How Australian IT companies can sell to international governments
There is no doubt that big opportunities exist for Australian IT companies in the international government sector. Australian businesses have already achieved significant success in markets such as Canada, New Zealand, Singapore, the United Kingdom and the United States, to name a few. The secret, according to Austrade, lies in understanding the subtleties of each market.
Opportunities in the US
As one of the world's largest growth areas for IT spending, the US government market is attractive to almost any export-oriented technology company. This brings opportunities for Australian IT companies as well as challenges – the most obvious being increased competition.
"The US government market is a massive opportunity for Australian IT businesses," says Dan Sullivan, Business Development Manager at Austrade's Washington DC office.
The US Federal Government is the world’s largest purchaser of technology products and services. It has budgeted to spend US$59.3 billion (A$85.4 billion) on IT in 2004, a solid increase over the previous year.
The civilian agency with the largest budget increase is the Department of Homeland Security where, according to INPUT, a Washington-based research group, the fiscal 2005 budget is expected to be about US$33 billion – nearly 10 per cent higher than current levels. The biggest funding boosts will be in air, marine and land security, bioterrorism prevention and modernisation of the Coast Guard.
"In order for the Department of Homeland Security to continue to function effectively under increasing labour costs, a heavier reliance on technology is required," said Kim Hovda, the Manager of Grant Products for INPUT. "The technologies necessary for the future will be the technologies that replace human effort with automated effort."
US state governments also spend big on IT: more than US$40 billion (A$57.6 billion) annually. Opportunities exist in many specific segments at both a state and federal level, including e-learning, e-health, financial software and outsourced services. Sullivan points to a number of related opportunities:
Civitas Group, a Washington-based strategic advisory group, estimate the private and public US Homeland Security market at US$115 billion over a 5-year period. Veterans' Affairs is the largest civilian agency in the government. Its IT spending for 2005 is set to increase 7.1 per cent over 2004.
The Australia-US Free Trade Agreement (AUSFTA) enhances opportunities for Australian IT suppliers looking to access the US government procurement market.
"There are currently many Australian companies doing business with the US Government," says Sullivan. "The AUSFTA will make it considerably easier for them to do business with federal and state agencies in the US."
The Agreement will ensure bids from Australian companies for contracts with US governments are considered in the same way as those from American businesses. Coupled with other market-opening measures secured under the Agreement, this presents new export opportunities for Australian firms to expand their activities in the US.
Relationships are vital, and Australian IT companies are succeeding in the US government market through commitment, strategic partnerships and patience. However, there are some challenges:
Complex distribution channels: including independent software vendors, systems integrators, consultants, value-added resellers, corporate resellers, retailers and distributors.
Highly competitive market: companies already doing business are trying to expand, and those that are not already in are trying to break in.
No quick fix: the government sales cycle takes between 18 to 24 months and requires a sustained presence to make the sale.
Desire for innovative solutions: Australian companies must present new solutions to existing problems.
Importance of return on investment: government buyers are risk-averse and demand a strong business case.
Relationships: finding a US partner in the government arena is critical to success.
Opportunities in Britain
The UK Government has been working hard to fulfil a target that all government services should be available online by 2005. E-government spending reached a peak in 2004 but spending is expected to continue until, and even past 2005.
The opportunity for IT exporters comes from the fact that the UK Government considers Australia to be more advanced in the implementation of e-government solutions. The various Australian governments are seen as having taken a more active approach to e-government.
When attempting to establish export credentials, a history of supplying technology products and services to government is critical. "All Australian technology companies that have successfully sold to multiple sites or customers within the Australian public sector (including schools, councils, hospitals and state and federal government departments) are well placed to access opportunities in the UK market," says Alex Moir, Business Development Manager at Austrade's London office.
"However, cracking the UK market requires significant commitment of time, people and financial resources. UK Government departments have strict procurement guidelines and processes that are very difficult to navigate without a UK presence or representative."
To pursue UK Government opportunities, Austrade suggests:
Your product needs to be marketed professionally, including electronic and paper-based marketing materials.
Testimonials and case studies from existing government customers in Australia are vital evidence of your ability to deliver.
Product marketing and case studies should outline how your products and services enable governments to successfully interact with the public.
Challenges in the UK include a high level of competition from established systems integrators, such as EDS and Fujitsu, and the demand for 'proven' solutions. The UK is a fragmented market and sales can take time. Governments are slow payers, very risk-averse and have a lot of bureaucracy and red tape, Moir warns.
Australian companies need to invest in the market by setting up credible sales and support infrastructure. They should tailor their marketing specifically to the local sector and have case studies or testimonials from government customers in Australia to support their product.
To assist Australian IT exporters prepare for UK market entry, Austrade London has actively engaged successful Australian IT companies in the UK to share their experience and expertise for the benefit of new entrants through a new website "Pathways to Market" (www.austrade.org.uk). The site is a repository of information and advice collected from over 30 successful Australian IT exporters to the UK and addresses questions as to why partnership strategies such as distributors and agents in the UK fail to yield desired results.
Austrade's Global IT Team works with a diverse range of Australian IT exporters to help them win government business around the world. Government business opportunities exist in many nations around the world but exporters must prepare for the diverse challenges presented by each country's administration. Local strategic alliances are essential in this sector but identifying the right alliance partner in an offshore market can be difficult from an Australian base.
Austrade's Global IT Team is available to assist Australian IT exporters identify and select appropriate partners offshore. The Team also assists exporters gather market intelligence and explore upcoming government tender opportunities.
To discuss your company's export marketing requirements, email our Global IT Team at exportIT@austrade.gov.au. An IT Export Adviser will then contact you to discuss your company's export plans and assistance available through Austrade's global network.
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