How to Expand a Business Internationally: Which Countries to Target

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Despite economic, cultural, and linguistic differences, small and midsize businesses all over the world face similar day-to-day issues that software can help resolve.

Capterra helps B2B software vendors reach businesses seeking software, and we’ve seen the global desire to make conducting business easier and more convenient through technology every day since we started this business nearly 20 years ago.

Though serving customers across different time zones, languages, and economies can be challenging, serving foreign markets can also be lucrative. However, you can’t expect to dive into the international market and see a profit immediately. Conducting business internationally requires a lot of research and hard work just to establish brand presence, let alone to sell your product at a profit.

Figuring out where your product has the best shot of selling is one of the most time-consuming decisions to make when considering how to expand a business internationally.

how to expand a business internationally
To aid you in your research—and to help you make data-based decisions when it comes to international expansion—we looked into hundreds of countries’ software markets, as well as the traffic we receive from those countries, the strength of their digital economies, and a few more factors to determine the best countries for B2B software companies to serve.

I’ll take a broad look at the world of business software, then take a closer look at the top countries you should consider expanding to, as well as detail some of the pros and cons of expanding to different regions of the United States.

The wide world of business software in 2018

The software industry has come a long way since the first software company started in New York City in 1955. There are now thousands of software companies all over the world, as shown by the map below.

Global distribution of Capterra
Capterra works with software companies all over the world (for this map and the rest of the maps in this piece, darker shading signifies a higher concentration of customers or clients)

However, the U.S. continues to dominate the software market, and, as the following map shows, software companies can be found in every state.

Distribution of Capterra
Capterra works with thousands of software companies in every state in the U.S.

When software companies are established, they typically focus on clients in their home country. This is certainly true for American software companies, which, given the prominence of the U.S. in the world economy as well as the prominence of English as a lingua franca of the business world, are at an advantage.

On the software buyer side, the U.S. is the country with the highest GDP, the largest software market, and the most English speakers. With over three million businesses with five or more employees spread across the country, the U.S. offers a huge market. The map below shows the regions in the U.S .that most often use Capterra to find business software.

Distribution of Capterra
Darker-shaded states use Capterra most often to find business software—these states are also home to national business hubs

Though it makes sense for an American software company to begin by focusing on the U.S, opportunities abound abroad, as this map of global Capterra traffic shows.

Global distribution of Capterra
Businesses in every country in the world use Capterra to find software

Looking at this vast array of potential software buyers, the next question is, if you want to expand into the international software market, where should you start?

The top countries your B2B software company should consider expanding to

To help you decide which countries you should focus on, we’ve ranked software markets around the globe.

These rankings are based on the following numbers:

    • Our own traffic numbers from different countries

 

    • The number of software companies we work with in different countries

 

    • Each country’s Digital Evolution Index score (DEI), which ranges from zero to four, and evaluates the maturity and competitiveness of a nation’s digital economy

 

    • Each country’s GDP

 

    • The number of internet users in a given country

 

    • The number of total English speakers and people who speak English as a first language

 

    • Other proprietary data points, including revenue and profit numbers from each country

 

Based on Capterra’s research, the table below lists the top 25 countries you should consider prioritizing when looking into expanding internationally.

How to expand a business internationally - the top countries to target
Now we’ll take a deeper look at the pros and cons of expanding to the top five software markets outside of the United States.

Most of the countries in the top five are English-speaking, but I’ll briefly cover expanding to markets where English isn’t as widely spoken.

1. United Kingdom

The U.S. and U.K.’s special relationship spans geopolitics, economics, and, apparently, software.

U.K. software market - world of business software
Pros: The United Kingdom is the second largest software market in the world, and has the second most native English speakers. Its Digital Evolution Index score ranks eighth out of the countries evaluated—higher than the U.S., by the way—which is a testament to its strong economy.

Cons: It’s five hours ahead of the East Coast, so you’ll need to take that into consideration for customer service and sales. Plus, Brexit is scheduled to go into effect in March 2019. Though some of the effects of leaving the EU remain to be seen, many people are nervous about the business and economic impacts the move will have on the country.

2. Canada

The United States’ northern neighbor comes in second, but many U.S. businesses may consider the country their number one choice for expansion.

Canada software market - world of business software
Pros: The fact that Canada spans the same time zones as the U.S. is hugely convenient for your sales and customer service teams. It also has the third-highest number of native English speakers, after the U.S. and U.K. These two things make Canada a no-brainer choice for starting your international efforts. Their digital economy is similar to the U.S., as well, so you won’t have to adjust your customers’ expectations based on issues such as bandwidth and connection capabilities.

Cons: With a GDP about half that of the state of California’s, and, overall, about one-tenth the GDP of the U.S., there are other countries (the United Kingdom, Germany, China, etc.) with larger software markets.

3. Germany

Germany has built its economy on research, innovation, and high-quality products, and is one of the European Union’s economic and political leaders.

Germany software market - world of business software
Pros: After the U.S., U.K., and China, Germany is the fourth-largest software market in the world. The European powerhouse has more English speakers than Canada, Australia, and South Africa, even if they’re not native speakers. Though its DEI score is slightly lower than most of the other countries in the top five, its digital economy is still considered strong and mature.

Cons: Germany has a reputation for being difficult for foreign businesses to penetrate and already has a number of huge homegrown software companies—the largest being SAP. Plus, if you really want to do well in Germany, you’ll have to translate your site content, at the very least, not to mention hire native speakers to assist with customer service and sales.

4. Australia

With a growing startup scene and a reputation for having a relatively laid-back business atmosphere, Australia is a solid choice when it comes to marketing your business software solution.

Australia software market - world of business software
Pros: Australia’s economy is almost as large as Canada’s, and English is the dominant language spoken, so there are few barriers for American companies when it comes to business and communication. Its DEI score comes in just below Canada’s, so its digital economy is solidly mature.

Cons: The huge headache with Australia is that it’s halfway across the world. Australians show up at work just as those of us in the U.S. are heading home for dinner. If you don’t already have people working odd hours to serve the U.K. time zone, then you’ll have to shift schedules around to serve Australia. And as with Canada, there are also larger economies and more digitally active populations you could put your efforts into serving.

5. South Africa

South Africa has one of the largest IT markets in Africa, as well as a growing entrepreneurial and startup scene.

which countries to target for international expansion - South Africa
Pros: South Africa has 5 million native English speakers and it’s just two hours ahead of London, so if you’re already serving the U.K. market, getting in touch with these customers won’t be too difficult. A number of software giants such as Intel, Microsoft, and IBM have found success there.

Cons: South Africa is still a developing nation, and the software industry remains somewhat in its infancy, which is indicated by its middling DEI score and its relatively low GDP per capita. While the U.S., Canada, U.K., Ireland, and Australia all have GDP per capita levels north of $40,000, South Africa’s sits well under $10,000. That translates to smaller, less advanced companies with less advanced software needs, on average. Finally, though English is the language of business in South Africa, language and business practices still differ by region, so you’ll want to tailor your approach to wherever you’re setting up shop.

2 runners-up to consider

Though neither of the following countries ranks in the top ten for countries to expand to based on Capterra’s data, I think they’re worth considering since they’re geographically near—and economically and culturally similar to—several of the countries in our top five.

If either the U.K. or Australia is a likely target for your business’s expansion efforts, you might as well look into Ireland or New Zealand.

1. Ireland

Ireland Software Market - world of business software
Ireland ranks number 11 on our top 25 list. The Emerald Isle is a fraction of the size of the U.K.—and many other larger software markets—but given its proximity to the United Kingdom and the fact that English is the most commonly spoken language, it makes sense to include it in your expansion efforts. If you’re already willing to figure out the time zone issue in the U.K., Ireland naturally comes next.

2. New Zealand

New Zealand software market - world of business software
New Zealand is to Australia what Ireland is to the U.K. and Canada what is to the U.S. It’s slightly smaller than Ireland, but the two countries both have roughly 4 million native English speakers and a strong economy. If you’re already serving Australia, it’s an obvious next choice.

Other regions you should consider expanding to

This next step gets more difficult for American countries.

For most of the top five countries and two runners-up I already mentioned, there are minimal language barriers. Of course, their dialects of English are different, but you typically don’t have to translate your content and supporting documentation.

But once you’ve tackled those countries, you have some tougher choices to make: Which region—or regions—do you target next? Mainland Europe, Southeast Asia, or Latin America?

Proceeding in that order probably makes sense for most software companies, but each region has its pros and cons.

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

Europe
Pros: Large, wealthy economies where English is often spoken as a second language are fertile ground for American companies. GDP per capita in mainland Europe typically ranges from $30,000 to $60,000 but surpasses $100,000 in some of the smaller countries. This translates to more advanced companies with more advanced software needs.

Cons: As I mentioned with Germany, the more serious you get about targeting this region, the more likely it is that you’ll need to operate in other languages. Though the average European speaks more than one language, if you really want to be competitive in an individual country, it’s best to translate your materials and hire native speakers for your sales and customer services teams, at least.

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

Southeast Asia
Pros: The sheer number of people who speak English, albeit as a second language, makes this part of the world attractive. Translation isn’t necessarily required to reach this market, and that’s a huge plus. The economies are, on average, less advanced than the U.S.’s and Europe’s, but the advantage of that is the opportunity for growth. India, in particular, is experiencing a huge economic boom, making it Capterra’s fourth most popular country in terms of users, despite the fact that we don’t actively advertise there… yet. There’s a growing demand for software in India, in particular. And the population of this area of the world, in general, 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 don’t invest in software. And though translation is not required, engaging with businesses in the native language of their employees is always an advantage. Once you do get a foothold here, you might find it beneficial to eventually invest in more localization and translation efforts.

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

Latin America software market - world of business software
Pros: Mexico, Central America, and South America are in the same time zones as the U.S. And with a few exceptions, most notably Brazil, they all speak Spanish. In contrast to the dozen different languages you’d have to translate to in order to expand across Europe, you could reach a fairly massive area by translating only to Spanish. You could also base operations in the United States: Miami is a popular city for establishing a satellite office to reach Latin America. When you combine all 20 countries in continental Latin America excluding Brazil, the GDP is over $3 trillion. That’s smaller than the U.S. and China but larger than, say, Australia. It’s not huge, but when taken in sum it’s certainly legitimate.

Cons: Similar to Southeast Asia, Latin America is still developing, 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?

China and Japan
How could we leave out the second and third largest economies in the world with the fourth and sixth largest software markets?

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 largely because of the language and cultural barriers. 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’s a reason why Capterra, which currently operates only in English, French, and German, gets very few users from China and Japan.

Using a service such as Milengo or OneSky to translate your content 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.

The world is your software market

Language, time zones, and economies are the key factors to consider as you seek to bring the value of your software to foreign markets. While the U.S. 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, and once you’ve figured out how to navigate some of the common obstacles to expansion, there’s no reason not to seek out international selling opportunities.

Has your B2B software company conducted business in companies outside the U.S.? Where did you start, and what was your experience operating in a new market? Let me know in the comments below.

Looking for Marketing Automation software? Check out Capterra's list of the best Marketing Automation software solutions.

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About the Author

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Kelsie Anderson

Kelsie is a former Capterra analyst.

Comments

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I agree that foreign owned businesses should invest more or expand to countries like the Philippines. In the Philippines, there are a lot of english speakers which would make the language barrier less of a problem. Filipinos are known to be hardworkers and hospitable. The labor cost in the Philippines is very affordable and at the same time Filipinos are efficient with their work. That is why a lot of foreign companies continue to invest in the Philippines

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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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Super-great article Mike!

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