Launching a Near Shore Business: Challenges and Lessons Learned

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Launching a Near Shore BusinessChallenges and
Lessons Learned

• Business Strategies Market Validation
• May 20, 2005
• TechBA San Jose, CA
• Mark L. Perez
• mark.perez_at_mlp-adholdings.com

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Presentation Agenda

• Introduction
• Background
• Challenges
• Lessons Learned
• The Role of the Business Environment
• Open discussion
• Summary

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Creating a near shore business model poses
various challenges
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In 2000, Internet technologies and business
applications were becoming prevalent

• Internet technologies
• Java, Wireless data, PDAs, mobile phones,
  webservers, networking/telecom technologies,
  storage media, HTML, XML, SQL, etc.
• Business applications
• Enterprise Resource Planners (ERPs) Accounting,
  Payroll, HR, Benefits, and Scheduling
• Inventory Management (IM)
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Salesforce Automation (SA)
• Contract Management (CM)
• Enterprise Portals
• Business Intelligence (BI)
• B2B, B2C, C2C, B2E, etc.

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.. and Latin America was not far behind

• Businesses
• E-Commerce
• Espanol
• Fiera
• Submarino
• Auctions
• DeRemate
• Lokau
• MercadoLibre
• Financial Services
• Dineronet
• Latin Stocks
• Patagon
• Zona Financiera
• Portals
• ElSitio
• Terra Networks
• StarMedia

PC Penetration, 1999
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Business Opportunity in Latin America Develop a
near shore business model for software development

• Focus on back end business applications
• Payroll, Accounting, Inventory, Supplier
  Management
• Place back end business applications online
• Help Latin American businesses compete by
  facilitating online business transactions
• Provide end-to-end consulting services

Idea/Strategize Develop Design
Plan Engineer
Partnership

• Assess projects system and supporting software,
  network, hardware and infrastructure needs
• Design a technical plan within the defined
  business parameters

• Understand clients
  business goals in the framework of its
  competitive market
• Define clients objective
• Develop strategy with client

• Develop and deliver web systems
• Implement and construct
• Test
• Customer feedback

• Maintain close relationship with client after
  project completion- provide advice for business
  development and provide technical expertise to
  meet the growing technological needs

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At its best, our near shore business model grew
quickly

• Formed executive team
• Six founders from engineering, operations, and
  investment backgrounds
• Created the business plan
• Hired Silicon Valley legal and accounting firms
• Set up operations in Sunnyvale, CA and Monterrey,
  Nuevo Leon (later in Mexico City)
• Six employees in Sunnyvale (management)
• Four employees in Monterrey (development)
• Leased office space and phone answering services
  (HQ)
• Acquired first client (Online Auction site from
  Mexico)
• Raised 150,000 (USD) in angel investor funds
• Purchased operational tools (computers, e-mail
  system, phone service, etc.)

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Understanding why this business model did not
succeed requires us to ask several questions

• Why didnt it work?
• What obstacles did we face?
• What prevented us from rolling out a successful
  business model?
• Was the timing and product/service positioning
  done correctly?
• What can we do differently to achieve success the
  next time around?
• The answer Adequately model and plan your
  organization, your projects, your product/service
  positioning, sales/marketing strategy, financing
  strategy, and understand the business environment
  in which you are operating.

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Challenges
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Challenges can come from various levels
Business Planning
BUSINESS ENVIRONMENT
Organizational Development
Capitalization
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These challenges can be further defined into more
detailed business creation elementsSM
Business data
Challenges
Database
Business Planning
B U S I N E S S E N V I R O N M E N T
Business Plan Drafting
Idea Generation
Product/Service Selection
Business Process Definition
Market Opportunity Analysis
Lead Generation
Sales Marketing Strategy
Competitive Analysis
Pricing Strategy
Financial Projections
Hiring Strategy
Senior Management Selection
Organizational Development
Executive Management
Geographical Location
Business Application Investment
Infrastructure (buildings, factories, etc.)
Tools (communication, web)
Discipline-Specific Applications
Capitalization
Bootstrapping
Loans
Venture Capital
Angel Investors
Self Sustaining
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Challenge 1 Business planning for success
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Business Planning can be challenging

• Drafting (wordsmith-ing) your ideas takes time
• Identify the correct management
• Plan for financial sustainability, but consider
  appropriate funding sources
• Thoroughly understand your target market(s) and
  competitive landscape
• Understand the opportunities (from unmet needs or
  improvements)
• Create a solid lead generation technique
• Position your business and yourself for success

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Our business planning process failed in several
areas
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Challenge 2 Creating the right organization
Business data
Challenges
Database
Organizational Development
Executive Management
Geographical Location
Business Application Investment
Infrastructure (buildings, factories, etc.)
Tools (communication, web)
Discipline-Specific Applications
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Organizational success is driven by people and
resources

• Hire strong senior management staff
• Identify pertinent geographical business
  locations
• Invest in the correct business tools
• Acquire (lease) the appropriate infrastructure
• Appropriately staff your legal and accounting
  resources
• Equip and train your team for success!

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Organizational development failed in several key
areas
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Challenge 3 Capitalization is very important
B.E.
Challenges
Database

• Identify the correct source (s) of capital
• Assess the adequate amounts required (at the
  correct stages)
• Focus on sustainability
• Know the return-on-capital investment

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In the end, our business model could not overcome
the challenges created
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Lessons Learned
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Consider employing a project lifecycle with clear
and distinct phases for deploying your business
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A more defined process with clear metrics can
also help you achieve success
Identify Market Opportunity
Define Product or Service
Recruit Support
Create Preliminary Business Plan
Develop Rollout Plan
Procure required infrastructure
Perform Competitive Analysis Product Positioning
Develop Staffing Plans
Lead Generation
Business Planning/Organizational Development
Pricing Strategy
Launch
Measure success
Capitalization/Business Rollout
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Map business creation elementsSM to your
business creation lifecycle
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Mapping business creation elementsSM helps to
minimize business creation risks

• Aids in prioritizing tasks
• Focuses effort on key business creation elements
• Helps provide a roadmap for business success
• Creates a phased approach to launching your
  business
• Provides definition for your work

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The Role of the Business Environment
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Dont underestimate the influence of the Business
Environment
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Business environment considerations

• Dont fall for buzzwords
• Understand business trends beyond the current
  market
• Differentiate your business from your competitors
• Understand the business creation elements at play
  (during each phase)
• Know what is happening on the global scale
• Track your business data
• Know the business culture and infrastructure
  deficiencies you are operating in
• Understand the obstacles to your success

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Open Discussion
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Summary

• Launching a near shore business presents several
  challenges
• Using business creation elementsSM can help
  minimize risks
• Consider using a business creation lifecycle to
  help launch your business
• Dont minimize the impact of the business
  environment
• Position yourself for success