Expanding into a foreign country represents a unique set of challenges. Countries that attract the most foreign investment are known to have soft landing options that facilitate opening and running new operations. Mexico in particular, has options by industry. Tech companies add Mexico’s Operational Capabilities using the Subsidiary-as-a-Service (SUBaaS) option, similar to the successful Shelter Model in the Manufacturing Industry that foreign companies have been taking advantage for the past 30 years to move into the region. These options avoid unnecessary expenses and risks, while lowering dramatically total costs, with total ownership from day one.
The Subsidiary-as-a-Service option
Subsidiary as a Service (SUBaaS) is business concept that has gained prominence in recent years as an alternative for expanding to a foreign country. It allows companies to open and run their own operation in the foreign country without the complexities, risks and setup costs associated with traditional options, such as local incorporation, joint ventures, merger and acquisition. SUBaaS is found in countries that are in a strategic location of a region or continent and attract plenty of foreign investment. Because of this, these types of countries offer safe landing options to different industries, such as the Shelter Model for the Manufacturing Industry, and Foreign Virtual Subsidiary or Subsidiary-as-a-Service for the IT Industry. The SUBaaS resembles the as-a-Service model, as customers pay only for users (workers) they use, benefiting from a shared infrastructure while these economies of scale further lower the total costs. Due to its flexibility, customers can start big or small, scaling in size and adding functionality only when its needed. Similar to how business software incorporates best practices in their as-a-Service Solution, SUBaaS assists foreign customers in bypassing the learning curve of the local market and enhances the likelihood of success of their plans.
What capabilities vendors need to have
When doing Market Research when evaluating SUBaaS vendors, several items need to be checked so they can offer end-to-end capabilities in the industry they specialize. Local end-to-end infrastructure and resources The as-a-Service model relies on benefiting from economies of scale, so it means that they should have plenty of assets, infrastructure, and staff from multiple business areas/departments. Having a customer portal with a great interface is just that, a nice interface. Being able to run Payroll is just one feature of multiple roles a local operation has. Be careful with companies that promote how they have multiple partnerships to be able to deliver locally, as it will aggregate additional layers of costs and it will lack a cohesive experience. Years in the Market The foreign customer benefits from avoiding the learning curve, so the SUBaaS should have checked already this item on their own. Success odds will dramatically improve with a SUBaas, than facing alone the learning curve of a new stand-alone operation. Be aware of vendors with 2-4 years in the market announcing their software is available in 160 countries. That is a feature, no company will have experience in each of those countries, unless it acquired 160 local companies that had more than 10 years of local experience in that industry. Industry capabilities While achieving savings and minimizing risks are undoubtedly crucial factors, the ultimate determinant of the move’s success lies in effectively establishing a thriving presence in the new region. The vendor’s ability to provide expert industry-specific local know-how will play a pivotal role in accomplishing this objective. What customers they have that are similar to your company. More on vendors
Alternatives for expanding into a foreign country
Every company varies in its approach to expanding into a foreign country, as their financial resources and the degree of commitment they are prepared to invest differ. Assessing the attributes of each option can significantly impact their overall experience.
