SaaS Entrepreneur

EXCERPT FROM CHAPTER TEN

SaaS Entrepreneur: The Definitive Guide
to Succeeding in Your Cloud Application Business

SaaS and International Markets

The Most Favorable SaaS Markets

Top Markets

Several English-speaking countries rank as top SaaS markets outside the U.S. These are the U.K. and Ireland (2nd largest SaaS market in the world when treated as one combined region), Canada (5th), Australia/New Zealand (11th) and Singapore (15th). These are the most promising locales for U.S. SaaS companies to consider first for international expansion, as they have a high number of internet users and well-developed internet infrastructure for web marketing. None of these locales require extensive translation and localization efforts, and sales can be conducted in English in each of them. (You will need to account for British spelling and vocabulary differences in the U.K. and Ireland and some minor tweaking for Canadian conventions may be advisable in your marketing materials.) These are the best territories to develop and test a U.S.-based SaaS vendor’s international growth strategy. Even if your company is not located in the U.S., there is a strong tendency to move into these markets because English has increasingly become the international language of business, travel and commerce, allowing you to internationalize once and then appeal to the world’s strongest markets.

Benelux and Scandinavia/Finland

Next on the list of strong potential markets are Benelux (Belgium/Holland/Luxembourg) and Scandinavia Norway/Sweden/Denmark/Finland. (The Finnish language is distinct from the various Scandinavian tongues.) Both are highly receptive towards the use of English as a language for business, have a relatively high percentage of English-speaking professionals, and possess very high national Internet usage.

Israel and South Africa

Two smaller countries that you may want to target as you open up new markets are Israel and South Africa. English is widely spoken and used in both countries. Israel is a first-world country, equivalent to a mid-tier European nation, surrounded by turbulent third-world Islamic populations. The country is also a miniature software development powerhouse given its population of 7.5 million and its penchant for creating new software and SaaS companies, many of which end up relocating to the U.S.

In South Africa, despite the end of apartheid and the ascension of a majority black government, there is a stark contrast between the country’s two major racial groupings. White GDP per person stands at the level of the second-tier Western European countries while blacks live close to third-world standards. While there is an expanding market for SMB SaaS products in South Africa, in the near future SaaS vendors will not be selling many subscriptions for enterprise-class applications outside the few large institutions such as government, major banks, and larger manufacturers.

Mid Opportunity Markets

Germany and France are large markets, ranked third and fourth in terms of SaaS market size. Italy and Spain are medium-sized markets, ranked 12th and 13th. These four large European countries — which combined with the U.K. account for 65% of total European GDP — have a high number of Internet users and excellent to good Internet infrastructure to support web marketing. However, translating software and websites into German, French, Italian and Spanish are required to initiate distribution of SaaS products. Also, the organizations and businesses that will be SaaS target markets tend to be slower to innovate and to accept new technologies than businesses in the countries listed in the previous sections.

Later Opportunity Markets

Unless special circumstances apply, the following markets should be saved for exploration after your company has established international opportunities in the top venues.

Japan

The fifth largest SaaS market in the world (tied with Canada), Japan is notoriously difficult for non-Japanese software vendors because of language and cultural barriers and resistance to businesses from outside the country. In addition, despite the success of a few large SaaS vendors, there are significant cultural barriers to sales because Japanese software customers insist on buying through Japanese resellers. This requires a software vendor to establish relationships with Japanese partners, who extract higher commissions than partners from other countries. Software and web-site translation into Japanese, a double-byte character set (DBCS) language, is vital.


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