus protection.
  • Offer your customers the possibility to sign a Non-Disclosure Agreement and/or a Non-Compete Agreement.
  • Verify to what extent your buyer requires you to implement a security management system like ISO 27002.
  • Find and work with a lawyer from the country where your client resides to formulate the contract/NDA/NCA.

6. Contract terms or Service Level Agreement

Typically, a contract is a written agreement between two or more parties. It is enforceable by law. It outlines the products or services provided, duration, cost, resources, approach and more.

A Service Level Agreement (SLA) is also a commitment between a service provider and a client, but it is more focussed on measuring the performance and service quality. There are three types of SLAs: service-based, customer-based and multi-level or hierarchical SLAs.

Service-based SLA: covers one service for all customers. If you provide customer contact services for many customers, this type of SLA will make the service level the same for all customers that will be using these services.

Customer-based SLA: an agreement with one customer that covers all the services used by this customer. It is like your contract with your telecom operator. You use voice services, SMS services and data services, all from the same telecom operator. Similarly, you as an IT service provider provide several services for a business and the customers, and if all the service levels are documented in one service level agreement for the provided services, it will be a customer-based SLA.

Multi-level SLA: this agreement focuses on the organisation of the customer. It discusses all services you offer and their relationship with other (subordinate) services.

An SLA can be an important component of any vendor contract. It sets clear and measurable guidelines for the partnership. It makes sure you are on the same page from the start. It also provides recourse in case the obligations written in the contract are not met. It can protect your business and will give you peace of mind. The reason companies choose to write up an SLA is because you can revise an SLA without having to revise the contract. The contract can just refer to the agreed SLA.

Tips:

  • Get a good lawyer in the country where most of your clients are located. Drafting a contract is a specialisation. A good lawyer can also help you negotiate with your clients.
  • Have a well-written draft contract and SLA at your disposal. Show this to your potential customers when negotiations reach this point and your client requests it. Many sample SLA contracts can be found online, for example at SampleForms, Template.net or Techdonut.
  • Run background checks on your (potential) clients before you sign any contract. A lawyer can help you with this process as well.

7. International Payment

IT and IT-enabled services outsourcing usually involve no export documents. The main payment issues occur in international payment depending on how local banks in DCs handle international payment. Examples of issues include: whether transferring money internationally is allowed, whether transferring in different currencies is allowed, bank commissions, exchange rates and time to complete a transaction.

Fixed-price projects are sometimes paid for in fixed instalments, for example: 20% up front, then 30% after delivering a certain part of the project, another 30% after finishing the second deliverable and the last 20% at project completion.

Payment by the buyer is usually done against mutually agreed-upon delivery requirements and a certain schedule of delivery and payment. Some penalties may hinder or lessen payments. Conditions for payment should be discussed in your Service Level Agreement (for information on Service Level Agreements, look at the document: tips for doing business with European buyers).

Preferred payment methods vary by country, so it is important to understand what is best for each market you (aim to) do business with. For example: in the Netherlands, 60% of payments are by direct debit, and in Germany, 46% of payments are done by online bank transfer. However, most European companies probably prefer to work with a wire transfer, as this is one of the more secure ways to receive payment internationally.

Tips:

  • Investigate international payment before you sign the contract. You can read this factsheet about International Payment from developing countries. It focuses on the tourism sector, but it can still be useful. Being able to offer smooth international payment transactions does give you a competitive advantage. So carefully select the right bank for your (international) business.
  • Try to negotiate short-term transactions (time between delivery and payment between 0 and 12 months).

8. Read our additional studies regarding IT and IT-enabled services outsourcing

  • Tips for buyer requirements – to find tips regarding buyer requirements when doing business with European Buyers of IT and/or IT-related services;
  • Tips for doing business with European Buyers – to find tips for doing business with European buyers of IT and/or IT-related services;
  • Tips for finding buyers – to find tips for finding buyers in the European IT and IT-related services outsourcing sector.

This study has been carried out on behalf of CBI by Globally Cool.

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