10 tips for doing business with European buyers in IT & business process outsourcing
Europe is a great place for IT and software businesses from around the world. It is a large and booming marketplace for software products, services and technology innovation. In order to be successful in this marketplace, you should consider the following ten tips and items of advice to work together with your European buyers of IT services and products, as well as their prospects.
Contents of this page
- Clear offer
- Right price
- Quality certification
- Getting to know buyers’ motivations
- Contract terms and Service Level Agreement (SLA)
- Intellectual Property Protection (IPP) / Security / Privacy
- Image of your country
- Long sales cycle / trust
- Professionalism and communication
- Nearshore outsourcing preferred
European buyers expect that your offer is clearly communicated throughout all the channels you use, be it a face to face meeting or your website. Competition is strong and buyers do not want to waste time on guessing and figuring out what you can offer them.
- Create the “ideal” client persona. This will help you to tailor your offer. An example of a buyer persona: “a software development company with fewer than 200 staff in the Munich area, specialised in ERP development / customisation by using Microsoft Dynamics AX”.
- Get inside the head of your clients. When you formulate your offer, ask questions such as “What problems do my European prospects have?”, “What can I offer to solve those problems?”, “Why should they work with me and not with my competitors?”, and so on.
- Work out your positioning statement, unique selling proposition and elevator pitch.
In IT outsourcing, price might not be the most important supplier selection criteria, but the price has to be “right” and competitive.
- Collect pricing information about your competitors. Trade fairs are excellent places to pick up such information.
- Monitor the pricing expectations of your potential clients.
- 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.
We have often had fierce debates with IT service providers on whether or not quality certification is necessary.
- Quality certification is “good to have” because some clients look for it, because it shows that you are a professional software developer, and, last but not least, because many of your competitors have (sometimes multiple) quality certifications.
- In many countries, various sources might provide IT companies with financial support to achieve quality certification. Contact the national IT association or one of the business support organisations in your country responsible for IT export promotion. Use these opportunities to get a quality certification.
When you are considering a particular quality certification, ask the following three questions before working out the details:
a. Is it good for my company?
b. Is it good for my clients?
c. Does it have marketing value?
In order to work together successfully with your European clients and prospects, and to tailor your offer and communicate well, you need to understand their motivations. Why do they want to outsource certain processes, why did they choose you as their service provider, what do they want to achieve on the short, medium and long term, and so on. In addition to their motivations, you should also learn what your clients consider to be major risks in the outsourcing relationship. Your potential clients will value your efforts in minimising risks.
- In general, clients’ motivations change over time. In difficult economic times this often boils down to cost savings, while at other times there might be a shortage of available personnel. Follow the market developments and tailor your offer accordingly.
- Very often, you will hear why a certain prospect does not want to outsource offshore or any related part of business. Be prepared to address the main risks and fears that your prospects might have.
The contract and the SLA is one of the most important parts of your relationship with your clients in Europe. In good times, you might think that those documents have less importance. You will value a good contract and SLA, however, when the relationship with your client has fallen on hard times.
- First and foremost (if you have sizable contracts to be signed with clients in Europe), get a good lawyer in the country where most of your clients are located. Drafting a contract is not an in-house, do-it-yourself job. A good lawyer can also help you to negotiate with your clients.
- Have a well-written sample contract and SLA at your disposal that you can show to your prospective clients when and if negotiations reach this point.
- Make background checks on your clients before you sign any contract. A lawyer can help you with this process as well.
Service providers that want to enter the European IT outsourcing market have to comply with legal requirements regarding intellectual property protection, 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.
- 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 that you have effective security processes and systems in place, from business continuity and disaster recovery to virus protection.
- Verify to what extent your buyer requires you to implement a security management system such as ISO 27002.
The perception about and the image of your country as an IT outsourcing destination will influence your success in Europe. It takes a long time and a lot of effort to improve the image of your country. Companies alone, without the consent and support of the government, can do little about this matter.
- When you meet people in Europe, be prepared to deal with the following question: “I never heard about IT outsourcing providers from your country. Why should I outsource software development there?” You should work out an answer to this question. However, you need to know what other, competing countries can offer in order to have a meaningful answer to this question.
- Promote the IT capabilities and advantages of your country as an IT outsourcing destination whenever possible, including on your website.
- Cooperate closely and actively with IT associations and other Business Support Organisations to improve the image of your country as an IT outsourcing destination.
If you want to enter the European IT outsourcing market, you will have to be prepared to sustain long sales cycles, often 8–12 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 business continuity, security, intellectual property protection, communication and references even before talking about the price. Building trust is of paramount importance.
- 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 as well as following up on any leads that you have already developed.
- Show your capabilities and provide the best possible references that you might have. No one will want to be the first of your European clients.
- Know your clients’ needs or problems and tailor your offer accordingly. You do not want to have your offer ignored.
Your European prospects and clients value a proactive approach, commitment, communication skills, openness, honesty, reliability and cooperation.
- Be aware of cultural differences that might exist between you and your European clients, such as the importance of status, informal or formal behaviour, the use of titles in communication, eye contact and body language, handshakes, linear or circular communication, and so on. All of these aspects may differ, even within the various regions of Europe.
- Be pro-active, to-the-point and professional in your communication.
- Do not waste your and your clients’ time. Be punctual at meetings, in your communication and in your project delivery.
Most of your continental European clients would prefer to work with nearshore rather than offshore suppliers. It means that the competition from central, eastern, and southern Europe (inside and outside of the European Union) is strong.
- If you are not from one of the strong nearshore IT outsourcing destinations such as Poland, Serbia or Romania (to mention just a few), you will have to be prepared to answer the following question that your prospects will ask: “Why should I outsource to your country rather than to one of the nearshore destinations?” In many cases, this is a difficult question that you can only answer if you know what the various countries / regions nearshore have to offer.
- In the middle or long term, you could try to establish your own company or form a strategic partnership with an IT company in one of the nearshore IT outsourcing destinations. Establishing a company in countries considered to be nearshore (even within the European Union) is usually much cheaper than having an office in one of the traditional European IT buyer markets such as Germany or the Netherlands. Having your own office in Europe has other advantages such as contracting and risk mitigation.
- Do not forget that coming from an offshore IT outsourcing destination (and possibly from a country not commonly known for its IT outsourcing capabilities) is not an incurable disease. Offer specialised services in niche market segments and sharpen your focus.
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