Grant Thornton - Technology International Expansion Report 2012

APRIL 2012

Technology investment report
Unlocking growth potential
in emerging markets

Contents Foreword

Foreword 1 As financial advisers to the technology industry, one of the most common questions we’re asked is
Technology Expansion Index 2 “How can my business expand into new markets?” Every business that asks this question has varying
Investing for growth 4 challenges, but their ambitions are the same – growth.
Country profile: Mainland China 8
To help respond to this question we conducted research to investigate the strengths and
Client case study: Galleon Holdings 9 weaknesses of some of the UK’s top current countries for investment, including our own
Country profile: India 10 domestic market, through the eyes of mid-sized businesses and our own specialist sector
Client case study: IDEAL INDUSTRIES 11 experts. As part of this, we explore the level of appetite and the encouraging factors such as
the opportunities offered by the R&D conditions, the confidence of the equity support
Country profile: Israel 12 and available tax breaks, whilst also examining the potential pitfalls.
Client case study: Mobile Tornado 13 The findings of the report highlight that both the hurdles of the UK
Country profile: Brazil 14 downturn and the Eurozone crisis have contributed to planned investment by
UK technology companies in global markets proving low, with three quarters of
Client case study: Kelkoo 15
our survey respondents having no plans at all to push beyond existing markets.
Country profile: Eurozone 16 This is a concerning statistic, however, when you consider this against the
Country profile: United Kingdom 18 comparatively huge opportunity in the fast-growing, tech-friendly economies
of India, China, Brazil and Israel. As the case studies cited in this report
Country profile: USA 19
identify, international expansion into these countries, approached in the right
Client case study: Tessella 20 way and with the right support, can pay off.
Further information 21 Furthermore, the US, Australia, Germany and the Netherlands have come
Contacts 22 consistently top for international expansion in comparison to other markets
and there remain some attractive business cases hinting opportunities for
growth. For example:
• US technology jobs in the past year, have outpaced the overall rate
of new employment nearly four times.
• In 2010, investments totalling 26 billion euros were made
in Germany’s renewable energies sector, presenting great
opportunities for innovation and R&D.
• The report identifies that these markets remain attractive to UK
technology companies because they offer a familiar business
environment, language commonalities and access to high skills.

Many of our clients have international operations or aspirations.
With the right advice, funding and local support, there are opportunity
areas that offer some solid foundations for overseas expansion. With
expertise across 100 countries, Grant Thornton International Ltd member
firms specialise in supporting technology companies to assess when the time
is right, prepare and to implement their expansion plans.
We hope that you find this report useful and look forward to
supporting you in your ambitions for growth.

Wendy Hart
Head of Technology Sector Group
Grant Thornton UK LLP

Technology investment report 1

Technology Expansion Index

The Grant Thornton Technology Expansion Index Prepared by Experian using a range of data sources,
has been constructed to cover the most important the Index compares and ranks ten countries selected by Key findings
Grant Thornton’s Technology team.
aspects of what a country can offer in terms of • At an aggregate level, the United States of America is • The rankings for France at five and Italy at nine tend to
The ten countries comprise a mix of those with high GDP
investment opportunities ranging from the ease of identified as the most attractive country for technology reflect their middle to low rankings in most of the four
forecasts, countries considered emerging technology markets
starting a business to the strength of political and and more traditional markets where respondents to our
business expansion. It ranks top for economic, themes. France scores highly for business start-up, where,
infrastructure/technology and political/legal factors notably, it has the second lowest number of days (seven)
legal systems. primary research survey (see page four) are planning and ranks second for business start-up factors. Its key required to start a business, behind Italy (six). However,
to acquire. strengths lie in having the largest economy in the world, other start-up factors, for example the ease of doing
For the Index, 41 variables and four themes have been a strong infrastructure, a stable political environment and business index, mitigate against Italy building on its swift-
weighted to take into account how important they are being time efficient when it comes to starting a business. start-up process to improve its ranking. France’s political
relative to a technology business making a decision to invest and economic performances are reinforced by its attitude
• The United Kingdom is ranked second at an aggregate
or expand into an overseas market. to press freedom and its spending on education.
level and has performed strongly across all four themes. It
The final outputs for the Index provide a ranking for In contrast, Italy’s economic troubles have contributed
ranks first for business start-up by having one of the fewest
to its low overall ranking.
each of the selected countries at an aggregate level as well as start-up procedures and is a relatively easy place to do
a ranking within each theme to give an assessment of each business with. It is the highest scoring country for quality • For infrastructure and technology, the United States
country’s relative strengths and weaknesses. of research institutions and also performs well for physical of America ranks top whilst Israel ranks bottom of the
and intellectual property rights. The United Kingdom also selected countries. China ranks third, largely due to the
A full list of the variables, weightings and source data is
has the second highest internet penetration rate of the technology aspects of this theme having more than 450
available on request.
selected countries (83%) after the Netherlands. million internet users and over 740 million mobile phone
subscribers. It is worth noting that, whilst the number of
• Mainland China ranks third at the aggregate level
internet users is greatest, the internet penetration rate
with a strong economic and infrastructure/technology
is only 36% indicating there is huge potential for further
performance. With the second largest economy in the world
Country Index Scores by Category Country Index Ranking by Category expansion in this area. The Netherlands scores highly in
and the largest population, China has the largest market
terms of digital accessibility which is related to the overall
to target and the highest growth forecast over the next
Political/ Infrastructure/ Business Political/ Infrastructure/ Business ability of individuals in a country to access and use
four years. This would suggest it is an ideal location for
Country Legal Technology start-up Economic Total Legal Technology start-up Economic Rank new ICTs.
expansion. However, China has the second largest number
Total Weight 0.15 0.30 0.10 0.45 1.00
of start-up procedures and scores amongst the bottom • India offers significant potential for the future, but its
USA 0.11 0.25 0.06 0.35 0.76 1 1 2 1 1 countries in relation to how much investors are protected position in the overall rankings is hindered by low ratings
UK 0.10 0.20 0.08 0.27 0.65 3 4 1 4 2 through disclosure of ownership and financial information, for both its political/legal infrastructure and the ease of
Mainland China 0.03 0.21 0.03 0.33 0.60 9 3 7 2 3
indicating that there are likely to be barriers to being able to start up a business. These are offset by
expanding here. a high economic ranking and recognition that although
Germany 0.09 0.22 0.04 0.24 0.59 4 2 6 7 4
infrastructure and technology issues remain, they are being
France 0.06 0.17 0.05 0.26 0.54 5 6 3 6 5 • Germany’s position in fourth place at an aggregate
addressed as the country’s technological and economic
level is due to its average overall performance across all
India 0.03 0.18 0.02 0.30 0.53 8 5 9 3 6 capacity develops.
four themes, but in particular due to infrastructure and
Brazil 0.03 0.16 0.02 0.26 0.46 10 7 10 5 7 technology performance. It has the strongest score for • It is worth noting that whilst Brazil is ranked bottom for
Netherlands 0.10 0.14 0.05 0.17 0.46 2 9 5 9 8 logistical performance which takes into account efficiency business start-up theme, it is amongst the top countries for
Italy 0.05 0.16 0.03 0.17 0.41 7 8 8 8 9 of the clearance process (ie speed, simplicity and new businesses registered, indicating that businesses are
predictability of formalities) by border control agencies, setting up in Brazil even though it is some way behind other
Israel 0.06 0.06 0.05 0.16 0.33 6 10 4 10 10
quality of trade and transport related infrastructure and countries relating to the other business start-up factors. In
Source: Experian competence and quality of logistics services. contrast to Brazil’s low overall start-up rating, Israel scores
highly, reflecting, with 1,800 active start-ups, that Israel is
• Within the political and legal environment, the Netherlands
poised for significant growth as a venture-backed economy
also scores strongly and this is backed by perceptions that
with the appropriate start-up environment to match.
its government is the least likely to be destabilised as well
as one with the highest quality of public and civil services,
policy formulation and implementation.

2 Technology investment report Technology investment report 3

Investing for growth Where are UK Technology companies investing?

Top ten countries for acquisitions made by UK Technology companies 2007–2011 (Source: Thomson Reuters)

217
170
150 142 141
40 39 38 13 13
31
11
The current economic climate seems pretty dire. ‘Gloomy’, ‘unpredictable’, ‘volatile’, ‘bleak’ – we’re running out 18 8
of words to describe the outlook for the economy. The Q4 2011 results from Grant Thornton’s International 6
5
Business Report (IBR1), showed business confidence across all sectors in Europe fall from a net 0% to -17%. 3
4 4
3 3 3
1 3 3
In the Eurozone, confidence fell from two per cent to -16%. Across Europe, more businesses expected a 2 2 2 – –
United States Canada United Kingdom Sweden Germany FRANCE
decrease in profitability, revenue, employment, exports, sales and investment in new building and equipment,
than expected an increase. For UK businesses the challenging condition of the Eurozone, where many of our
top trading partners reside, is a great concern for order books.

The outlook Where are UK Technology Plans for future expansion
The miserable outlook in Europe companies investing? As part of our Technology Expansion
contrasts starkly with a far more Over the last five years, volatility in Index research, we asked 50 UK mid-
positive outlook in other regions. the global market has inevitably had market technology companies about
The IBR indicated that optimism in an impact on the volume of cross- their plans for future investment. 26%
North America rose three percentage border deals taking place. Furthermore, planned to invest in countries where
points to six per cent, while in the the volume of investment by UK their business already has a presence
BRIC economies – Brazil, Russia, India technology companies into emerging and a further 50% have no plans
and China – confidence rose from net technology markets such as India, for investment at all. The remaining
25% to 34%. This confidence is an China, Brazil and Israel has remained 24% planned to branch out into new
indicator of the increasing economic relatively low, dropping off entirely in markets. In practice this means that
strength of emerging markets and of the 2010, however returning with renewed three quarters of those surveyed have
vast opportunity they present to those vigour in 2011. Our analysis of reported no plans at all to push beyond existing
able and willing to invest. deals show the US, Germany and markets. This is a concerning statistic
Australia have consistently placed as the when you consider the comparatively
most popular countries for outbound huge opportunity in the fast-growing,
M&A (see chart on page five). tech-friendly economies of India,
China, Brazil and Israel.

Netherlands Spain South Africa Australia TOTAL number of
acquisitions by
7 7 7 uk technology
6
5 5 5 5 5 5
4 4
3 1 1 1 1
– 2 2 351
In practice this means that three quarters of those surveyed
have no plans at all to push beyond existing markets.
282
This is a concerning statistic when you consider the
238
comparatively huge opportunity in the fast-growing, tech-friendly HOW FOUR EMERGING MARKETS COMPARE 203
222
economies of India, China, Brazil and Israel.
Brazil INDIA ISRAEL CHINA

5
4
3 3 1 3 1 1
– – – 2 2 – 2 – 2 – – 2

2007

2008

2009

2010

2011
Source: http://www.internationalbusinessreport.com/Press-room/2012/Jan_update.asp
1 KEY


Investing for growth (continued)

Country profiles and
Where UK mid-market technology companies plan to invest in the next 12–18 months

No plans for any
50%
client case studies
investment in the next • Of those with plans to invest 18% were
12–18 months
planning domestic investment (UK).

• The Netherlands is the most likely
New international country to be invested in over the next
countries where your 12 to 18 months by respondents who
business does not 24% at present do not invest there (33%).
currently have investment
• The United States of America, Italy,
Germany and France are also likely
Countries where your to be investment targets (all at 25%).
business already has
an investment 26%

Source: International Technology Expansion Survey 2011

Challenges and opportunities In reality there is not a lack of In our experience there
Our Technology Expansion Index appetite for or interest in high-growth is no shortage of interest
(see page two), based on economic data markets. The low M&A figures in India, China and
sourced and analysed by Experian, represent deals that have actually Brazil as potential places to invest.
demonstrates that the markets with come to fruition, but in our experience It’s the ‘in practice’ part
that prevents a higher
the highest growth also have the most there is no shortage of interest in India,
volume of investment.
challenging environments in which China and Brazil as potential places
to conduct business. Take mainland to invest. It’s the ‘in practice’ part that
China for example; ranked second only prevents a higher volume of investment.
to the US in the Index for economic In our research, the majority of In the next section, you will find country
strength but coming a mere ninth for respondents cited red tape and high profiles with commentary from local
political and legal infrastructure and levels of taxation as the main barriers Grant Thornton partners and case studies
a hostile seventh for business start-up to investment in unfamiliar territories. featuring UK clients who have already
environment. Throughout the Index, Another reason that many aspirations achieved, or are looking to achieve,
this pattern is a theme, with the weakest to break into fast-growing economies growth in overseas markets.
countries in terms of economic growth fail is a lack of financing options for
scoring higher for their comfortable, overseas acquisition or investment
familiar business environments. strategies. As this report will show, in
Ultimately, investors looking to make a overcoming these challenges, there is a
quick buck will be rapidly disillusioned multitude of opportunities out there for
by hard realities. the taking.


IMF GDP Growth Grant Thornton Opportunity: Challenges:
prediction 2012: expansion index: Huge economic growth potential, Complex for start-ups, low rank
8.2% 3 tax incentives in tier II cities for investor protection

Country profile Case study

Mainland China Galleon Holdings

Grant Thornton’s Technology One of the reasons that UK Galleon Holdings is an entertainment media company with two principal businesses operating in different
Expansion Index ranks China second technology businesses are reluctant Where to locate?
markets. Galleon Entertainment publishes digital content in China across both online and mobile platforms and
for economic growth and third for to enter China is a fear of copying or Chongqing – Chinese states are providing also develops and exploits its multi-platform branded formats to establish a direct, interactive relationship with
infrastructure and technology. On the reverse-engineering of their products. tax breaks to attract high tech businesses
to poorer western provinces. In Chongqing users. It also has a product business, Croco Worldwide, which makes promotional toys to foster brand loyalty
flip side, China is one of the lowest Though this is still a risk, as China’s
ranked markets for political and legal patent system evolves there are
plans are underway for a Government for snacks such as crisps and cereals.
funded $154m 10sq km cloud computing
landscape and has one of the most increasing opportunities for businesses centre for hi-tech and start-up firms.
complex systems in the world for to protect their intellectual property Shanghai, Beijing, Guangzhou and Listed on AIM since December 2001 Galleon’s business is unusual in that, into China remotely from the UK.
business start-ups. It is this dichotomy, (IP). These opportunities are being Shenzhen – these East Coast cities are and with offices in London, Hong rather than developing its business in We found Hong Kong and China to
paired with the complexities of Chinese noticed. Recent research by the China- well developed and are saturated with Kong and China including Beijing, Europe and then taking the concept still be worlds apart in many aspects.
foreign investment. UK businesses looking
culture, that best explains the lack of Britain Business Council showed that Galleon is a leading publisher of digital to China, it went there to prove its What has been most effective for us is
to invest here may find their competition
UK businesses looking to enter the 59% of UK businesses with a presence is already here or may find a better deal content on both mobile and online interactive media model worked, to have someone from mainland China
Chinese market. in China want to increase their R&D elsewhere. platforms with distribution across the with Chelsea Football Club its first in place to develop the business. Our
However, great returns are never activity there1. Hong Kong – Hong Kong is a good whole of China and more than nine partner in a reality television venture. day to day operations are also run by
easily achieved. The opportunity in launchpad for many technology million registered users on its online Now it is exporting its business model local staff.
“There is an argument that it’s better companies. For new starters in the successfully into other worldwide “The overriding factor for success
China is huge, not just in terms of platform.
East, Hong Kong’s western style Asia
salary arbitrage and tax incentives. to enter China with IP safeguards in It is also a wireless short-messaging markets. in China is communication. You need
with English still as a primary business
Despite the recent slowdown in China, place than not to enter it, and find language may suit. Hong Kong is also a service (SMS) and multimedia Galleon has benefited from using to go and spend time there and build
growth is still upwards of 8% and this that your products have been copied low tax haven that attracts many global messaging service provider in China, Grant Thornton’s local audit expertise relationships, otherwise things can
anyway, reinvented and eventually technology companies to place their APAC get lost in translation. It also helps
high growth potential means that those holding nationwide SMS billing in Beijing. It has also successfully
patented in China by someone else so headquarters there.
companies able to access the Chinese codes for major groups such as struck up relationships with third to develop the business if you have a
that you can’t sell them at all. China is Chengdu, Qingdao, Zhenzhou and
market will be better at meeting China Mobile and China Unicom. In parties to help develop its business. partner who is as committed as you
rapidly becoming a major hub for IP Zhejiang – fourteen second tier cities
consumer needs and faster to market, and research.” such as these offer cheaper labour, low October 2008, Galleon acquired this As Galleon’s Chief Financial Officer are to the project. Sometimes you’ll
leaving those who shied away from rent and energy costs, favourable local operation to strengthen the Group’s Hayden Eastwood explains: “There find ‘partners’ who want to take your
Nick Farr, Head of China Britain Services policies and a steady flow of workers.
early investment trailing in their wake. media infrastructure in emerging are lots of companies that will say they money to fund their business. If they
Group, Grant Thornton UK LLP
markets and to provide complete multi- have expertise in China. We used a third put up hard cash, they’re more likely
platform media solutions to Chinese party based in China and we have used to be wedded to your idea. It does take
broadcasters. The company has now Grant Thornton’s local office to do time at first to get things done in China,
evolved into online games to exploit the our auditing because they have a good but then they will suddenly take off,
significant growth opportunity in this Western understanding. When you’re because the Chinese are very good at
In 2010, UK companies made 2,087 patent applications sector in China. investing in China, it pays to use local making things happen.”
in China, of which 1,164 were granted2. people. You cannot expect to move

The overriding factor for success in China is
communication. You need to go and spend time
there and build relationships, otherwise things can
get lost in translation.
Source: China Business Climate Survey, November 2010 http://www.cbbc.org/guide/downloads/china_business_climate_survey
1

Source: State intellectual property office of P.R.C, http://english.sipo.gov.cn/statistics/
2


prediction 2012: expansion index: Huge long-term growth potential High levels of complex bureaucracy, no quick
7.0% 6 and potential customer demand return, sensitivity of local business culture


India IDEAL INDUSTRIES

Taking India into the future A strong driver for IT investment IDEAL INDUSTRIES is a 100 year old family-owned manufacturer of tools and supplies for electrical, data,
is India’s own Generation Y who are Where to locate?
• India has more than doubled its telecommunications, low voltage and security installations. Over the last decade it has expanded into
hourly wage rates during the primed to become hungry consumers, Special Economic Zones (SEZ) – environmental monitoring through its acquisition of Casella Measurement and into the automotive sector
last decade. particularly of IT, consumer technology India’s states are home to numerous
• India’s burgeoning middle classes specially allocated areas created through its acquisition of SK Handtools. Its connection with India began through a joint venture established by
and social media. India’s consumer
with disposable income are market, currently the world’s thirteenth
specifically to attract investment. As of another IDEAL company, Trend Communications, acquired in 2004.
October 2010 there were 114 operating
projected to number 580 million largest, is expected to become the fifth SEZs in India with the most being in the
by 2030. largest by 20252. Its telecommunication state of Tamil Nadu (20), followed by In early 2011, the rules on requiring a Grant Thornton India LLP and by compliance issues and to establish
India is one of the world’s fastest- industry, the world’s fastest-growing, Karnataka (18). Approximately 500 more No Objection Certificate from Indian the appointment of an Indian entry robust systems. One of the issues
new SEZs have been approved throughout
growing economies. However, GDP added 227 million subscribers during joint venture partners changed and the development firm. Lee Thomas, the company has had to consider in
the country with the most in the state of
per capita is still relatively low and, the period 2010–113. Andhra Pradesh (109). original joint venture was dissolved. IDEAL INDUSTRIES’ Group Finance developing its pricing and offer model
there is plenty of room for tapping Vibrant economic areas excluding A new direct Indian subsidiary has been Director EMEA, explains: “When you is India’s import duties, which can be as
into the unlocked disposable income A developing business culture SEZs are: set up, focusing on network installation set up operations in India, everything much as 25%. IDEAL plans to use an
generated by the middle classes. Although dealing with the larger West Bengal – for three decades under and management, the professional is based on trust. If you want to indirect channel to market and will sell
To support this strong domestic IT services companies in India is a Communist regime, this state saw little electrical channel, and the supply of employ quality people, how do you through local dealers and distributors.
little different from large companies growth. Economic reform was introduced attract someone unless the local trust For UK technology companies
demand for goods and services, environmental devices and equipment.
in the mid-1990s and the state is now
the Indian government is investing elsewhere, smaller businesses can be The new office is based in Gurgaon, is there? Our use of an Indian entry planning to invest in India, Thomas
a beacon for ICT investment with tax
heavily in infrastructure projects to less professional, with delays in getting exemptions for investors. one of Delhi’s four satellite cities in the development firm has helped increase recommends using a reliable entry
facilitate the GDP growth, but it’s deals completed and getting people to Gujarat – arguably India’s most National Capital Region. our local credibility in entering strategist to help engender local trust
been a bumpy ride. In late 2011, India’s adhere to agreed contractual terms. economically proactive and reform-minded The development of infrastructure the market. because trying to go it alone is a
telecom networks finally rolled out state, Gujarat is planning a new city, the in India is a critical government goal, “It was soon clear how important long haul.
“When investing in India you need Gujarat International Finance Tech-City
3G when the rest of Asia was moving to be there for the long term, ie at and one of IDEAL’s key business trust was and that the customer always Lee says: “Be prepared for a lot
(GIFT), to attract finance and technology
on to 4G. The Indian Government’s least two business cycles (ten years). firms to relocate from Mumbai and of investment of time and money,
new ICT policy aims at speeding up You have to be visible and work Bangalore. but principally time. You have to
development, including plans for fibre collaboratively with local business There are 37 Indian cities among the It was soon clear how important trust was and that understand the culture. And don’t
optic cable installation and aggressive people.” world’s 300 fastest growing urban centres,
the customer always looks for local support, so forget the opportunity cost of the
according to the City Mayors Foundation,
broadband implementation1. Anuj Chande you need to have a base within India. Customers people you may have managing your
a global think tank on urban affairs.
want to know that you are a trusted brand and that investment from outside too. Managing
“Previously, agriculture would have Cities that have benefited from technology
you’re committed to the market. from Europe is practical because of the
been the highest contributor to GDP investment include:
growth in India – but this is no longer Pune – emerging as a technology hub time difference crossover, which is five
the case. IT and telecoms are very and home to a number of large software opportunities is to address this looks for local support, so you need to and a half hours. We have found using
40% of India’s companies such as Wipro, Infosys, development through an initial three have a base within India. Customers IP telephony and video conferencing is
much enablers for future growth.”
Anuj Chande, Head of South Asia Group,
population is younger Satyam, Tata Technologies and Veritas. platforms that it is establishing in want to know that you are a trusted particularly helpful in working closely
Grant Thornton UK LLP than 35 years old. Nagpur – The US airliner-making Boeing,
in partnership with Air India, is building
the market. brand and that you’re committed to together with our colleagues in India.”
a maintenance, repair and overhaul
The creation of trust is critical in the market.”
facility here. establishing an Indian investment, and To develop IDEAL’s Indian
IDEAL’s new operations have benefited presence, the business has put in place
1
Source: http://www.mit.gov.in/content/public-consultation-2011 from professional advice on the most a country manager, and a financial
2
Source: http://www.indembassy.co.il/Trade%20and%20Commerce.htm appropriate structure provided by controller to deal with legislation and
3
Source: http://www.stockmarketindian.com/diversified_section/2011/10_facts_about_India.html


prediction 2012: expansion index: Favourable climate for entrepreneurs Bureaucracy and red tape can
3.6% 10 and innovators be a significant burden


Israel Mobile Tornado

Israel is well known for its Foreign technology companies Advanced Technologies Park at Mobile Tornado is a provider of next generation instant messaging solutions which serve the market of mobile
entrepreneurial spirit, enabling it investing in Israel can access a number Ben-Gurion University (BGU)
data services in the mobile communications industry. These services include a group of services generically
to quickly transform start-ups into of financial incentives such as: A key example of the Israeli
termed ‘Push to x’ services, of which ‘Push to Talk’ (PTT) is the most commonly known.
profitable and competitive companies. • tax reductions Government’s desire to attract new
Out of the top technology • exemptions on capital gains and inward bound technology companies
investment regions highlighted infrastructure investments is this new facility in Negev. Designed
Mobile Tornado is seeing increasing it supplies its technology platform We are a British
by Grant Thornton’s Technology • credit lines for business and to enhance the economy of the region,
interest in PTT in developing countries, and provides professional services to company but we
Expansion Index, Israel is ranked export credit to provide world class facilities for
and has been approached by a number install and configure the system into have received
fourth for business start-up, after the • funds to hire workers and BGU researchers and nurture start-up
of potential partners who are well the operator’s own network. It has also significant support in Israel from the
UK, US and France. for retraining companies, including incubators, Israel Mobile and Communication
this programme presents a great placed to address significant market concluded a similar deal with a mobile
“With 1,800 active start-ups – the
• support for R&D. Association (IMA) which helps
opportunity for foreign investors. opportunities. operator in Israel, which has embraced
highest seed stage investment levels Israeli mobile and communications
Large multinationals that have already PTT turns a mobile phone into a PTT with around 500,000 users.
since the 1990s – and a diversified “Though Israel has many opportunities companies succeed and grow
invested in Israel include a number walkie-talkie but with a global range. Mobile Tornado has a strong
high-tech pipeline spread out over for foreign investors, the challenge by providing them with
of technology companies such as: Instead of transmitting/receiving base in Israel which doubles as its
life sciences, semi-conductors and presented by bureaucracy can be strategic and practical
Microsoft, Motorola, Intel, HP, radio frequencies, PTT uses the GPRS research and development arm and as assistance.
Internet technologies, Israel is poised as significant as the encouragement
Siemens, GE, IBM, Philips, AOL, data connection on mobile phones the management base for its Indian
for significant growth as a venture offered by the Israeli Government’s
Cisco and Applied Materials. to send and receive calls using VOIP operations.
backed economy.” innovation policy. To avoid
unnecessary market restrictiveness, technology. Mobile Tornado Chief Executive
Ilanit Halperin, Partner, Head of Technology Technological incubators
and Life Sciences Department, Fahn potential investors would be advised In the last year, Mobile Tornado has Jeremy Fenn says the company
As part of a drive to strengthen Israeli to seek local consulting services closed deals with two mobile operators has received significant support in
Kanne & Co. Grant Thornton Israel
export power, the Government has to fully understand both risks and in India for over 200,000 licences, Israel: “We have worked closely in
Israel has the largest number of developed a programme of support opportunities.” and signed partnership agreements in partnership with the Israel Mobile and
NASDAQ listed companies outside the corporations to give fledgling Ilanit Halperin South Africa and Guatemala. That has Communication Association (IMA)
United States and an increasing number entrepreneurs an opportunity to raised Mobile Tornado’s profile and it which helps connect Israeli product
listed on the London Stock Exchange. develop their innovative technological is now discussing further partnership companies with global operators and
Apart from Silicon Valley, the ideas and start to build a business. The opportunities in Mexico and Brazil. It network and handset vendors. We are a
highest concentration of high-tech incubator programme is applied in all has also deployed technical resources British company but we have received
companies is found in Israel. parts of Israel, under the guidance, across Israel, UK and India to maximise significant support in Israel from the
and with the support, of the Office of its business efficiency. IMA which helps Israeli mobile and
the Chief Scientist of the Ministry of Its preferred way of working in communications companies succeed
Industry and Trade. developing markets like India is to and grow by providing them with
partner with local operators where strategic and practical assistance.”
The Government has developed a programme of
support corporations to give fledgling entrepreneurs an
opportunity to develop their innovative technological
ideas and start to build a business.


prediction 2012: expansion index: Second most favoured destination for PE in Greater innovation; restrictive
3.0% 7 emerging markets; large IT market; technology labour laws; IT skills shortage
driver for future global sporting events


Brazil Kelkoo

At 8.5 million square kilometres, Brazil accounts for nearly half Kelkoo is a price comparison shopping and travel website which helps consumers to get the best deals by
Brazil is the size of a continent, and of all IT spending in Latin America; Where to locate?
comparing the prices of retailers and travel suppliers. It currently operates in 12 countries across the world,
currently accounts for 40% of Latin prompting the government to Key tech locations mainly in Europe, but also now extending to the US and Brazil.
America’s economy. IMF GDP growth introduce a plan to expand broadband • City of Sao Paulo and Sao Paulo state.
forecasts through 2013 are strong at infrastructure throughout the • Recife in the North East – Brazil’s ‘China’. Kelkoo’s move into Brazil takes it into “We looked at India, but there “We’ve benefited from
4%, potentially underpinned by the country. The results are beginning to • Porto Alegre (in the South of Brazil). a large, growing market where it has is only a small market for online Grant Thornton’s help. Because we’re
impact of the 2014 World Cup and be apparent. The first all-Brazilian • Belo Horizonte/Minais Gerais a very strong opportunity to compete purchases. There isn’t a lot of online not large in size, ease of market entry,
2016 Olympic Games, which will drive semiconductor manufacturing facility (South Eastern Brazil). with an existing comparison shopping spend. The big opportunity in India is the overall size of the market, and the
technology investment. The domestic is now in production, and IBM has Emerging tech – Porto Digital site. A benefit for Kelkoo is that, as mobile,” says Craig Dixon, Kelkoo’s number of competitors are important
market for IT in Brazil is now the selected Brazil for its first new research • A fast growing tech cluster in Recife, a site offering comparison shopping, Chief Financial Officer. “We are not a criteria for us. I’m very optimistic
seventh largest in the world. $165.7bn facility in 12 years. North Eastern Brazil. it can enter a market virtually and large company and there are regulatory about the Brazilian market. It is a large
was spent on ICT in 2010 with only Apart from the World Cup and • Vision to be leading centre for innovation does not necessarily need a physical issues in China which would mean we’d market and we’ve found that people are
$2.4bn of services exported. the Olympics, opportunities exist in and enterprise for ICT and creative presence. However, as with its existing need to find a local partner. We were very savvy, so you have to be aware of
Brazil is a potential technology areas such as the broadcast and health sectors in Brazil.
European operations, a virtual presence looking to get into a market more easily the regulatory environment and
investment hotspot because of its large, sectors, in industrial automation, • Cluster includes CESAR which has
is likely, in time, to become a physical than that, which is why Brazil offers the cost and complexity of doing
created innovative solutions for
stable, growing economy; a modern mobility solutions for retail and presence. Its main challenge in entering such a good opportunity.” business there.”
Motorola, Intel, Dell, Samsung and IBM.
financial system that has largely commercial sectors, and partnering the Brazilian market is to drive traffic One of the issues in Brazil is the
• Successful spin-outs include Silicon Reef
escaped the global financial crisis; a for corporate IT opportunities. There (mixed signal ICs). to its site which it does by search engine considerable cost of import duties,
strong base of local investors; and is a large private health sector due to Source: UK Trade & Investment optimisation and through paid search which can be up to 20%. For
robust capital markets and a middle the pressure on Brazil’s public health in Google. that reason, Kelkoo has utilised
class of almost 100 million people as service, and both sectors want to use Kelkoo has also looked closely at Grant Thornton’s expertise in
potential technology consumers. the latest technologies, including other emerging markets that might offer delivering local compliance and
China is already targeting Brazil’s e-health and remote diagnostic tools. bureaucratic and requires at least 15 a competitive opportunity, including auditing advice.
technology sector and plans to invest However, Brazil faces some documents and many visits to a notary. China and India.
US$4.5 billion this year, shifting challenges which could hinder Brazil has a need for greater
investment in Latin America from technology investors, including technology innovation. One bright spot
agriculture and mining. Apple’s a shortage of trained IT labour. is an innovation cluster, Porto Digital, One of the issues in Brazil is the considerable
Chinese manufacturing partner According to predictions, by 2020 the in the Recife area of North-Eastern cost of import duties, which can be up to 20%.
Brazil which employs around 6,500 IT For that reason, Kelkoo has utilised Grant Thornton’s
Including telecommunications, IT end-user spending in professionals and now has an annual expertise in delivering local compliance and
auditing advice.
Brazil is expected to approach US$134.2 billion in 2014. turnover of around US$431 million.
The cluster includes CESAR, which has
Foxconn is reported to be considering country will be short of about 750,000 created innovative solutions for Intel
Brazil as an assembly site for the iPad. IT workers. Brazil payroll costs are and IBM as well as successful spin-outs
Moreover, the Brazilian government also amongst the highest in the world, such as Silicon Reef which provides
is granting relevant tax incentives for and the overall expense for employers, mixed signal integrated circuits.
the manufacturing of tablets within including taxes and benefits, supported
country lines. The Manaus Free Zone is by protective local labour laws, is
an interesting option for those seeking significant, A company can be started
such opportunities. quite easily, but the process is very

IMF GDP Growth Grant Thornton Opportunity: Challenges: IMF GDP Growth Grant Thornton Opportunity: Challenges:
prediction 2012: expansion index: Supportive of R&D and innovation; Complexity of labour laws prediction 2012: expansion index: Strong Biotech and Cleantech Weak growth and unclear financial outlook;
0.2% 5 tax incentives; labour reforms -2.2% 9 sectors; innovative heritage bureaucracy and funding hurdles

France Italy

In the last couple of years, French France has also created a Strategic France should take advance advice on Despite its recent financial problems, Thriving areas for technology Renewable energy is a growing
reforms have made the country more Investment Fund to support the contract and employment practices and which are likely to culminate in start-ups include the Lombardy region, sector with solar and wind power
attractive to technology investors, development of small and medium- perhaps consider outsourcing to local economic shrinkage of 2.2% in 2012 home to Milan, and the area around prominent areas. Southern Italy
notably by investing in innovation, sized companies, particularly those specialists. and a further 0.6% in 2013, Italy’s IT Pisa. Both have strong university links provides an ideal hot, windy climate to
changing labour regulations and with scope for innovation and market France has also introduced tax market is the fourth largest in Europe, that have created numerous start-ups. attract cleantech interest, especially in
instituting more attractive tax policies leadership. Its ongoing investments credits exempting new investments its mobile wireless market is a world Italy is strong in life sciences and is regions such as Apulia and Calabria.
for those setting up businesses. include Bull and YouTube rival from local business tax and providing leader and Italy ranks third in Europe committed to innovation with over a
One key focus is research and Dailymotion. up to 50% tax relief on R&D costs. in the field of wind energy. billion euros from a mix of funding Entrepreneurship among
development. A growing area twenty France’s labour laws remain Companies investing in Italy will sources spent annually on research and scientists and researchers
miles south of Paris, Plateau de Saclay, complex, although reforms now Gross domestic R&D find bureaucractic barriers being development, notably in biotechnology.
is increasing. In the last
dubbed ‘Europe’s Silicon Valley’, enable companies to better tune spending exceeded $42 steadily lifted but not completely The Italian marketplace is
accounts for 10% of all research employment contracts and working removed. There have been some dominated by small and medium few years more than
billion in 2008, placing
personnel in France, providing a base hours to their business requirements. marked changes in tax legislation sized enterprises. There are only 800 university spin-outs
for 43,000 people, covering scientific National Insurance contributions France second only to and investor funding for technology 3,500 companies with more than 250
were created.
disciplines as broad as nano-science, in France, however, are greater for Germany in Europe. ventures is not easy to find. Funds are employees. 95% of companies have less
climate and the environment, and IT. both employers and employees than available for research in some regions, than nine staff.
in the UK. Companies investing in notably in Southern Italy.

IMF GDP Growth Grant Thornton Opportunity: Challenges: IMF GDP Growth Grant Thornton Opportunity: Challenges:
prediction 2012: expansion index: Strong technological base; well-qualified Language and cultural barriers; prediction 2012: expansion index: UK-friendly environment to target the rest of Western Restrictive labour laws;
0.3% 4 workers; compelling market breadth weaker growth 1.3% 8 Europe; health technology specialism; tax advantages small domestic market

Germany Netherlands

Although Germany is facing Investment incentives can reach Germany, close to the North Sea. Raising finance in the Netherlands is Holland spawning a number of health- to avoid double taxation on profits
comparatively weak growth of just up to 50% of the cash needs for small The automotive industry in the south a straightforward process and there is technology spin-offs. whilst an ‘innovation box’ provides a
0.3% in 2012, rising to 1.5% in 2013, its investors. Maximum investment has created several local, innovative a well-trodden path of Anglo-Dutch Groningen and Assen are both in special tax regime where all income to
strong technological base ensures a high support can be obtained if a business companies. joint ventures, particularly in the oil the sparsely-populated North-East, be allocated to qualifying intellectual
quality of research and development, is located in the new federal states industry. which provides incentives to attract property (IP) is subject to an effective
a clear prerequisite for technology that previously belonged to Eastern In 2010, investments The labour market, however, foreign investment in the form of Dutch corporate income tax rate of 5%.
investors. Well qualified workers and Germany. Subsidies are most generous totalling 26 billion euros lacks flexibility. ‘Older’ European tax breaks and grants. Groningen
a constant strive for innovation are for technology start-ups in the countries like the Netherlands suffer in particular has a reputation for The digital divide is
were made in Germany’s
key drivers. As a further incentive, Berlin area. from restrictive legislation with strong entrepreneurialism. Tax advantages for barely noticeable in the
companies investing in Germany can Germany has a strong focus on renewable energies sector. redundancy protection. foreign investors are also offered in
address the German-speaking market renewables with solar companies The Netherlands has a strong the South East, around Maastricht.
Netherlands where 88.6%
of 100 million people and springboard established in the federal states of the focus on health technologies, with the Comparatively, the Netherlands of the total population
into the growing markets of Central former Eastern Germany and wind universities of Groningen in the North offers significant tax advantages. Many is online.
and Eastern Europe. companies located in north western and Leiden in the province of South companies use a Netherlands base


Grant Thornton - Technology International Expansion Report 2012

Grant Thornton - Technology International Expansion Report 2012

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (17)

Ähnlich wie Grant Thornton - Technology International Expansion Report 2012

Ähnlich wie Grant Thornton - Technology International Expansion Report 2012 (20)

Mehr von Grant Thornton

Mehr von Grant Thornton (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Grant Thornton - Technology International Expansion Report 2012