While working with tech clients and private equity funds who owned tech assets, I led many integration management programs. I helped many cross-border deals complete the post-merger integration processes in various European markets. Therefore with this article, I would love to shed light on the best strategies for Vertical SaaS products interested in expanding in international markets. The dynamics of the market and the product’s functionality are two important metrics to balance when expanding your SaaS product in new markets. A successful expansion ensures that the product drives revenue while maintaining its core functionality. We could summarise the key watch-outs in three steps. The first step is to assess your chosen geography’s market to identify the opportunities and challenges you might face.
Assess your target market thoroughly
When assessing the market, you need to focus on the correct elements. This depends on the functionality of your product. Here are some examples of crucial elements for major verticals of two common SaaS products below:
HR/Workforce Management:
- Business licenses: Ensure that you possess the licenses required for providing certain workforce management services (e.g., contingent worker/EoR)
- Legal limits for data transfer: If you process personal data and your main servers are located overseas, GDPR could limit the transfer and processing of the data. You might need to consider getting local servers.
Unified Commerce Platforms (Retail/Hospitality):
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Technical architecture: Assess your potential customers’ technical architecture. Whether they use cloud or legacy systems will dramatically impact your implementation process.
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Incident support: Imagine a grocery store that is open 12 hours a day and has issues with its self-checkout systems. Any minute spent on an unresolved incident means revenue loss for them. It is crucial that your support teams could resolve issues quickly regardless of their location.
Once your checklist tells you that the critical elements of an attractive market are not an issue or easily achievable, you can proceed to the next stage, which is planning your technical implementation phase.
Overcome Technical Challenges of Scalability
Does your infrastructure have the scalability to deliver global service? How will you integrate your product into your client’s systems? How will you send updates? How will you fix bugs? What local resources would you need throughout this process, and how could you optimize them? You must review all these questions, and your technical teams must develop a concrete action plan ahead of expansion.
Let’s consider an example. You built an ESG data management platform, and you’re based in the US. I believe things aren’t looking great for you in the US market right now, and you are considering scaling your product into some markets with higher demand. Let’s say you did a market assessment and decided the Netherlands is an interesting market in which you’d like to expand your product. You’ve identified a few potential customers but noticed they mostly have legacy ERP systems, on-premises HR systems, and various databases and spreadsheets for sustainability metrics. Your product is, however, cloud-native. Let’s look at your integration challenges and how to navigate those.
Challenge #1: The customer’s ESG data is in multiple sources, primarily within legacy systems, so consolidating it takes a lot of effort.
Solution #1: Because you have a cloud-native product, your architecture is microservices type, which allows you to deploy your microservices-based connectors to engage with different legacy systems to consolidate data. You just need a program manager who’s on top of their game to oversee the process.
Challenge #2: The customer’s API is not up to your standards, limiting the integration process. It requires long response times. The data format isn’t compatible with your system. They don’t have the necessary features. Plus, there is a security risk during integration because of their outdated protocols.
Solution #2: Develop a custom API and build an additional data transformation layer to integrate securely with your customer’s legacy systems. Ensure that the time and effort invested in this will be compensated with greater returns after successful implementation, in oter words there is high revenue potential in the market.
Challenge #3: EU-US DPF (Data Privacy Framework) regulations have strict measures regarding transferring personal data from a Dutch entity to the US, primarily through the cloud. Other regulations, like the Data Governance Act (DGA) and the proposed Data Act, protect the transfer of non-personal data from EU corporations. The data transfer has to be proven technically secure to comply with these regulations.
Solution #3: The solution depends on the business opportunity and the amount of data that needs to be processed. I recommend playing it safe and processing the data locally, getting edge servers to store and edge computing to process sensitive data. Remember that if you’d like to expand into more than one European country, you can leverage those servers and processing systems for neighboring EU countries as well, as long as latency is not an issue.
Managing other boogie stuff: Culture, Team & Resources
Obviously, you will need to establish an entity and employ some resources from the local market you’re expanding into. Don’t underestimate the power of these elements. The most significant emphasis should be on revenue-generating elements, such as designing and continuously enhancing your sales funnel strategy and customer retention. Establish with your teams how to improve these KPIs: Number of leads, Sales conversion ratios, churn, and customer satisfaction scores. The sticky customer base will depend on the market dynamics of your vertical industry and your competitive edge; however, a first-mover advantage generally applies to B2B SaaS as switching costs could be high for enterprise customers with legacy systems and fragmented data. Finally, understanding your customers’ and employees’ needs and communication styles could help you quickly advance in the game.
Conclusion
When expanding a SaaS product into different markets, the first step is ensuring the attractive market is feasible for you. Confirm there are no big red flags or huge risk factors related to data compliance, legal boundaries, or the nature of the customers’ needs. The next step is to have a robust implementation plan, know your client’s architecture, have the capabilities to develop additional layers, be prepared to process data locally, and prioritize security. The final step is to be smart when allocating your resources. Try to form teams with well-equipped people to deliver results and be agile in adapting to changing needs. Good luck with your market expansion!
