Notable in this report is:

• The U.S. is estimated to account for 60% of the worldwide SaaS market in 2011
• The top 5 markets with their estimated revenues in hundreds of millions US$ and their percentage of the world’s total are:
1. U.S. – $ 7,315 million (60%)
2. U.K. + Ireland – $ 716 million (5.9%)
3. Germany – $ 450 million (4.5%)
4. France – $ 405 million (3.3%)
5. Canada – $ 385 million (3.2%)
• Markets 6 – 10 are Japan ($ 379 million), Greater China ($ 365 million), Belgium + Netherlands ($ 297 million), Scandinavia + Finland ($281 million), Brazil ($156 million)
• The Rest of the World after these top 10 markets accounts for approximately $ 1,260 million of Total SaaS revenues, or slightly more than 10% of the world’s total.

The source of this data is the Gartner Group and the World Information Technology and Services Alliance.

This post provides an overview of Asia and then: What is East Asia? Other posts will describe East Asia in terms of Wealth and Population, which is the first dimension of country analysis explored in the book mentioned above. Posts after that will compare and contrast the East Asian countries on the 3 other dimension of country analysis from the book and implications for market entry and starting up sales: (2) Acceptance of Technology, (3) Acceptance of English as a language of Commerce, (4) The Sales and Technology Buying Cutlure.

Asia is generating a lot of interest these days for many reasons:

• the rise of China and its interesting interactions with its neighbors: its special administrative region (SAR) of Hong Kong with its own set of laws and independent Taiwan, which China considers a wayward territory
• India and China, who are unique many aspects, including the thousands of years their cultures have spanned and the more accurate classification of them as sub-continents rather than merely countries. As their economies develop, they will change the world
• the decline of Japan, who has been hobbled by natural disasters, bursting of its real estate asset bubble and virtually no economic growth for 20 years. China has surpassed Japan as the second largest economy in the world
• continued rapid growth and development, of both the newly developed countries (South Korea, Singapore, Taiwan) and the less developed countries (Indonesia, Vietnam, Philippines).

The first tenet of understanding Asia is that there are vast differences in country size, cultures and business cultures, level of development, the sales and technology environments and pretty much any measure you can think of. There are lots and lots of contrasts, which you will see repeatedly as you read on.

Introduction – What Is East Asia?
Asia was hardly affected by the West’s financial meltdown of 2008-2009. For most East Asian countries, software and technology revenues kept right on growing from 2008 – 2010 and will continue to grow for the foreseeable future faster than any other part of the world. Self-sufficiency and confidence are rising across East Asia.

There is no exact definition of East Asia, but the classification used here is:

• India
• China and its orbit of Taiwan, Hong Kong, which is starting to be called Greater China by most
• Japan, South Korea
• The more developed countries of Southeast Asia: Singapore, Malaysia, Thailand, Indonesia, Philippines

Areas that could be considered part of East Asia, but are not discussed because their economies are small and are not advanced enough to have developed significant markets for software and technology:

• The less developed countries of Southeast Asia: Vietnam, Cambodia, Laos
• The countries bordering India: Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka
• Military dictatorships of Myanmar and North Korea

Geographically, this definition of East Asia creates a rough rectangle several thousand miles on each side:

1. Southwest: India
2. Northwest: China
3. Northeast: Japan and South Korea
4. Southeast: Indonesia

Australia and New Zealand are successfully building close economic ties with East Asia, but culturally, these countries are more similar to the U.S., Canada and Western Europe, so they will be discussed in a separate blog. However, to get a great sense of Australia and its geography, I recommend Bill Bryson’s book “In a Sunburned Country,” here at Amazon:
http://www.amazon.com/Sunburned-Country-Bill-Bryson/dp/0767903862/ref=sr_1_3?ie=UTF8&s=books&qid=1272517199&sr=1-3.

Summary
This post defined East Asia from the point of view of an enterprise software or technology vendor and divided it into 4 distinct regions: (1) India (2) Greater China, which consists of mainland China, Hong Kong and Taiwan (3) Japan and South Korea (4) five of the small, more developed countries of Southeast Asia anchored by Singapore: Indonesia, Malaysia, Thailand and Philippines.

It also introduced the basic fact about East Asia: each of the 4 regions defined above has huge contrasts. Additionally, the countries within the Southeast Asian region have large contrasts between them.

The article from the New York Times discusses how Brazil is booming and people are picking up and moving there to take advantage of the opportunities.

Brazil is a great place to visit and has huge potential on many facets: economic growth, multi-culturalism, natural resources, not to mention its now-famous drink the caipirinha, which is made from cachaça, which is made from sugar cane and is 95% alcohol. We called it the truth serum when we brought unsuspecting Americans to Brazil because after 2 caipirinhas they were spilling their life story.

When I worked for Sterling Software we built a direct sales office there for selling enterprise software before many realized how fantastic a market this was. We had 25 sales and technicians there and closed several multi-million dollar deals, grew the office and developed some great Brazilian staff.  The first thing we had to do when starting in Brazil was to convince our company CFO that the Brazilian market and currency was strong enough for us to use accruals instead of cash accounting. Rather than explain this is in excruciating financial detail, this means we could use the same kind of accounting to recognize software sales as we could in the rest of the world rather than starving the local Brazilian offices to take cash out of the country.

Nowadays, others are starting to recognize Brazil’s huge potential and now, rapid growth and development:

• Brazil’s natural resources, including the Amazon River, its vast river basin of almost three million square miles, and the largest rainforest in the world offer huge development possibilities, somewhat tempered by the world’s growing “green” consciousness against rainforest destruction. Also, one of the largest oil discoveries worldwide in the last 50 years was in the deep water off the Brazilian coast. Brazil will become an OPEC member once it starts oil production from this discovery.
• In 2010, Brazil was the seventh largest economy in the world in terms of GDP PPP and is poised to pass Russia for sixth place in 2011. Its population is the fifth largest in the world and continues to grow rapidly. Its culture is racially diverse and multicultural.
• Over the last 15 years, the Brazilian economy has rapidly expanded, and its currency has stabilized for the first time in its modern history. Its current president is the second leader in a row to come from a supposedly anti-business, populist background, but she has continued a surprisingly pro-business trend and oversees economic policy that has continued to sustain Brazil’s rapid economic ascent.

Brazil’s standing in the world and its diplomatic power is increasing, but it still does not have as much influence as its economic and natural resources might indicate. However, it is a leader in the non-aligned country movement; one of the “BRICS” countries (Brazil, Russia, India, China, South Africa), an informal organization of large developing countries.  Brazil will also host the Olympics in 2016 and the Soccer World Cup in 2014, the two largest sporting events in the world and both firsts for South America.

Clearly, Brazil’s political and international influence is on the rise. This also seems to be an inflection point in the world’s balance of power, as the stalwarts of the advanced world like the U.S. and Europe seem to be mired in eternal economic crises while the Brazil’s of the world are rising.

What do you think? Please comment.

This blog is for anyone who is considering international expansion for their software. Our focus is on business-to-business software for on-premise enterprise, SaaS and Cloud software vendors that focus on medium and large businesses and/or organizations. How large is a “medium and large business“? The definition is a little fuzzy, but from the point of view of the software we focus on, a medium or large organization has more than 20 computer users and operates at least one server.

Another definition so we are on common ground is “enterprise software,” which is what International Revenue ACCELERATION does. A country’s total software market is divided into:

1. Consumer Software
2. Small Business Software – all the way from a sole proprietor running QuickBooks up to a business or organization with 20 users and a server
3. Enterprise Software – used by a businesses or organizations the next size up from a small business as defined in bullet point 2

The total software market worldwide is estimated to be US $325 billion. Gartner Group, the leading IT market research firm, estimates the 2010 worldwide enterprise software market at US $245 billion or approximately 75% of worldwide total software. Each country’s split between sales of consumer, small business, and enterprise software varies. The less developed countries tend to have lower shares of enterprise software as a percentage of their total software markets. For example, according to Gartner, China’s enterprise software accounts for 35% of its total software market, much lower than the worldwide share of enterprise software at 75% of total software.

Why would a U.S. or Canadian software or technology vendor want to expand outside the U.S.? Well, companies that don’t might be leaving lots of revenue on the table. Though the U.S. accounts for 20% of the world’s GDP (using the International Monetary Fund’s–IMF– measure of GDP using purchasing power parity or PPP), 72% of the world’s technology spending is outside the U.S. and 60% of the world’s software is sold outside the U.S. (WTSIA’s 2010 report entitled Digital Planet). The 2010 total for technology spending outside the U.S. is something like $2,700 billion US dollars according to the same report. A company getting their share of this total is our goal.

This blog will discuss interesting tidbits about software and technology markets around the world. It will draw on information from our experience and consulting work that we will soon be publishing into a book (see http://intl-rev-acceleration.com/purchase-e-book/) and other things we hear about in the course of learning more about international markets.

A little about us: I (Jay) have worked in enterprise software companies managing 65 countries in sales, channels, product, operations and M&A and lived in London, Paris and Singapore. Edward Chow, has worked in Taiwan, Singapore, France and other European countries in strategy consulting and journalism and speaks French and Mandarin Chinese. We have contractors ready to help in Singapore, Australia, South Korea, Brazil, UK, France and Southern Europe. Our common interest is the cultures and business environments for technology in all the countries of the world. Stay tuned for more!