Building a Global Alliance
Note: This article has been modified from an earlier version. See clarification below.
Tacit Networks, a technology company in South Plainfield, N.J., makes software that allows instant file sharing between networks, no matter how far apart. So it made perfect sense for the company to expand internationally. The problem was mustering the resources. At the start of 2005, Tacit had 60 employees and revenue of less than $5 million, and there wasn't a lot of manpower or money to spare. What's more, no one on staff had strong business connections overseas. Tacit needed savvy locals onboard to help negotiate the language, culture, and legal barriers--but president Chuck Foley could hardly afford to put them on his payroll.
It's a dilemma faced by nearly all first-time global traders--how to get a foot in the door. Many entrepreneurs stalk industry trade shows for contacts, while others cold-call or travel overseas to pound the pavement in search of customers--none of which is terribly efficient, says Niraj Patel, CEO of Vipana, an international technology consultancy based in Jersey City, N.J. "It takes a great deal of time to make inroads in new markets through grass-roots efforts like these," Patel says.
A more efficient approach is to put off searching for clients and instead forge relationships with companies that sell to your potential clients--essentially turning those outfits into your offshore sales force. It's a global twist on the classic relationship between, say, tech companies and their resellers. As in most reseller arrangements, the overseas partners get deep discounts on what they sell. But they also provide instant access to a network of trusted customers, helping defray the expense of establishing a local presence and marketing in new languages. "It's kind of an inside-out sales process," Foley says.
Tacit took that approach last spring when it made its first moves into Europe. First, two sales VPs, Bob Minschall and Nick Smyth, searched for companies that had a need for Tacit's technology by sending general information e-mails to anyone they thought might have logistics and distribution issues. Among those that responded was Elan, a technology-industry recruiter with offices in London, Paris, and Nice. Two months later, in London, Minschall and Smyth demonstrated Tacit's iShared Networks system to Elan executives. They were impressed but didn't exactly rush to write a check. That was fine with Minschall and Smyth: The idea was less to sell to Elan than to find out where the recruiting firm would turn for similar services. Elan referred the pair to its tech consultant, London-based Solution Centre--which, as luck would have it, was looking to provide file-sharing technology. Two weeks later, Tacit had a partner.
Under their agreement, Tacit will sell its applications to Solution Centre at a discount of 30% to 40% of what it charges most end users; it also will provide technical support. Solution Centre will do the marketing and installation. Forty percent is a big discount, Foley admits, but worth it because Solution Centre already has contacts and licenses across the continent.
Since then, Tacit and Solution Centre have been operating in tandem, crafting pitches together and making sales calls together. Their first client: Elan, which in February hired Solution Centre to install Tacit's software. "This wouldn't have been possible without them," Foley says. "We didn't know these markets and weren't licensed to sell there." Solution Centre, meanwhile, is scouting for more clients.
Tacit has inked similar deals with partners in Denmark, Germany, and Ireland. In each case, the company took the same tack--getting likely users to refer Tacit's sales execs to their tech consultants, who then agreed to become resellers. The company also has opened offices in Australia and England, gunning to make more fast friends. Offshore sales now account for 20% of Tacit's revenue, which is projected to hit $10 million in 2005.
Foley is bullish on partnerships, but he's also careful, cautioning his salespeople to keep all intellectual property to themselves. He asks overseas partners to sign nondisclosure agreements written to comply with U.S. laws. If they balk, he tries to get them to consider documents that comply with United Nations guidelines for businesses.
In July, Tacit forged its biggest partnership yet, with Brocade, a San Jose, Calif.-based manufacturer that is a leading seller of communications equipment in Europe. Brocade will sell servers with Tacit's file-sharing software preinstalled to clients across the continent. The deal stands to give Tacit a global footprint it never could have created by flying solo. "It gets us inside of their product," says Foley. "With this type of partner, they can't be swayed to the competition as easily."
Resources The United Nations guidelines for global businesses can be found at UNCTAD.org. For advice on working across language and cultural barriers, check out Cultural Intelligence: People Skills for Global Business by David C. Thomas and Kerr Inkson.
Correction: An earlier version of this article misstated the year Tacit had 60 employees. It was the beginning of 2005, not the beginning of 2004. The earlier version also identified Chuck Foley as CEO, although he is president. Finally, the article printed projected revenue of $10 million as an amount already achieved. Tacit's revenues are projected to hit $10 million by the end of 2005.