Capitalizing on the European Market

Software Industry Conference 17-19 July 2008

Carmen Sebe, CEO / Avangate BV

carmen.sebe@avangate.com

1. Market overview – why Europe?

Europe – a software market as big as the US

2. What to consider when going to Europe

Overcoming the entry barriers

3. Some ideas on how to generate money from

a foreign market

Agenda

Market overviewGlobal Software Market

In 2011, the Global Software Market is forecast to have a value of $271.8 billion, an increase of 33.6% since 2006.

Global Software Market Value Forecast: $ billion, 2006-2011Source: Datamonitor

Market overviewGlobal Software Market Segmentation

•Americas region accounts for 42.1% of the global market's value.

•European region generates 36% of the global market's revenue.

% Share, by ValueSource: Datamonitor

Market overviewEuropean Software Market

In 2011, the European Software Market is forecast to have a value of $91.9 billion, an increase of 25.4% since 2006.

European Software Market Value Forecast: $ billion, 2006-2011Source: Datamonitor

Market overviewEurope by Country

• France is the most lucrative software market in Europe, accounting for 23.7% of the European market's value.

• United Kingdom generates an additional 22.2% of the regional market's value.

% Share, by ValueSource: Datamonitor

Software Piracy in Europe

The software piracy record in Europe is mixed:

o Austria, Finland have the lowest rates Worldwide, 26%

o Average in EU – 36%

o Central and Eastern European rate 69%

o Rates in Russia and Ukraine have experienced the largest decreases in the world, but still very high – around 80%

High piracy regions are also high market growth regions - for example: IT spending in Russia in the next five years is expected to grow between 15 and 20 percent -

• Despite it’s late start Europe is now a mature eCommerce market and one of the biggest markets in the World.

• A mature market concentrated in Northern Europe (United Kingdom, Germany and the Scandinavian countries) where 60- 80% of Internet users are eShoppers.

• A growing market in France, Italy and in Spain with a ratio of eShoppers to Internet users the weakest (between 35-50% according to markets), but a very strong growth rate amongst new eShoppers which bodes for excellent potential for the short and long term.

eCommerce Opportunities in Europe

eCommerce Opportunities in Europe

• A budding market represented by Eastern Europe, with

different levels of maturity according to the countries

• 2008 and 2009 years will be significant for the development

of e-commerce in Europe

Opportunities

• Europe – a market as big as US

• A software market accounting 91.9$ billion

• Both mature markets and new markets

• IT spending for decreasing the software piracy

• High end market

• Favorable exchange rate $/€

Entry barriers

• Language barriers

• Multiple currencies, eased by adoption of the Euro

• Differing tax and VAT regimes

• Uncertainty over and pending legislation on ecommerce taxation

• Cultural differences

Is Europe a good place to be?

Product LocalizationEnglish only No cost

Help, Manuals, etc. - targeted countries languages

Translation Cost: $2000/10000 words

Product Localization - best selling countries

With a dedicated Partner $3000 - $10000

With a partner Associated No cost

What do I need to sell in Europe? Product Localization

What do I need to sell in Europe? Customer Support

Customer Support LocalizationSupport in English No cost

FAQs, Tutorials, etc. - targeted countries languages

Translation Cost

Multilanguage Support

Using Call Center

$6-$15 / h

$3000 - $10000In house Salary

A Partner No cost No cost

What do I need to sell in Europe? VSO – ConvertXtoDVD - Product Localization

What do I need to sell in Europe? VSO-Software.fr – Website Localization

What do I need to sell in Europe? VSO – ConvertXtoDVD - Product Localization

What do I need to sell in Europe? VSO-Software.fr – Website Localization

What do I need to sell in Europe? VSO-Software.fr - Customer Support

What do I need to sell in Europe? VSO-Software.fr - FAQs

What do I need to sell in Europe? VSO-Software.fr - Tutorials

What do I need to sell in Europe? VSO-Software.fr - eMail

What do I need to sell in Europe? Other things to consider

PRICING:

US $ for the US ; Euros for Europe

• Online: to have an eCommerce provider that allows to set prices in different currencies

• Channel: to have a price list in Euros

What do I need to sell in Europe? Other things to consider

LEGAL

VAT • EU countries for direct sales:

– The end user will pay their country VAT– Should register in an EU country for VAT

reimbursement• Non -EU countries: VAT does not applies.

Trade mark– Register in EU to protect the mark (should be used in

a 5 years period of time)

Start selling in Europe Make your product available online

What you have to consider

• Cultural differences

• eCommerce is available in Europe from 1998 since in the US is available since 11 August 1994 (according to the University of North Carolina - the first retail Internet transaction probably took place then).

• More and different payment methods available

• Local online promotion

Your partner will:

• Generate revenue for you

• Market your product and generate brand awareness

• Local support and help you with the localization

What you have to do:

• Generate an attractive partnership program

• Look for the right partner (or at least A partner)

• Support your partner actively

Start selling in Europe Setting up a Distribution Channel

Start selling in Europe Partnership Program

Commercial conditions

• Partnership levels & Reseller discounts

• Payment terms

Partner Training & Support

• Online

• Face to face

Marketing coop-fund and joint marketing activities

Start selling in Europe Look for Partners

Where and how to look for partners:

• Choose a country, if you have a reason to, or go generally

• Local IT events: conferences, trade shows

• Referral from your business partners or clients

• Online – sign up

Start selling in Europe DrWeb.com - Partnership Program

Start selling in Europe DrWeb.com – Look for Partners

Conclusions

• Going to Europe is not very expensive

• You can go by yourself, but it is more profitable and

easy with a partner

• Balance your revenue

• Minimize the business risk

• More attractive for venture capital

Thank you!

Questions?

Carmen SebeCEO – Avangate B.V.carmen.sebe@avangate.com