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The World of Business Software: Which Countries to Serve?

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A new coworker was shocked when I told him that half of Capterra’s traffic comes from outside the US. As a company based right outside our nation’s capital, with an English-only website, it would be easy to assume the vast majority of our visitors are American.

But there’s a strong, worldwide demand for business software that has manifested itself in the user base of Capterra ever since we started, 15 years ago. We’ve seen that companies from all over the globe need software and, despite the challenges in serving customers across different time zones, languages, and economies, these foreign markets can be lucrative. Savvy software vendors such as Freshdesk, Wrike, and Hubspot are translating their websites into different languages and often establishing branch offices in order to bring their software to customers around the world.

As the map below depicts, the software industry has come a long way since Elmer Kubie and John Sheldon started Computer Usage Company in New York City in 1955. Thousands of software companies can now be found all over the world.

capterra-software-vendors-worldwide-updated

As the birth place of the software industry, the USA continues to have the most software companies and, as the following map shows, they operate from coast to coast.

capterra-software-vendors-us-nolegend

Most software companies start out by focusing on clients in their home country. This is certainly true for American software companies which, given the prominence of the USA in the world economy as well as the prominence of English as the lingua franca of the business world, puts them at an advantage. The USA is the country with the highest GDP, the largest software market, and the most English speakers. With over two million businesses with five or more employees spread throughout the land, it’s a huge market. The map below shows the most popular regions in the US that use Capterra to find software.

capterra-ga-sessions-us-nolegend

While it makes sense for an American software company to begin by focusing on the USA, opportunities abound abroad, as this map of global Capterra traffic shows. Companies from every country of the world use Capterra to find software.

capterra-world-sessions

So where should you begin once you have a foothold in the USA? Based on the data and my conversations with many software companies, including a recent one with software industry expert Jay Greenwald, here is how I would prioritize entering different software markets.

  1. Canada – It’s no wonder that Canada is often referred to as the 51st state. With a GDP slightly lower than the state of California, and overall about 1/10th the GDP of the US, there are other countries (UK, Germany, China, etc.) with larger software markets. But the fact that it is in the same time zone is hugely convenient for your sales and customer service teams. And, oh yes, most Canadians conveniently speak English. Canada is the no-brainer choice for starting your international efforts.
  2. United Kingdom – The UK is the second largest software market in the world, and has the second most native English speakers. They are five hours ahead of the east coast, so you will need to take that into consideration for customer service and sales. Nonetheless, they are next in line for most software companies after Canada.
  3. Ireland – Yes, Ireland is a fraction the size of the UK (and many other larger software markets), but given its proximity and the fact that they also speak English, it makes sense to come next. You’re already dealing with the time zone issue in the UK. Ireland naturally comes next.
  4. Australia – With an economy almost as large as Canada and English as the dominant language, Australia is #4 on the list. The huge headache with Australia is that it is halfway across the world. They show up at work when we head home for dinner. So if you don’t yet have people working odd hours to serve the UK and Ireland, then you will definitely have to do that to serve Australia.
  5. New Zealand – New Zealand is to Australia what Ireland is to the UK and Canada is to the USA. It’s even a little smaller than Ireland but they also have roughly four million native English speakers and a solid economy. You’re already serving Australia; it’s an obvious next choice.

Some software companies rank South Africa as the next country to target after these five. After all, it has five million native English speakers, just a little bit more than Ireland and New Zealand. And they are just two hours ahead of London time. A number of software giants such as SAP, Oracle, Sage, and Microsoft have found solid success there. The one caveat here is that South Africa is still very much a developing nation and the software industry remains somewhat in its infancy. The best indicator of this is GDP per capita. While the US, Canada, UK, Ireland, Australia, and New Zealand all have GDP per capita levels north of $40,000, South Africa’s is under $10,000. That translates to smaller, less advanced companies with less advanced software needs – on average.

Now it gets hard. The beauty of those 5-6 countries is there are minimal language barriers. Yes, their flavor of English is different, and you may want to account for that, but you don’t have to go so far as to translate your content and supporting documentation into another language. But once you tackle those countries, you have some tougher choices to make.

Which region do you target next? Mainland Europe, Southeast Asia, or Latin America? Proceeding in that order probably makes the most sense for most software companies, but each region has its pros and cons.  I’ll take them one at a time.

1. Mainland Europe (Germany, France, Netherlands, Belgium, etc.)

Pros – After the US, UK, and China, Germany and France are the largest software markets in the world. Large, wealthy economies where English as a second language is extremely common create a fertile ground to do business for American companies.  GDP per capita typically ranges from $30,000 to $60,000, with some of the smaller countries even crossing $100,000. This translates to more advanced companies with more advanced software needs.

Cons – The more serious you get about targeting this region, the more likely you will need to operate in their languages.  And each country has its own native tongue. That not only means translating your materials, but hiring native speakers. Also, Germany is known for being difficult to penetrate and has a number of huge homegrown software companies, the largest being SAP, that you will be competing with.

2. Southeast Asia (India, Singapore, Phillipines, Malaysia, Indonesia, Pakistan, etc.)

Pros – The sheer number of people who speak English, albeit as a second language, makes this part of the world attractive. Translation is not required to reach this market – and that is a huge plus. And while the economies are less advanced than the US and Europe, the advantage of that is their capacity for future growth. India, in particular, is experiencing a huge economic boom, making it Capterra’s 3rd most popular country in terms of users despite the fact that we don’t even actively advertise there…yet. There is a budding demand for software in India. And the population of this area of the world makes it difficult to ignore for long.

Cons – Similar to Australia, this region is halfway across the world. You either need to set up offices there or have your staff work night hours. And with the obvious exception of Singapore, GDP per capita in this area of the world is very low – often under $3,000. Companies without resources typically do not invest in software. And while translation is not required, engaging with businesses in the native language of their employees is always an advantage. Once you get a foothold here, you may find it beneficial to eventually invest in more localization/translation efforts.

3. Latin America (Mexico, Brazil, Argentina, Colombia, etc.)

Pros – Mexico, Central America and South America are in our time zone. With the exception of Brazil, they all speak Spanish. Transitioning into one additional language to reach a fairly massive area is much easier than a dozen different languages (Europe). Miami is a very popular city for establishing a satellite office to reach this region. When you combine all 20 countries, the GDP is roughly $7 billion, smaller than the USA and China, but larger than Japan. Not huge, but certainly legitimate when you add them up all together.

Cons – Similar to Southeast Asia, Latin America is overall very poor, which leads to less advanced businesses and less demand for business software. In general, Spanish is considered a requirement for doing business.

What about China and Japan?

How could we leave the second and third largest economies in the world with the 4th and 6th largest software markets for the end?

One could make the case for targeting both of these countries ahead of Europe and it would be a good one. I mention them separately mainly because of the language (and even cultural) barrier. Whereas much of the world has adopted English as the language of business, speaking Mandarin and Japanese is generally considered the price of admission for these markets. There is a reason why Capterra – which is only in English at the moment – gets very few users from China and Japan.

Using a service like Milengo or OneSky to translate your content (typically 15 to 25 cents per word) is a great first step, but staffing sales and customer support teams that speak the language and are familiar with local ways of doing business is the much greater challenge. Thus, language remains a huge barrier for American software companies in these two huge markets.

When it comes to actually penetrating these markets, a common first step is to partner with local technology resellers that are already operating and serving customers in their respective regions. They will help to demonstrate how large the opportunity is for your specific offering before you invest significant internal resources.

In summary, language, time zones and economies are the key factors to consider as you seek to bring the value of your software to foreign markets. And while the US is an amazing place for a software company to begin serving business clients, it only represents half of the entire software industry. Opportunities abound abroad!

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About the Author

Michael Ortner

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Mike started Capterra in 1999 as the first website dedicated to helping people find the right software for their business. Today, Capterra lists over 30,000 software companies, displays more than 250,000 software reviews, and receives over 3,000,000 monthly visitors. He's been featured in the Wall Street Journal, Washington Post, Fox News, and Inc. Magazine, among other publications, where he's spoken on topics ranging from the business software industry to running and growing a business in the 21st century. Mike received a business degree from Georgetown University and a philosophy degree from the University of London. He lives in McLean, VA with his wife and six children.

Comments

Super-great article Mike!

Lantin America’s GDP is wrongly calculated. It’s not the size of The Netherlands. Brazil alone is the 7th economy in the world and the Unasur (mostly South America) is currently the 5th economy in the world in terms of GDP (after the EU, China, USA, and India). This doesn’t even include Mexico.

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