Global Expansion Still Valuable, Despite Challenges

The vast majority of tech firms in both the U.S. and the U.K. say they have plans to expand into new markets overseas, but stiff challenges have prevented nearly half from doing so.

According to Velocity Global’s “The State of Global Expansion 2019” report, which surveyed 500 directors and C-suite executives, nearly 90% of IT, software and technology companies on both sides of the Atlantic are currently looking to expand abroad in the next five years.

Europe, Asia and North America were the top regional destinations for tech businesses based in the U.S. and U.K., with the Netherlands, the United States and Hong Kong topping the list of most promising markets, according to the report’s Global Expansion Tech Index.

However, while the vast majority of decision-makers surveyed are targeting international growth in the years ahead, 49% have yet to make the leap.

Attention-grabbing headlines about an imminent recession, the continued fallout from Brexit and global trade disputes may seem like culprits for this apprehension, but those surveyed say it’s due to practical challenges on the ground.

According to the report, 41% of businesses in both countries cited managing employee immigration and recruiting talent in international markets as the main barriers to international expansion. Lack of government support and regulatory compliance concerns came in last.

Many of the companies surveyed have reasons to question talent acquisition and management abroad. More than a third of firms say they have already exited an international market after establishing a presence overseas because of these difficulties.

But there are alternatives, the report finds. Tech businesses can acquire foreign entities, establish joint venture partnerships or work with an international professional employer organization, known as a PEO.

PEOs can help tech companies expand abroad, the report says, because they allow firms to build a customer base and employ local talent with lower levels of risk than other options.

Despite mounting pressure abroad, technology leaders still view international expansion as a vital path to growth, but knowing how to navigate it is becoming equally important.

To learn more about how tech leaders responded or see where countries ranked in the Global Expansion Tech Index, read Velocity Global’s report here.

Recently, Velocity Global Founder and CEO Ben Wright hosted a webinar on the top markets for expanding tech firms, how firms can determine which top markets best align with their global expansion goals, why U.S. and U.K. tech firms are seeking talent abroad, and challenges that may arise when expanding operations overseas. Watch the webinar here.