Digi International, a provider of data communications hardware and software, had been marketing to Canadian technology consumers by itself through original equipment manufacturers (OEMs). But it wasn’t making the sales it wanted. So the Minneapolis, Minnesota-based company decided it needed help to further penetrate the market.
Digi was learning that marketing and serving customers in Canada, even though it shares a common border and language, is just like any other foreign country. More is required than simply dispatching a few employees to open up a new territory.
“Many American companies are somewhat naive when it comes to doing business in other countries,” says Katherine Jones, Ph.D, an analyst for Boston, Massachusetts-based Aberdeen Group. “The company has to manage its behavior and practices appropriately in those markets. There’s room for a lot of errors if they don’t think things through before entering other countries.”
What Digi needed was an outsourcing partner. Not just any partner: one who could better open up the Canadian tech delivery channels, then help develop customer relationship management (CRM) and other support that offer value to these new distributors and end-users.
Opening Doors “North of the Border”
Digi’s new CEO Joe Dunsmore had outsourcing experience. He came from US Robotics, which used Keating Technologies, a Markham, Ontario service provider, to manage the Canadian marketplace. In addition, Digi had used an outsourcing firm with its marketing efforts in South America.
Privately held Keating says it brings more than $1 billion in technology products and services to Canadian consumers through outsourcing partnerships with numerous providers. A roster of clients includes such companies as Gateway, 3Com and Palm Canada Inc.
“Keating has an excellent understanding of the market,” says Digi’s Dunsmore. “This allows them to take our strategy in the vertical markets that we target and get us closer to the distribution channels we feel are important to our business.”
Dunsmore says Keating targets customers in those verticals and helps it go after them. “They help us manage those channels better and assist us in establishing communications portals for end-user CRM,” he says.
Keating’s integrated services strategy deepens relationships with distributors and resellers. It can also include localized promotional efforts designed especially for Canadian customers. Aftermarket services include a boutique of comprehensive pre-and post-sales support to distributors, resellers and retailers and sometimes even end-user customer relations through a variety of technical support and service programs.
“We become a focal point for our clients’ Canadian sales efforts,” says Art Keating, vice president of business development. “We’re seen as an outsourced ‘Canadian branch office’ for our clients. We mirror their objectives and philosophy in the Canadian marketplace.” The service provider also minimizes operational costs and offers better speed-to-market.
Keating’s process involves shared risk when it comes to costs. A typical practice of this partnership involves setting specific objectives. If Keating doesn’t produce the required sales, the client doesn’t have to bear the financial start-up burdens alone. In certain cases clients will use Keating’s existing resources and in others, will leverage internal resources to blend with Keating’s. In Digi’s case, Keating adjusted its sales and marketing strategy to specific distribution channels, creating better distributor awareness, improving distributor CRM, and developing reseller and end-user support unique to Canada.
A local outsourcing service provider understands the workforce. If a company chooses to open a foreign office without a guide who is familiar with hiring practices, they can get in trouble. Aberdeen’s Jones explains. “If I’m in New York and am looking to hire employees to staff an office overseas, and I don’t know the questions I can and cannot legally ask, it could lead to trouble with that government,” she says. Foreign taxation is another issue.
Dunsmore says the relationship is working well because the two companies share a common set of values. Digi, like other Keating clients, is realizing larger market share and lower cost of sales in Canada than it did before it outsourced. “Even though the Canadian market is only about 10 percent of our U.S. market, our penetration is better than most of our other international markets,” adds Dunsmore.
Lessons from the Outsourcing Journal:
- Companies that market their products and services to Canadian consumers are discovering that a partner who understands the needs of those customers is valuable.
- Establishing an indigenous presence and expertise in any international market is vital. Creating a local presence encourages the comfort of local clients.
- Foreign partners who assist firms in penetrating new international commercial venues often have a greater ability to drill deeper into vertical markets and customer bases because of their understanding of what drives these buyers .