Disrupt: Easier to sell to overseas clients than local ones
By A. Asohan August 29, 2013
- Unlike local companies, overseas customers don’t really care where you come from
- Self-confidence and belief important: ‘If you want to make it, you will make it happen’
MALAYSIAN startups may find it easier to sell to overseas customers than their fellow Malaysian companies, which may be due to a lack of confidence in local capability or the more risk-averse nature of decision-makers here.
“The bar that we set here seems to be higher, for whatever reasons, that we had to try really, really hard to get in,” said Andre Sequerah, cofounder of telecommunications software company Aexio.
Speaking at the Aug 28 DNA-TeAM Disrupt panel discussion with the theme ‘Getting your foot in the door,’ Sequerah said that his company, founded about seven years ago, faced two different sets of challenges.
“If you’re a local company working the local market, it’s one set of challenges; if you’re a local company working the international market, it’s a different set of challenges.
“Overseas customers don’t look so much at where you are from, they will just look at your product and see if it’s good enough,” he said, adding that they would ask for customer references, have their technical team look into the product, go by the quality of your presentations and so on.
“If all this was good, they might ask you for a trial or a proof of concept, and if it works, and the price is good, then you will get the go-ahead,” he added.
Aexio develops software that helps engineers in the telecommunications industry troubleshoot and optimise their networks. When the company first started, its challenge was getting to meet the right kind of people within the customer organisations.
“You will be talking to the engineer, but he may not be holding the budget,” Sequerah (pic) said.
But the company managed to get DiGi Telecommunications as its first big local customer. “They took a chance on us, which was great – you always have to start somewhere, and we ran with it,” he added.
But Sequerah acknowledged that it was more difficult trying to sell to local customers – it was an issue of track record and whether they would really want to trust a smaller company to deliver what the big boys are doing.
“The challenge in the local market has always been getting people to believe that, as another Malaysian company, you can do the job and do it well,” he said.
“We’ve had a good rate [in the domestic market], but it’s always been a challenge to try and prove that we can do it, we’ve always been doing it, and you can trust us to do it,” he said, adding that DiGi’s bet on his company was an all-important one.
“Now that we’ve built up the track record and have the customer references, when we go back to those local customers we have pitched to before, they take more notice – it’s a small industry, and word does get around,” Sequerah said.
‘One screw-up and they’re gone’
DNA-TeAM Disrupt is a monthly panel discussion and networking session organised by Digital News Asia (DNA) and the Technopreneurs Association of Malaysia (TeAM). This month’s topic focused on how hard it was for Malaysian startups to penetrate a very sceptical market when it comes to home-grown solutions.
Joining Sequerah on the panel, moderated by DNA founder and chief executive officer Karamjit Singh, were Azran Osman Rani, chief executive officer of long-haul low-cost carrier AirAsia X; and Bob Chua, founder of the Pulse Group and an even newer venture, Pulsate, which specialises in big data analytics.
Chua came on as a late panellist after Centium Software founder G. Saravanan had to bow out because of a family emergency.
While acknowledging the fact that Malaysian startups do not necessarily get a fair shake from local enterprises, Karamjit noted they may have their reasons too.
“On their side, they may be afraid – you (the startup) may not realise it, but their careers could be on the line,” he said. “If somebody picks your company, which is unproven or with very little market traction, they’re really putting their reputation on the line.
“You may not see it that way, but that’s the reality of the situation,” he added.
In the olden days of the information technology industry – the 1970s and 1980s, until the personal computer revolution transformed the landscape – it was encapsulated by the pithy saying, “Nobody ever got fired for buying IBM.”
A member of the audience Andy Khoo (pic), formerly the Brunei and Malaysia country manager for storage multinational NetApp and currently with US technology giant Hewlett-Packard, offered some insight into this from his two-year tenure as chief information officer (CIO) in a government-linked company.
“You must understand the position of the person making the decision – he will always want to maximise his own safety and security, as well as the position of his organisation, and make himself look good in front of his bosses.
“And no disrespect to any CIOs out there, but the typical CIO is very risk-averse – the majority of them have taken 20 to 30 years to rise to their present position, and believe you me, there are any number of people below them in the hierarchy knocking at their position,” Khoo said.
“All they need to do is make one screw-up, and they’re gone,” he added.
And even if the CIO takes the risk, it may not be a done deal. Another audience member offered his own experience, in which his insurance software was taken up by the CIO, but the decision was vetoed by the company’s board.
“It’s harder if you’re touching core, mission-critical systems,” he said. “You might want to go in with a big partner, an IBM or a Microsoft.”
‘Help us differentiate’
Not that all decision-makers and IT-buyers are risk-averse. AirAsia X’s Azran (pic), in fact seems to delight in it and is no stranger to controversy after taking on Malay-language daily Utusan Malaysia in June for its race-baiting articles.
“The common theme here is probably understanding the internal structure, the dynamics and decision-making process [in large enterprises],” he said.
“AirAsia X, by nature, is the black sheep of the family – when we started, we had to spin off as a separate company because even (its short-haul low-cost carrier parent company] AirAsia didn’t believe in us or didn’t believe in our business model.
“Being the black sheep of the family, we are by nature more experimental, and can do things that even AirAsia does not,” he added.
He said that AirAsia X was the first to introduce assigned seating, which AirAsia adopted 18 months later; the first to introduce pre-booked meals; and the first to introduce connecting transfers, which AirAsia emulated over a year later.
“When it comes to technology, where it is within our ability to do so, we’ve taken a lot of chances with a lot of new startups,” he said. “Some have worked well; some haven’t.”
Azran said that when it comes to technology procurement and use in the AirAsia family, there are three main parts.
“The cornerstone of AirAsia is the booking platform, and that is one area that is common for all the different AirAsia companies,” he said. “This is something that AirAsia manages centrally and inhouse.”
“When it comes to anything to do with the core website and the core mobile platform, I’m more of a user than a decision-maker because AirAsia really wants to manage it,” he said.
Azran said that unlike AirAsia X, AirAsia prefers to do a lot of things inhouse. “Even if you were to pitch interesting ideas at them, their first thought would be, ‘Can we do it inhouse?’ “
Another set of technologies that AirAsia X uses would be the very specialised aviation-related or aircraft-specific solutions, such as fuel management systems and aircraft navigation.
“Early in our inception, we worked with a startup out of Singapore which had an interesting solution on an iPad-like device for pilots in the cockpit,” he said. “Everything was digitised and pilots could get real-time weather information and what-have-you – we thought it was cool, and we went with it.”
The third set of technologies that “interests us are solutions that can really differentiate us from other airlines,” Azran said.
An example of this was a startup based out of India and founded by ex-MIT graduates, which had developed an algorithm that could dynamically price options such as seat upgrades, or getting all three seats in a row, which can be much-needed on a long-haul flight.
With the solution in place, travellers can put RM50 down, for example, to attempt to get three seats in a row. Upon check-in, if the flight is fully booked and he can’t get those three seats, the RM50 is refunded. But if not, he gets those three seats for a mere additional RM50.
“I thought it was a very unique idea to monetise something, so I went for it,” said Azran, adding that the startup made and elevator pitch to him.
“Cool stuff like that, we’re prepared to try,” he added. And as CEO, “I am more willing to take chances because the buck stops here.”
Azran offered another lesson for startups trying to get their ‘foot in the door.’ The Singapore-based startup with that iPad-like solution, after it managed to get AirAsia X as a customer, saw it as a foot into the door of the greater company, AirAsia, and its vast fleet.
AirAsia X was also expanding, and the startup could not keep up. It had difficulty getting the funding to scale up, and spent nearly two years getting distracted trying to sell to AirAsia, Azran claimed.
“That’s the other thing – the sales cycles in larger enterprises are always longer,” he added.
Pulsate’s Chua concurred. “When it comes to the bigger guys, some of them in my experience have been the worst paymasters, with the longest procurement processes,” he cautioned.
Ultimately, Azran said a bigger company came to AirAsia X with a similar solution that the Singapore startup had developed, and because it had better economies of scale, at a lower price-point too, so the airline switched.
When asked by a Disrupt participant if the startup had been on the ball, would AirAsia X have switched to the less expensive solution offered by the bigger company, Azran said no. “We definitely see value in relationships and track record, and like for like, we’d rather stick with people we know.”
However, he acknowledged that while AirAsia X is startup-friendly, he hasn’t had pitches from local companies that he could recall, probably because there are no, if any, players in this specialised field.
A white space opportunity there? Just don’t neglect an existing customer when making a play for a bigger one.
Tales from the trenches
There are challenges selling to the big guys, but they can be surmounted. Pulsate’s Chua (pic) noted that his three ventures to date are representative of the lifecycle stages a startup grows through.
With a background in analytics, he left Nielsen to start his first venture GMI in the late 1990s.
“It was a two-man show, my buddy in Seattle and me, and we had very little money. The first door you want to get in will always be the hardest, and we wanted to go after a big guy,” he said.
That ‘big guy’ was his former employer Nielsen. That helped a little, but was not going to seal any deal.
“We had some traction because my partner came from Procter & Gamble and I was a former employee – but Nielsen then was a 45,000-employee company with US$1.2 billion in revenues, and it was listed on the New York Stock Exchange,” he added. “So, really, we were a nobody.”
Hearing that Nielsen was sending senior executives to a big conference in Bangkok, Chua and his partner flew into the city with their equipment, which almost didn’t get through Customs, loaded it all onto a tuk-tuk (auto-rickshaw) and headed for the conference.
“There we were, perspiring and all, but we managed to corner this guy who was the vice-president of analytics at Nielsen, and told him to have a look at our platform,” he said. “It was, at that point, all built out self-confidence and belief – if you want to make it, you will make it happen.”
“We stood by certain philosophies, and these could have been delusional when I think about it now, but for an entrepreneur, there is a very fine line between delusion and reality – or no line at all. We had this Sun-Tzu mentality – when small, appear big; when weak, appear strong.
“It’s all BS at the end of the day, but we believed in it – we believed in it so much that we actually managed to sell to Nielsen, and once a company like Nielsen buys, everyone else takes notice,” he said. “So it’s self-belief, confidence, a bit of luck and a bit of BS.”
Chua finally sold GMI to WPP, and began on his second venture, Pulse. At the time, he already had clients that knew his company, and had a bit of a reputation and a brand.
“But we were still small, and we started in Australia because we wanted to be ‘somewhat international’,” he said.
They had an office in Sydney, but their ‘Cyberjaya office’ was an apartment. “We had my friend’s mom cooking for us, his son was running all over the place, but we had a brand and a reputation and so people thought we were big.
“Five months later we got a few million from a Japanese investor, and in our 33rd month, we listed (on London’s AIM exchange),” he added.
His latest venture is the RM60-million (US$19-million) big data analytics company Pulsate, which was officially launched on the morning of the 29th. “We’re a startup nonetheless, but we do have clients knocking at our door this time,” he added.
Disrupt #10: Getting your foot in the door