international business expansion guide

Emerald Technology in association with USA2Europe

International BusinessExpansion Guide

“For many entrepreneurs, their teams and backers, thedecision to expand abroad is more than a big deal; it is an inflection point in the lifecycle of their business. Get it right, and the company can grow exponentially, and see its value soar. Get it wrong, and it can mean a world of pain and often blame.”

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International Business Epansion Guide©

Emerald Technology, all rights reserved

Contents:

Uncertainty 1Compliance 1 ComplianceforUScompaniesoperatingabroad 2Accountability 2Location 2 Gettingthebeststart 2 Takethepathofleastresistance 3 AfootholdinEurope 3Talent 4 Achievingabalance 4 Partneringforsuccess 5 Useaprofessionalorganization 5Structure 5 Becarefulofmeetingcompliancerequirements 6 Compliant,costeffectivesolutions 6 Apayrollonlysolution 6 Whollyownedoverseasoperation 7 Experthelpgivespeaceofmind 7Conclusion 8Netezza Case Study 9Contact 14

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International Business Expansion Guide©


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The decision to grow a business internationally, and particular-ly to establish a permanent bridgehead in a foreign country is a watershed moment. It often marks a point of real transition, changing the business from one with narrow, national market perspective, to one focused on its global potential.

For many growing US-based tech companies, the idea of venturing abroad is an attractive one, but the fear of the unknown holds them back, restricting their growth

UNCERTAINTY

Most successful senior executives, far from being risk takers,seekcalculatedgamblesbasedonhavingasmuchinformationaspossibleinadvance,andemployingsolutionsthatstacktheoddsintheirfavor.

Factorssuchas thestrengthofcompetitionandthepotentialofagivenmarket;theavailabilityoftherightresourcestosup-port their investment and theprobable costs associatedwithgettingfromstart-upoperationtoROIcanbecriticalindeciding whethertoinvestornot.

COMPLIANCE

In the US, compliance is an essential requirement for everybusiness, and ensuring their company complies fullywith US regulations like Sarbanes-Oxley is an important considerationforseniorexecutives.

Itisperhapsunsurprisingthen,thattoppingthelistofconcernsformanyUSBoardswhenconsideringwhethertoexpandtheirbusinessoverseas,isworryovermeetingforeigncompliancerequirements, and thepotentially expensive consequencesofgettingitwrong.



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Compliance for US companies operating abroad

Compliancerequirementswithrespecttolaborlaws,anti-trustandeconomic-espionageapplyequallytoacompany’sdomesticandforeignoperations.

For example, labor agreements have to be both acceptablein the US and meet local conditions. Caution is required, asthe company cannot always impose U.S. standards on local employees, nor can it allow practices locally that would beviewedasunfairorillegalintheUnitedStates.

ACCOUNTABILITY

Inadditiontolocalanddomesticcompliance,araftofUSlegislationisspecificallytargetedatinternationalbusiness.ThismeanstheUSGovernmentcanstillholdaCompanytobeliableforeventsoractionsthatmightseemreasonablytobeoutsideitscontrol.

LOCATION

Oncethereisastakeholderagreementthatacompanyshouldexpand overseas, possibly the next most important decisionis the choice ofwhere it should locate its first presence. For companiesunfamiliarwithoperatinginforeigncountries,itisagoodideatoseekguidancefromexpertsininternationalbusi-ness expansion before committing the business. Making therightchoicesfromtheoutsetcansignificantlyimpactthefuturesuccessoftheventure.

Gettingthebeststart

Many factors are likely to affect the choice of location, butby far themost important isaccesstoareadymarket for the company’sproductsandservices thoughmanyUScompaniesareputofflocatingincountrieswhereEnglishisnotthefirstlanguage.

Failure to comply with local labor laws in some countries can expose a business to expensive settlements or law suits against the parent company



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Overcomingthisbarrier isbestachievedbyemployingprofes-sionals-whetherinterimmanagementorpermanentstaff-thathavesoundlocalknowledge,speakthelocallanguageandhaveanetworkofcontacts,enablingthemtodeliveraquickerandcosteffectiveROI.

Takethepathofleastresistance

Withoutadoubt,somecountriesaremoredifficultthanothers.However,withtherightadvice,apartnerwithlocalknowledgeandtheabilitytoputtherightservicesandcontractualagree-mentsinplacefromtheoutset,thepathwaycanstillbesmooth.

Sothefirstruleofchoosingalocationshouldbe:Gowhereyourcustomersare,andbesureyoucanprovideyourproductsorservicestherewithoutrestrictions.Somecountriesaresubjectto US Government control over certain imports and exports,orhave sanctions inplace.Toensurethecompany iscompli-ant,itisimportanttobeawareofanylawsandrestrictionsthat relatetotheproposedterritory,especiallywheretheexportof technologyorIntellectualPropertyisinvolved.

Once the right markets to attack are established, thensecondary issues can be considered: where possible regionalpartnersarelocated,abeneficialtaxregime,andareasonableGovernmentthatwelcomesforeigninvestment.

If the company is going to be covering an entire region likeEurope or Apac, then choosing the right location is a key decision.

AfootholdinEurope

InEurope,forexample,theUKhasfamiliarcompanylaw,speaksthesame language,andhas lenienttax lawsaswellasstrongbankingandfinancialconnectionstotheUS.Additionally,thereisalonghistoryofsuccessfultransatlantictradeandinvestment.

AstheUKisaninternationaltransporthub,manyseeitasanideallocationtoexpandto,enablingthecompanytocovernotjustEuropeandScandinaviabutfurtherafieldtotheMiddle

Some countries can seem more familiar than others for US businesses expanding overseas.



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EastandAfrica.Forthesereasons,manyUScompanieschoosetobasetheirEMEAHQoperationsintheUK.

The Netherlands too is popular as it also has a familiarbusinessclimate,moderatetaxregimeandmostpeoplespeakEnglishamongstotherlanguagesincludingGerman.Thetrans-portlinksarealsoexcellent.

ExpandinginAsiaPac

SingaporeandHongKongarebothwellestablishedasexpan-sioncentersforUSandEuropeanbusiness,havestablegovern-ments,business-friendlytaxsystems,andlegalsystemsprimar-ilybasedonUKlaw.BotharealsogoodhubsforestablishinganAsianfootholdanddoingbusinessacrosstheregion.

Australia isathirdpossiblechoicewithsimilarly familiar laws,albeitalessbenigntaxsystem,howeverisfurthertotraveltoandfromclientsiftheintentionistoserviceJapan,China,KoreaandotherNorthernHemisphereAsiancountries.

TALENT

Possiblythemostchallengingaspectof internationalbusinessexpansion ishumanresources,andassales is likely tobe thefocus,findingandattractingtherightcustomertouchtalent -seniorexecutives,pre-sales,salesandpost-salessupportwillbeapriority.

Achievingabalance

Asidentifiedearlier,theidealcandidatetoleadthebusinessisan individualwhetherpermanentor interimwith localknowl-edgeandcontactsand,ideally,hands-onskillsandpreviousexperienceinaStart-upenvironment.

However, someone tooentrepreneurialmaybecomedissatis-fiedwithworkingfortheUSparent,andmayevenposealong-termthreattothebusinessonceestablished.Equallyevenhighachievers,iftheyareusedtohavingastrongsupportstructurearoundthem,canflounderwhenitisremoved.

Theperfectcandidateislikelytobeahighlydisciplinedandself-motivatedproblemsolver,familiarwithlocalbusinessculture,possiblywhospeaksthelanguage,withareadynetworkofrelevantcontacts.



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The challenge is in finding and attracting such an individual,andoffering thema compensationandbenefitspackage that motivatesthemtomove.

Partneringforsuccess

Fromthemoment,thebusinessstartsoperatingoverseas,theclock istickingtoachieveROI. Foranycompanytotrytoun-dertakeasearch,selectionandrecruitmentprocessinaforeigncountry at arm’s length is fraughtwith potential risk.Howev-er,neitherUS-basedRecruiters,HR,norastandardrecruitmentagencyislikelytobegearedtohandlingthiskindofassignment.

Localknowledge,contactsandthetoolsandmethodologiestoseekoutandengagewith thehighest caliberpeopleonyourbehalf,areallcrucialifyouaretosurveythemarketandfindthebesttalent.

The ideal solution is toworkwithapartnerwhounderstandsyourbusinessproposition,willprofileexactlytheskillsandex-perience mix you seek and take a methodically approach to findingandattractingthetalenttoleadyourteam.

Useaprofessionalorganization

Thekeytothesuccessofthewholeventureliesingettingtherightcustomertouchtalentinplacefromtheoutset.Thereforeitisfarmoreefficientandcost-effectivetoworkwithaspecialistSearchandSelectionpartnerwhowillundertakeconsiderableresearchandqualificationbeforeputtingforwardcandidates.

STRUCTURE

Beforeacompanycanstartaneffectiveoperationoverseas, itneedstoconsiderthebeststructureforitsforeignventureandfortheemploymentofresources.

Atitsmostsimple,acompanyexpandingoverseascoulddecideto appoint a distributor, VAR or set-up a partnership or jointventure.However,operatinginforeignterritoryinleaguewitha third party comeswith its own set of issues and risks, andis likelytobe lessprofitable,andcertainly lesscontrollableor compliant.



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Becarefulofmeetingcompliancerequirements

Oneoptionmany companies consider is to engagewith, andselectcontractorstoleadthenewoperationandbilltheparentcompanymonthlyfortheirsalary,expensesandcommissionsasasupplier.Thecontractorsare thenresponsible fordeliveringROIandforpayingtheirtaxes.

Caution needs to be exercised however as this arrangementmaywellbeseenbylocaltaxauthoritiesashiringfulltimeem-ployeesundertheguiseofconsultants,andcanleadtosignif-icanttaxevasionrisks.Withtheworldbecomingeversmaller,Governmentsareincreasinglycrackingdownoncompaniesthatseektofloutthelawandevadetax.

Compliant,costeffectivesolutionsthatdeliverrapidROI

Oneofthemostcosteffectiveandfastestsolutionstogetyourbusiness into a new market quickly is to employ a business acceleration service, led by experienced managers who owntheir legalentity,butworkasyour interimteamtogetanewventurestarted.

Typically, these individuals will have built up very successful remote operations previously for technology vendors, theywillhaveawealthoflocalknowledge,speakthelanguageand alreadyhavebuilt-upanetworkofcontactswithpotentialpartnersandcustomersinregion.

Inthiscase,theiroperationappearstotheoutsideworldtobetheoverseasofficeof theparent company, and theywork tohelpdefineyourgotomarketstrategy,buildyourbusinessanddeliversalesintheirregion.

Aninterimsolutioncanbetheidealwaytogetyourinternation-al business establishedwithout need tomake a commitmentto a local subsidiary. Itwill also significantly reduceoverseasset-upcosts,oftenbyatleastfiftypercent,providingfareasieraccessandmuchfasterROI.

Apayrollonlysolution

Thesecondcompliantoptionofferedbya fewspecialistcom-paniesisapayrollonlysolution.Formostcompaniesseekingtoexpandabroadquickly,hirepermanentemployeesandtestthemarketwiththeminimumofupfrontcost,thisishighly



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resourceefficientandcosteffectivepayrollprovidestheabilityforyourbusinesstoemploylocalsonapermanentemploymentcontractatafractionofthecostofsettingupawhollyownedsubsidiary.

Payrollonlymaybethebestoptionwhenemployingonlyafewindividualsinanumberofcountrieseachofwhomsellintodif-fering territorieswithin a region. Thepayrolls canbe createdwiththeintentionofextendingtheoperationtoset-upaperma-nentsubsidiaryinthefuture.

Whollyownedoverseasoperation

Thefinalandmostcommonsolutionistosetupawhollyownedforeignsubsidiarycompanywitheitheraninteriminchargeoramanagerjoiningasanemployeeofthenewbusiness.

Forsomecompaniesseekingapermanentbridgeheadabroadandwithconfidenceintheirproductandmarketthisapproachmakessense.

However,ifthenewbusinessistobeestablished,cautionshouldbeexercisedtoensureallthebasesarecoveredproperlybeforeitstartstrading.

Experthelpgivespeaceofmind

Professional advice should be sought at the outset to ensurethatthetaxarrangements,payrollmanagementandotherlegalandadministrative functionsare fullycompliantwithbothUSandlocalrequirements.

Theidealsolution,andtheoneproventobemostcosteffectiveandreturnthequickestROI,istoworkwithspecializedGlobalExpansionExperts.Employingaspecialistfamiliarwiththelocalmarketandwiththecontacts,knowledgeandexperiencetode-signtherightsolutionfromtheoutsetisasmallinvestment,butonethathasprovenoverandovertoofferthebestvaluewhenallfactorsaretakenintoaccount.



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CONCLUSION

FormanyBusinesses,theirteamsandbackers,thedecisiontoexpandabroadismorethanabigdeal:itisaninflectionpointinthelifecycleoftheirbusiness.Getitright,andthecompanycangrowexponentially,andseeitsvaluesoar.Getitwrong,anditcanmeanaworldofpainandoftenblame.

Thebestadviceis:ifacompanylackstheskillsandknowledgeitself, to seek out professional advisors who know the mar-kets, the laws and have access to high caliber resources thatwillhelp to take thegambleoutofbusinessaccelerationand internationalexpansion.



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Based just outside Boston, Massachusetts, Netezza designeddatawarehouseappliancesforbusinessesthatwerelookingtoanalyselarge,complexandrapidlygrowingvolumesofdata.

Thecompanyexperiencedsignificantgrowth intheUSbeforesettingupoperationsinanother11countries.In2010,NetezzawasacquiredbyIBM.

LookingtonewhorizonsAfter establishing a commanding position in the US, Netezzastartedlookingatthepossibilityofexpandingoverseas.

“It made sound business sense,”saysDrewSantaniello,TechnicalAccountingManageratthetime.

“We’d gained a lot of traction in the telecommunications and fi-nancial services sectors in the US. There was obviously potential in those markets overseas - not to mention sectors like utilities, healthcare and media.”

Thecostoflocalknowledge“Setting up a new team overseas takes an awful lot of effort. You’ve got to find somebody who has local knowledge on tax issues, VAT and filing requirements, as well as experience of set-ting up a new legal entity. And then you’ve got to find your first people on the ground!”

“Nine times out of ten,” he adds, “there is no one person you can rely on for that knowledge. You need two or three specialists, and that can be very expensive - especially in the early stages of business when there’s often a lot of inactivity.”

Asluckwouldhaveit,Netezza’sCFOPatScannellknewexactlywhototurnto.Severalyearsearlier,hehadworkedwithAndyHooper,aformerEuropeanCFOwithover20years’experiencemanaginglegalentitiesforUStechnologycompaniesinEurope.HooperhadrecentlyestablishedUSA2Europe,abusinessded-icated to helping organizations inNorth America expand intoEurope and Asia. This in turn meant that Netezza were also

Our solution for



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introduced to Emerald Technology, an Executive Search firmfoundedbyMikeJonesin2000.Mikeandhisteamhadworkedwith someof the largest technology vendorswithin theTele-communicationsandBigDataspaceandwereeagertoexpandtheirportfolioofsuccessbyassistingwithNetezza’sexpansionrequirements.

BoostingrevenuesintheUKNetezza’sfirsttargetcountryoutsidetheUSwastheUK.“As a major financial hub and an ideal jumping off point for the rest of Europe, London made a lot of sense,”saysSantaniello.

ScalableandflexibleAccordingtoSantaniello,itwasn’tjustthelocalknowledgethatUSA2Europebroughttothetableinthoseearlymonths.Itwasthefactthattheyweresoscalableasanorganization.

“As our business grew in the UK, USA2Europe were able to start adding in the services we needed. But in the beginning, they only turned on’ what we really needed - which kept costs down.”

BootsonthegroundAftersuccessfullystaffingouttheUK,NetezzarolledouttoJa-panandAustralia,beforeexpandingintoFrance,ItalyandotherpartsofEurope.EmeraldTechnologywaslargelyresponsibleforplacingthefirstbootsonthegroundinthesecountries.

“It was really a case of following the customers, wherever we saw opportunities, we’d start putting people”

Thatwasonlypossible,ofcourse,becauseEmeraldTechnologyhadeachcountrycovered.

“Emerald Technology put boots on the ground straight away,” saysSantaniello,adding”Theyhadaknackforscopingoutex-actlywhatweneededineachcountrytoo.”

“Whatever the country, whatever our intentions, they under-stood the unique needs of our business, and what needed to be done to minimize our costs.”

SolvinguniqueproblemsAcaseinpointwasNetezza’simportdutyliability.

Netezzaimportedlarge,highdollardatawarehousingsystems.



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Thesewerehugemachinesthesizeofarefrigerator,andtheycosthundredsofthousandsofdollarseach.Soimportdutywaspotentiallyaverylargeexpense.

“Initially, we looked at using a bonded warehouse,” saysSanta-niello, “so that we could ship all our items in and out of a central location. But that would only have gone so far in reducing our VAT liabilities.”

ItwasAndywho suggested itwouldmakemore sense to setNetezzaupwithVATnumbersinthecountrieswheretheydidmostoftheirbusiness.

“That saved us more money in the long run,” saysSantaniello.

StayingfocusedoncustomersAt the end of the day,workingwith an organizations likeUS-A2EuropeandEmeraldTechnologyofferedNetezzamuchmorethanjustfinancialsavings.

“Trying to stay on top of compliance and hiring in 12 different countries ourselves would not only have been hugely expen-sive,” saysSantaniello-“it would have taken us away from what we needed to be doing.”

“Knowing that Andy and Mike were on top of the day-to-day running of the business and keeping us up to date with our filing requirements and hiring process meant we could really focus on how to improve services for our customers, and that’s how we managed to grow so fast.”

Amoreattractivepropositionforacquisition“If we weren’t as large as we were, and we hadn’t been able to expand our global presence as much as we did, I don’t think we’d have been as attractive a proposition.”

“Would IBM still have purchased us? Probably, but I don’t think the value they paid for the company would have been as high if we didn’t have Emerald Technology and USA2Europe helping us expand internationally.”

“And that,” he says, “sums up just how valuable they’ve been”.



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Emerald Technology now partners with USA2Europe to provide holistic international business accelerationmanagement solutions.

Emerald Technology Ltd

HeadquarteredintheUK,withofficesinSingaporeandDubai,EmeraldTechnologyspecializesininternationalbusinessexpan-sion,specialistExecutiveSearchandManagedServices.

Emerald’scorecompetenciesareintheDataCenter,Telecom-munications,InformationSecurity,Cloud,BigDataandSoftwaresectorswith a specialized focus on providing integrated solu-tionsforcompaniesseeking internationalexpansionandbusi-nessacceleration.

Assubjectmatterexperts,thecompanyseeks-outandengageswith, thehighestcalibercustomertouch individualstofillpo-sitionsformulti-national,mid-sizedandventure-backedclientsworldwide. Withover15yearsofoperation,andhavingmadeover2100placements, in 43 countries across 6 six continents; EmeraldTechnologyhasnever failedto fulfilaclient’sHRrequirementwithinanagreedtimescale.

USA2Europe Ltd

Foundedin2004,USA2Europehasbeeninstrumental inhelp-ingUScompaniestosuccessfullyestablishandrunsubsidiaries,branchoffices,andpayrollsacrossEurope,Asia,andAmericas.

Thecompanyspecializesinback-officeoutsourcingsupportin-cludingEnterprisePayroll,Finance,HR,LegalandCompliance.Ithasprovenexpertiseinseeingbusinesses,particularlytech-nologystart-ups,throughCompanyFormations,IPOsandM&Aactivities.

USA2EuropeisheadquarteredintheUKandhasofficesandon-the-groundsupportincountriesincludingBelgium,Ireland,Sin-gapore,GermanyandtheUnitedStates.Throughindustrypart-nershipsinotherkeymarkets,thefirmhasexpandeditsreachtosupport200+businessentitiesinover40countriesworldwide.



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MikeJones-ManagingDirector,EmeraldTechnology

Mike’s career in Executive Search spansovernearlytwentyyears.HefoundedEm-eraldTechnologyin2000andhasseenthebusiness grow exceptionally since then.

MikeistheManagingDirectorandhasoverallresponsibilityforbusinessgrowthintosupportingUScompaniesseekingInterna-tionalandBusinessExpansion.

UnderMike’sleadership,Emeraldhasrecentlycapitalizedonitstrack recordby investing into itsnewoperations inSingaporeandDubaitosupportagrowingclientbase.

AndyHooper,CEO,USA2Europe

Andy is aCharteredCertifiedAccountant,whofoundedUS2Europe in2004andhasoverseentheimpressivegrowthinitsclientbase and global reach of operations overthelasttenyears.

Andyhasover30years’experienceworking in seniorfinancepositions for US Technology companies, including Chipcom,3Com,andFORESystems.Hehasestablished legalentities inmanyinternationalcountries,andhisexperienceincludesman-agementofFinance,HR,IT,Legal,LogisticsaswellasFacilities,companyformations,andM&Aactivity.

About the Authors

USA2Europecombinesextensiveexperiencewithtrustedlocalteamstomeetthepreciseinternationalneedsoffast-growingVCbackedcompanies.Veryfewoutsourcingfirmstrulyofferaglobalservice.

USA2Europepridesitselfonbeingsuper-responsive,deliveringtimelyresultsandworking inthespiritofpartnershipwith itsclients.

Click here to connect with Mike

Click here to connect with Andy

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