Internationalization of software industry

Introduction

Over the recent years, the research on software business has extended the focus of business networks to include the informal business relationships between customer companies and suppliers and how this effective corporation can be used to bring value to both parties.  Such relationships also relate to software business that has experienced a rapid growth recently. Internationalization as a strategy is in software business is better discussed after understanding how it has been used in research and how the process has been involved in enhancing business networks. This research also focuses on which problems internalization aims at solving in business operations especially among the Small and Medium Size enterprises. Knowledge on network connectedness helps companies to benefit reduced market restrictions and hence, improve creation of relationships to a wide range of companies.

Review

 The article explores the practice of network relations for SMEs and the internalization process in regard to business to business markets. The main factors that enable rapid Internationalization of activities by software firms include an improved communication and transportation infrastructure, and the understanding of technological advancement and internal specific-knowledge performance.  However, a reliance on this scope is likely to hinder SMEs survival in foreign markets over the long-learn.  Absence of market knowledge hinders the possible benefits that could be achieved from existing dyadic partner network connections.  Having this knowledge enables an expansion of the dyadic relationship of company while lack of it hinders the company from learning about networks and understanding the network.  Hence, the paper also examines how the expansion of network in marketing at business level can enable a firm to build its network in U.S as a host country.  An examination of Vincit, a Finnish software developing firm helps the authors to understand how Internationalization of activities through expansion of network abroad can be done.

 Relationship forms the major aspect of business network since they enable connection of resources, operations and actors to other firms. The evolution of such a relationship begins once the parties starts interaction and doing business together and its development involve an investment on time and resources to facilitate interaction between firms.  The present business relationships emerge from previous business operations and interactions but they enable firms to handle the increasing reliance on parties and develop more tailored requirements. The relationship is profitable to both parties and informal, since it involves bilateral decision making and is based on people’s relations in the companies and they are handled according to past interactions’ experience.

 The Uppsala, a business model for internalization, has enabled companies to penetrate international markets and involves formalization of entries through having deals with intermediaries as the first step and later replaces them with their sales representatives and later replaces the sales representatives with manufacturing plants abroad. The Uppsala model shows how casual line is developed from commitment over practical knowledge and then opportunity development. Such processes lead to the creation of relationships, generation of new knowledge through interacting and these results to new business opportunities. A revision of this model involves new ingredients which consider the network approach but still emphasizes how existing relationships affect market penetration by a firm. It also considers that a dyadic relationship between two firms happens in business markets where there is interaction and formation of business networks. A business network involves forming relationship by business units and related network. The involved parties use resources and knowledge develop complex interactions and adaptations between forms.  A company that is expanding in foreign markets must understand the business networks in these markers.   Trust and commitment are important in building networks necessary for internalization lack of which may lead to parties ceasing or reducing relationships. Knowledge in the network context helps in internationalization and hence building of relationships through trust and commitment.

These business networks have been established by software companies have been developed to Software Ecosystems, and the forms in the network are able to create competitive value. The software ecosystem are steered and managed by   coordinating firms which also have control over the underpinning technology that forms the base of the ecosystem.  For Vincit, the services it offers to an expanding B2B customer network are basis of its success since the customers and businesses are satisfied.  The analysis of data on Vincit case study focuses on knowledge and opportunities, relationship and commitment, learning, creation and building trust and network position. Internal knowledge of the firm enriches its experience and which is used in transforming intangible product into customer solutions. Relationship building helps in transiting internal knowledge into products and hence opportunities. Knowing what customer needs and providing solution shows commitment that enable Vincit to build good relationships. Having knowledge about partners and learning emanates from its various working experience and positions in interaction given that there is a good relation with customers. On network position, Vincit has not taken advantage of dyadic relationships to expand beyond them and gain the various benefits that comes with a wider network. Its independent operations in US market have made the firm to lose out on many opportunities and its big trust on its first-hand knowledge and neglect of knowledge from other companies in the network has not helped the situation.

Conclusion

 Internalization of any industry requires the firms to realize the need for building trust and commitment with other businesses that are its customers and hence a strong network position. An Internationalization model that stresses the importance of creating relationships between businesses that depend on each other is expected to serve the software industry right.  Building of such relationships will make it necessary for companies in the software industry to open up opportunities in the international markets and hence growth in their business. However, such relationships are built on knowledge about the importance of corporation in the market between different firms.  With the example of Uppsala business model for internationalization, a local business is able to penetrate in foreign markets by establishing networks with other business in the market a path that will lead to full expansion.

 A dyadic business relationship as the initial step of developing business networks involves the knowledge that companies in the software industry do not carry out their activities in operations. The social exchange between two firms can be used to build business operations that are more connected which can be for a bridge for international expansion. The firms in foreign countries have knowledge about the market which the local market needs. If a firm an act independently like Vincit and only believes in its capabilities, it will miss out on opportunities that come with wide networking.