DENVER--(BUSINESS WIRE)--U.S. and UK technology businesses remain determined in their plans for international expansion, according to findings in the 2020 State of Global Expansion™ Report: Tech Industry, which is based on a survey of 1,000 U.S. and UK decision-makers from companies in the IT, software, hardware, and technology industries. The company also released findings from its annual Global Expansion Tech Index™, which identifies the most promising markets for international expansion.
According to the report, tech businesses on both sides of the Atlantic say they primarily pursue international expansion to grow their customer base (62%), develop greater scale and efficiencies (56%) and access a talented workforce (41%).
“During the past year, technology companies maintained ambitious growth plans while managing through growing uncertainty on a number of fronts,” said Ben Wright, Founder and Chief Executive Officer of Velocity Global. “Challenges to global expansion included increasing protectionism from some of the most significant economic powers such as the U.S. and China, political instability in the Middle East, Brexit—which dominated the agenda in Europe, and most recently global health pandemic fears.”
In spite of these challenges, more than four in five tech companies said they plan to open operations in at least one new country over the next 12 months. However, according to the report, companies still face significant challenges when it comes to establishing a presence in a new country.
“Businesses entering new markets need to recruit, manage, and retain the right people, comply with ever-changing local labor laws and regulations, manage tariffs or export fees or VAT/GST, navigate immigration processes, and stay current on tax updates,” added Wright. “A significant proportion of organizations admit to pulling out of an international market at least once due to one or more of these factors.”
Top markets for international growth
The report found that both U.S. and UK businesses still consider Europe the most promising market for growth (41%, up from 38% in 2019).
- Asia and North America are in relatively distant second and third places at 23% and 19%, respectively, despite Asia increasing in popularity by six percentage points year-on-year (17% in 2019).
- U.S. firms consider the UK as the most promising European market for growth (48%), level with Germany, despite the Brexit uncertainty.
- In Asia, U.S. and UK tech businesses have their sights set on China (56%), Japan (43%), India (35%), Hong Kong (28%), and Singapore (23%) to take advantage of their growing digital economies.
Top geographies for tech talent
- Asia is the top destination for tech talent. One-third of U.S. and UK tech firms (33%) say the region offers the best access to skills—up from 29% last year—compared to Europe (30%) and North America (22%). U.S. firms targeting Asia for new talent favor China (63%) over Japan (47%). In contrast, a greater proportion of UK businesses believe Japan (55%) to be a more critical source of skills than its larger regional competitor (54%).
- Brexit impacted how U.S. businesses view the UK. The country topped the list of European targets for new skills last year but has since fallen behind Germany (47%) and France (46%). Just over one-third (39%) now see Britain as a promising market for accessing tech talent, suggesting American firms still want access to free movement, which could be threatened by Brexit.
Top barriers and challenges to global expansion
The main issues highlighted by businesses across the board are recruiting internationally (30%), incurring tariffs and export fees (29%), and managing employee immigration (28%).
Other commonly-cited issues include:
- Communicating long distances with clients (28%), managing different payroll processes (27%), and finding expert consultancy in international markets (26%);
- Regulatory compliance in the U.S. and UK as only a quarter (25%) of the businesses surveyed highlighted compliance as an issue, representing a significant increase in the past 12 months, up from just 14% last year.
Velocity Global surveyed 500 U.S. and 500 UK decision-makers from companies with 50-1,000 employees, focused on the IT, software, hardware, and technology industries. Respondents are director level and above, including C-suite, in the following job functions: business development, legal and business management, finance, operations, and HR. Independent survey consultant, Censuswide, conducted the research.
The Global Expansion Tech Index™ evaluates countries on five factors, which are weighted as follows: GDP growth and inward investment (30%), the availability of skills (25%), the complexity of the regulatory landscape (20%), connectivity (15%), and the quality of infrastructure (10%).
ABOUT VELOCITY GLOBAL
Velocity Global is the leading provider of global employment solutions that has reinvented the way companies expand overseas. With unrivaled expertise in over 185 countries, Velocity Global delivers end-to-end services and best-in-class support to help companies confidently navigate the entire lifecycle of international business. To ensure a compliant, efficient, and flexible international expansion, Velocity Global provides a comprehensive suite of global services that includes International PEO, Entity Setup and Support, Global Talent Acquisition, Immigration, and Consulting.