Digital and Technological Acceleration: An Opportunity for IT Services Internationalization

The digital and technological acceleration we’ve been witnessing in recent decades, especially in recent years, has opened a window of opportunity for companies that provide IT implementation and consulting services to expand and internationalize their business.

Technology is universal and very little impacted by “regional” constraints; the world is global, and the need for technical expertise is widespread.

The era of digital transformation has also brought us a talent shortage. The “most qualified and prepared generation ever” is not enough to keep up with the pace of technological acceleration and innovation.

There is a scarcity of specialized talent; new technologies, solutions, and languages emerge at an overwhelming pace, and the demand for technical skills far exceeds the supply. This is a truly global and highly competitive market.

On the other hand, Digital Nations such as Israel, Estonia, Denmark… and Portugal have become suppliers of talent and innovation, with excellent technological capabilities, knowledge, infrastructure, and increasingly attractive levels of innovation, not so much from a local market perspective (which is small in most of these nations) but as hubs for a global operation.

It is in this economic, technological, and geographical context that the opportunity arises, which, however, entails a set of challenges:

Starting operations in a new market requires compliance with a set of distinct legal requirements (even within the eurozone) and, in some cases, high complexity. A complex legal and regulatory network that needs to be accommodated.

When we look at internationalization, we can do it in two different ways. One, from the perspective of “where is the talent I need to enhance my business,” that is, an internationalization logic centered on creating Hubs/CoE (Centers of Competence) from where the company develops its solutions and provides its services to its global clients. On the other hand, an internationalization strategy focused on business: “Where is my market?” and “Where can I get more business, more clients, and profitability?”. Both paths are valid and probably necessary for a successful internationalization strategy.

The “easier” path, especially for smaller companies with scarce investment capital, is an “organic” growth strategy. It bets on low-risk internationalization, with a minimal local presence, and leveraged by a project or client won abroad.

Services are provided remotely (nearshore/offshore), guaranteeing interesting levels of profitability and low risk. This strategy is certainly safer, but it is also slow and insufficient to gain scale effect and make the operation “truly” global.

Speaking about IT services and in the context of global talent scarcity, the more mature markets (the United States, for example) are receptive to remote service delivery models – nearshore or offshore. It is a well-accepted and common practice, primarily from LATAM (Latin America) and Asia. Still, if the advantages of this model are undeniable, both for the client and the supplier, they are also limiting, from a certain point, for true internationalization and global operation.

Leveraging the growth of an international operation in strong local strategic partnerships is one of the most common paths and often a successful strategy. However, it requires close and dedicated management, including finding reliable business partners, aligning expectations and objectives, protecting intellectual property and talent, and even establishing joint ventures.

Internationalizing a business is much more than “just” providing services to some international clients. Indeed, that is the first step. Land some clients, and revenue is needed. However, as international operations gain dimension, it is necessary to transform the organization to acquire a multinational mindset.

Not implementing procedures as basic as defining an official language in the organization, adapting internal tools, or successfully integrating multinational and multi-geographical teams are barriers to successful internationalization.

Vital for the success of any business, this is the first “barrier” to entering a new international market, especially if it is a mature market and much larger than the national market.

Moving from a leadership position in the native market to being “just one more player” with low levels of notoriety in the global market is a giant step that requires a significant behavior and cultural changes and in the company's organizational structure.

Internationalization is far from being an easy path with immediate results. Strategic thinking, knowledge of local markets and dynamics, and a high capacity for adaptation and resilience are required!

Article originally written and published in The Next Big Idea website, May 2024 - A internacionaliza??o no mercado IT? - The Next Big Idea