Discussion brief for the Export Strategy-Maker

Export Development in the Digital Economy

A focus on business and professional services

by Dorothy Riddle, CMC
President, Service-Growth Consultants, Vancouver, Canada

DRiddle@compuserve.com

Business and professional services, delivered directly or through offshore back office operations, constitute the fastest growing component of international trade. The move towards further digitalization means that an increasing number of services can be traded more cost-effectively, and the export opportunities have become almost limitless. All else being equal, firms in developing and transitional economies have a competitive edge in that, with equivalent professional qualifications, they can offer a price advantage over the billing rates of similar firms in developed market economies.

But "all else" is not equal, and the competitive challenges can be either mitigated or exacerbated in the digital economy. The leading issues for business and professional service firms are not legal concerns or credit card acceptance; rather, they focus on marketing and infrastructure. This discussion paper will briefly review opportunities and challenges in the following seven areas:

1. Credibility

2. Visibility and market share

3. Infrastructure

4. Service design and delivery considerations

5. Bidding for contracts

6. Payment issues

7. Purchasing

Credibility

Because services do not exist for inspection prior to purchase, new customers have to assure themselves that the benefits of dealing with a new supplier outweigh the risks. Developing economy business and professional service firms report that the single biggest barrier to increased exports is a lack of credibility in the international marketplace. Firms have first to convince potential customers that their economy produces excellent service providers and then to persuade those potential customers that their firm has the capabilities to design and deliver the service in question. Only then are potential customers interested in hearing about the service on offer.

Opportunities: Use of websites as proxies for service quality; listings in on-line directories and vertical portals; partnering with well-known global service firms.

Challenges: Devalued if national infrastructure does not support website benchmarks or missing from global on-line directories and vertical portals.

Visibility and market share

One of the classic problems for developing economy business and professional service firms has been building name recognition and capturing international market share once basic credibility concerns have been addressed successfully. The Web environment makes it possible to reach customers around the global with little incremental cost.

Opportunities: "Open for business" to site visitors from around the globe.

Challenges: Promoting one's on-line presence; identifying and becoming listed by validators; joining appropriate vertical and horizontal portals; knowing how to assess market makers for one's service industry; providing culturally sensitive services for a wide range of customers; staffing e-reps.

Infrastructure

E-business is not about the technology itself; rather, it is about how to use ICT to meet strategic goals. Further, information and communication technology is the core infrastructure for services trade. Service firms' competitiveness is directly linked to the cost, quality, and availability of telecommunications and Internet infrastructure.

Opportunities: Increase global reach and competitiveness.

Challenges: Disappoint customers or incur high operating costs.

Service design and delivery considerations

In services, the design and delivery is usually linked and may take place in the same interaction. Business and professional service firms have several decisions to be made with regard to the design and delivery of services:

1. Balancing/integrating technology-enabled with technology-neutral service delivery, including the option of web-enabled delivery (e.g., call centres, etc.).

2. Adapting to the culturally-appropriate role for customers.

3. Determining whether or not to outsource ICT-related tasks

4. Managing and extending the boundaries of service offerings

5. Empowering staff to make decisions in their interactions with customers

6. Implementing common standards with partners

Opportunities: Provide personalized service; provide one-stop service through networks with partners; provide a common database for staff to access in working with customers.

Challenges: Having customers with different types of technology usage; having customers from different cultural backgrounds and with different self-service expectations; potential barriers in outsourcing technical support; unwillingness of partners to adopt a common standard.

Bidding for contracts

The bidding process, especially for large customers, continues to move online. The new twist is the reverse auction.

Opportunities: Able to access and participate in all-open bidding.

Challenges: Identifying the appropriate bidding arena.

Payment issues

Most exported business and professional services are paid for through wire transfer rather than through a credit card. The digital environment potentially exacerbates a common concern, which is whether or not the customer will actually pay for the service once it is delivered. In domestic markets, this concern is typically managed through personal relationships and a shared legal framework. In export markets, if there is no face-to-face contact, it becomes more difficult to build the kind of trust that helps to ensure payment.

Opportunities: Potentially faster payment transfer.

Challenges: Lack of security about whether payment will be received; high costs for transfers.

Purchasing

More efficient sourcing is one of the potential benefits of the digital economy; however, this scenario assumes that other firms (particularly service firms) wish to supply developing country firms.

Opportunities: Use reverse auctioning or buyer communities to lower costs.

Challenges: Participating in online purchasing portals, including identification and technology compatibility.

Export promotion support

Web-enabled trade support institutions need to add several additional services for exporters, namely:

1. Promotion of the websites of exporters

2. Provision of a searchable database of qualified service providers

3. Development of a national mall featuring successful service exporters

4. Listing of the leading vertical and horizontal portals used by potential customers

5. Education on e-business best practises

E-competencies for service firms

For small exporters, a distinction needs to be made between ICT firms and those without an ICT focus. The second group (i.e. the bulk of service firms) needs very little technical competence as long as they work with a good outsourcer who handles the technical side for them. For business and professional service firms, the focus needs to be on skills to build credibility, redefine benefits, expand service boundaries, build in "personal touch", and provide a truly one-stop services.

Additional comments

The above discussion has focused on business and professional services. There are three other types of services that trade more like goods but that share some of the challenges facing business and professional service firms, namely:

1. B2C retail operations

2. B2B enabling services that facilitate the delivery of goods, the financing of transactions, and the management of risk

3. B2B IT/software related services that focus on the technology infrastructure

The Web is a service environment. We know in the bricks-and-mortar environment that goods producers have to learn new marketing skills as their sales shift more towards services value-added. One of the e-competencies needed by SME goods producers is how provide valued benefits to their customers online. 

Posted 25 July 2000 

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