The Open Road

As the developed economies crater, many vendors are looking beyond the borders of North America and Western Europe to grow into Asia-Pacific, Eastern Europe, and Latin America.

For open-source companies, in particular, Latin America shows a great deal of promise, as countries such as Brazil and Argentina deliver many leads--but to too few closed contracts.

Dorian Turner

Over the past three years, part of my role has included managing Alfresco's business in Latin America. In so doing, I have sought expert advice from Red Hat, which has a booming business in Latin America, and other trusted sources. This weekend, however, I was privileged to hear from an unexpected source: Dorian Turner, president and founder of Lingo Consulting, a firm that helps enterprises expand internationally.

Turner gave some excellent advice on the nuances of building a business in Latin America, which she has kindly allowed me to share here:

• Most Argentines do speak English, and certainly, (that includes) Argentines in IT and hard-science fields...The most common issue was not the language barrier, but a) understanding other employees with accents over the phone..., b) correctly understanding differences between American and British English..., and c) getting nervous when speaking with their English counterparts here in the USA or when they visit. The same is very true of Brazil.
• Understand that (Latin American) employees are in awe of how American business works (especially how we work as a "team" that even includes management, when they are so used to an "employees vs. the big, bad boss" kind of mentality). So if you are hiring there, and (your company) has one of those "we are all one" corporate cultures, this is something you will have to train new hires in, as it is not the norm culturally.
• When you don't have operations there, hire someone local to help with local hiring...Argentine and Brazilian people are accustomed to doing things in person. Of course, IT professionals and other corporate employees are typically very Web-savvy, but as a rule, they do everything face to face.
• In addition, (Argentines and Brazilians) are used to going through several grueling rounds in the hiring process...In both Argentina and Brazil, it is permissible to ask for photos, have age and gender requirements mentioned in job descriptions, and even to visit a potential employee's home during the hiring process. Unlike the U.S., it is not only legal, but acceptable that a potential employer also ask personal questions, such as marital status, as well.
• I highly recommend that you make sure to have a representative team from your company or a U.S. representative team to train and/or assist in recruiting. Argentines have a way of hiring friends and relatives that makes an objective eye (who has your company's interests at heart) essential when it comes to hiring decisions.

  This also helps to set the tone of inclusiveness, rather than that these new hires will simply be "cheap labor," even if that may be one of the perks of hiring there. Argentines have a complex about American businesses because of a past history of U.S. companies coming there and abusing employees.

• You should look at Uruguay as well. It is a small country wedged between both Argentina and Brazil. They are almost identical culturally to the Argentine people (sort of like how Canadians are similar to Americans), but with more flexible tax laws and reciprocal agreements with the USA that may make it worth your while to investigate.
• Ideally, (your company) would put a small or satellite office in either Argentina or Brazil (preferably both) as again, it has been my experience that this is best for everyone; these will be "full-time employees." The only other alternatives would be to either work with a partner firm or to have a designee fly there periodically to ensure that your company's goals are being met.

Great advice, and great insight into how to pragmatically grow in a growing, but sometimes difficult, market.

(Credit: Roy Schestowitz)

Microsoft has been a little quiet on the "independent TCO (total cost of ownership) study" front for at least a week now, so it is perhaps not surprising to see the company promoting a new TCO study comparing the cost of deploying Linux and Windows in emerging markets. Vital Wave Consulting, that paragon of research (no, I've never heard of it, either), published the study.

But who wrote it is somewhat immaterial here. The problem is that the research fails to acknowledge the biggest cost of working with Microsoft: the cost of exit.

First, to the research. As Microsoft's James Utzschneider, general manager of Marketing and Communications for Unlimited Potential (Microsoft's euphemism for emerging markets), suggests, the study reveals that Windows is more expensive to acquire but that the cost of Linux-savvy administrators offsets that expense, making it a financial wash over five years.

This may very well be true, but it misses the point, as noted. If the cost is the same, buy Linux. Linux doesn't come with a monopoly attached to it. Sometimes a picture really is worth a thousand words, as this one provided by Roy Schestowitz does.

Microsoft, of course, has only dropped its prices to play catch-up with open-source pricing and to stave off piracy, piracy which company co-founder Bill Gates admits helps Microsoft as much as it hurts it in such markets.

About 3 million computers get sold every year in China, but people don't pay for the software. Someday they will, though. As long as they are going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade.

That Gates quote was taken from a 1998 article in Fortune, and should be enough to clearly describe why inbound acquisition cost is the wrong way to measure a financial decision to purchase Windows over Linux. Indentured servitude is not what most IT departments are looking for in an operating system.

In short, I believe Microsoft's sponsored TCO study may have many flaws, but only one that really matters: it overlooks the cost of buying a one-way ticket into Microsoft's walled garden. The cost of entry may in fact be quiet low. But what's the price of exit? Open source makes the cost of exit as close to free as the cost of entry is. It's a software development methodology and a CIO risk mitigation strategy, all rolled into one.

Microsoft is cutting the price on its Vista between 20% and 40% from its price as of the beginning of this year. While most copies of Windows aren't sold via the retail channel, Microsoft is apparently hoping to reduce the disparity between hardware costs and its software. When you can buy a new PC for $400, it hardly makes sense to drop another $400 for an increasingly irrelevant operating system. (All operating systems, not just Windows, in terms of perceived customer value.)

But the bigger reason appears to be an effort to make Windows more appealing to emerging markets, as Mary Jo Foley notes, where customers should expect to see bigger price cuts than in more established markets.

This isn't really about the United States and Western Europe, in other words. It's a battle for the emerging markets which aren't droning after Microsoft just yet. Outside the saturated markets of the United States and Western Europe open source is a much bigger threat in the short term.

It's a bit pathetic to watch proprietary behemoths slug it out over saturated markets. SAP just went on the offensive in one such skirmish, announcing that 100 of Oracle's Hyperion customers are buying SAP for performance management with the intention to replace Oracle. (As Josh Greenbaum notes, the real story here may not be the customer defections, but rather the fact that conservative SAP is taking the gloves off at all to smack Oracle around.)

This is fine, but I'd prefer to see press releases that announce that 100 net new customers were created through a differentiated product and licensing strategy. You know - the sort of thing that open source does.

Alas, Oracle's consolidation play suggests that the big enterprise software vendors struggle to see the market in terms other than zero sum. IBM is looking abroad to developing economies for growth, and surely Oracle and SAP are doing the same. But what about here in the US? Or Western Europe? Surely there are new markets to be created here, too?

Or would Oracle et al prefer that open-source vendors clean up on these emerging markets?

For all the doom and gloom in technology spending in the United States and Western Europe, IBM's results suggest that there's a world of opportunity in emerging markets. IBM reported stellar earnings - three days ahead of schedule - but it's where the growth is coming from that is most interesting. Writes the Wall Street Journal:

IBM Chief Executive Officer Samuel J. Palmisano, said in a prepared statement that the improvement was "led by strong operational performance in Asia, Europe and emerging countries." IBM said it will report revenue for the quarter of $28.9 billion, up 10% from the year earlier level and about $1 billion above analysts' estimates. About six points of the gain came from currency translation, reflecting the decline in value of the dollar against the Euro and other currencies.