US Emerging Hi Tech Firms - Is now the time to invest in International Expansion to the UK?

'Sterling slumps to lowest in 16 years,' was yesterday's Business headline in one UK broadsheet as the value of the pound against the dollar plunged to just $1.7863. A far cry from the heady $2.00 to the pound experienced not so very long ago.

Lower Value Sterling Presents Opportunities

Over the last year or so, emerging US Hi Tech firms have shown a distinct ambivalence to investing in expanding into the UK and Europe markets as the value of pound and Euro have made the spending power of the dollar weaker. In my own survey of US Hi Tech firms in the last year, I have found that CEOs of emerging US Hi Tech companies concerned at all levels about the cost of entry into Europe. All costs are escalated from recruitment, salaries, fuel, overheads, office rentals - everything appears expensive plus there is the psychological problem that particularly UK salaries expressed in dollars may actually exceed those of the executives hiring them - a mental blocker if ever there was one.

Now sterling has swung the other way. Partly, it is because the OECD (Organisation for Economic Co-operation and Development) believes that the UK is already in recession though strictly speaking growth has ground to a halt in the last quarter not yet receded according the the Treasury, but also the OECD was concerned about the UK's pledge of £600m to bail out the housing market. It has been housing, with over 160% growth in the average price of a UK house, that has pretty much fuelled the boom in the UK in the last 10 years as house-owners leverage equity for cheap money to fuel the spending boom.

The interesting prospect for emerging US Hi Tech firms is that now Europe is looking much better value as the currencies move downward and the UK in particular is offering some unique opportunities to act as the launch platform for European Expansion.

Market Conditions

A recent survey by the KPMG and the Recruitment & Employment Confederation showed that the number of permanent jobs available has fallen at the sharpest rate since late 2001.

• There will be a richer pool of executives and staff to chose from in the UK due to the slowdown of the UK economy
• The average salaries of these people will be more affordable as the dollar gains strength against sterling

As the property market cools rapidly (average house prices in the UK fell over 10% in the last 12 months and analysts suggest a further fall of 18% or more is likely before the market bottoms out), so too will the average office space rental and lease costs ease. There is already an abundance of available office and warehouse space in the UK and as the economy slows or even goes into recession, the costs of office set up and rentals will fall also.

• Available, high quality office space is widely available in major, attractive city locations throughout the UK and prices are coming down
• Again the growing strength of the dollar to sterling will increase the effect

Some Great Examples

As the economy cools in the UK, businesses will be looking to save costs. This can be achieved in many different ways but companies offering innovative solutions in identifying significant revenue reclamation such as in Revenue Assurance or Billings Integrity will have a significant advantage, particularly if the solution is innovatively priced and easily deployable, making the benefits accessible faster - one way to get growth in a shrinking market is to identify what you are not billing today; it's simply lost money reclaimed. Telecom companies, insurance companies, the NHS - all are companies who miss opportunities to bill all their customers for all services consumed.

Companies with high productivity advantages such as eCollaboration which can dramatically reduce the need to travel, the cost of which has soured in Europe as fuel costs rise, will have a distinct advantage. Companies offering ways to consolidate compliance and governance for financial and safety regulations will look to use to tools to mitigate cost exposure in terms of insurance, fines and accidental costs.

• Teleonto - A Revenue Assurance Solution aimed at Telecom providers and carriers of all categories which is Saas based, with no upfront costs or capital spend, helps fast identify all forms of revenue leakage and provides immediate and rich ROI
• ActionBase - a clever Action Tracking solution which is tightly integrated with Microsoft Office helps companies translate (and track) paper based processes into Human Activity and have full audit trails for compliance and governance. The solution is gaining much traction in the Oil & Gas sector but also in Finance, Manufacturing and Telecoms increasing management efficiency but up to 30% and decreasing compliance issues such as HSE, SOX or FSA regulations.

Corporations will be looking to re-budget and re-plan as the markets change and they make sure they have anticipated growing costs and potential less revenue. Those who plan ahead will adapt easier, faster and not be surprised by 'holes' appearing in their forecasts. Companies looking to consolidate spend on services like IT, Telecoms and recruitment will look to innovative suppliers who can quickly identify and realise savings. Once again, outsourcers look like good value.

• Intelligentcomms - an independent platform and consultancy specialises in helping companies identify and save costs across their entire Telecom spend, without a tie to any Telecom vendor to get impartial advice with a risk/reward method of payment to ensure fast win-win
• Adaptive Planning - an innovative SaaS based platform which is easily deployable that can help organisations streamline budgeting and planning to ensure companies plan more frequently and deeper to anticipate changing market conditions and adapt quicker
• Workday - a new SaaS based HR Management solution from the people behind PeopleSoft has already attracted the largest ever SaaS software order at Flextronics.
• Taleo - another innovative SaaS based in-house recruitment management system that helps smooth the process of managing recruitment and contractors

Those companies who look to drive growth through other methods like the internet can take advantage by rapidly expanding their online activities by outsourcing their Ad and Media Operations to companies who have deep market expertise and scalability enabling fast market traction and negating the need to hire staff or expensive contractors for peak requirements only.

• Theorem Inc - is rapidly expanding its footprint in the UK and provides outsourced Ad and Media Operations to companies wishing to take advantage of market expansion via the internet without having to hire staff for peak periods only, providing an ongoing partnership for scalability

Outsourcing is again back on the agenda - as costs are of a concern and staff levels, companies are again looking to leverage clever offshore companies who are experts in BPO, application management, consolidating enterprise applications and data and customising applications.

• Ephlux - is one a new generation of sub-continent based companies who are driving savings to companies by off-loading critical back office processes, applications and data
• Accexperts - is a China-based outsourcing company expert in Finance and Accounting with deep technology experience and expertise in all aspects of accounting and financial governance across a wide range of markets

Now is The Time to Act

So if you are an emerging US Hi Tech firm and you have an innovative solution that can help companies mitigate costs or realise extra profits fast, then now is a great time to enter the European Market and specifically via the UK. There is a rich experience in the sales, marketing and technical workforce, costs are more affordable and the timing is just right. Calx Europe is the experts in the field in helping manage your expansion in Europe and driving sales.

For more information on any of the companies mentioned above or on how to enter the UK and European Market to expand, please drop us a line at info@calxeurope.com or call on +44 (0)207 193 2356.