Key Findings: International Expansion Study

Solution providers based in the U.S. that have expanded operations beyond U.S. borders will generate a total of more than $64 billion in economic activity for themselves in 2007, according to best estimates based on data from the U.S. Bureau of Economic Analysis. CMP Channel surveyed 400 high-level managers or owners of U.S.-based solution provider businesses to discover their opinions and experiences with regard to expanding their operations beyond U.S. borders. We found that nearly a quarter of U.S. solution providers already do some business outside the U.S. and a surprisingly large 14 percent are considering branching out internationally within the next 5 years. Here are some other key findings.

1. Phenomenal Increase
If solution providers that aren't yet international are able to follow through with their plans to expand outside the U.S., the percentage of U.S. solution providers operating internationally will grow by 62 percent in 5 years, 47 percent in 2 years. That would be a phenomenal rate of increase.

2. The "Pull" Factor
The biggest determinant of whether or not a solution provider will go multinational is customer pressure/opportunity. Among solution providers that are already multinational, the top two drivers they name for expanding beyond the U.S. carry the same weight, and they are: "We wanted to grow our business," and "New customer prospects required us to have a multinational presence." Weighted just a hair below those two is: "My existing customers required multinational deployments."

3. Real vs. Perceived Benefits
The main benefit realized by multinational solution providers is increased revenue or profit. However, this benefit doesn't seem to be as great as solution providers in the planning stages of international expansion expect. 63.7 percent of multinational solution providers give "increased revenue or profit" a rating of 5-7 on a 7-point scale of how greatly they benefitted from going multinational. But 83.9 percent of solution providers in the planning stages expect to benefit as much from increased revenue or profits.

4. The Right Strategy
Solution providers in the planning stages of international expansion seem to underestimate the value of certain strategies for making a multinational presence viable. Compared to multinational solution providers, those in the planning stages greatly underweight the strategy of dedicating a business development or sales executive to develop the business overseas (21.4 percent of planners rate this strategy a 5-7 on a 7-point scale of importance, while 38.5 percent of successful multinational solution providers do the same).

5. Key Obstacles
Insufficient investment funds and prohibitive laws are the two factors most likely to inhibit multinational aspirations. However, the importance weights given to the top impediments are significantly lower than the weights given to the top drivers and benefits, showing that, despite the hassles of doing business overseas, it is still likely to pay off well.

6. Target: Europe
Western Europe is high on the list as a target market for multinational U.S. solution providers. Some key stats:

15 percent of all U.S. solution providers operate in Western Europe.
66 percent of multinational U.S. solution providers operate in Western Europe.
54 percent of U.S. solution providers planning to go multinational plan to enter Western Europe.
79 percent of U.S. multinational solution providers already in Western Europe plan to expand into other countries there

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