Due to the shortage of engineers and software developers in the Netherlands, the technology traffic company ARS T&TT ended up in India twenty years ago. "India, unlike other outsource locations such as the Balkans and Argentina, offered us exactly what we were looking for. Highly skilled technical staff, excellent English-speaking people and good facilities", explains director and founder, Jan Linssen. "In addition, India also seemed like an interesting sales market to me."
Founder and Managing Director of ARS T&TT, Jan Linssen, signs an agreement with the Indian city of Vadodara for their technological traffic solutions.
Back in 1998, Linssen ran into the problem of not being able to find the right software developers in Europe for the technological traffic solutions that his company makes. Since then, finding suitable, highly educated technical staff has become even more of a challenge. According to Linssen, the solution is simple. "The logical step is to look outside Europe and, after a period in the Balkans and then a team in Argentina, we found what we were looking for in India. Many companies think of outsourcing in terms of cost savings, but you choose India because you can find talent there that is simply not available in the Netherlands. In the Netherlands, we pay such high salaries that wherever you set up a remote team, you will always save on costs."
The outsourcing team as a basis for market entry
The Indian ARS team initially started developing software for the European market. "That gave them insights into the possibilities for India," says Linssen. "The more they learned about our European approach, the more they became aware of the enormous difference with the chaotic traffic situation in their own country. At that time, around 2000, the Indian government was also looking for solutions to improve traffic management. My team therefore regularly contributed ideas and suggestions on how ARS could also play a role locally. Their knowledge gave me a great insight into the market and laid the foundation for our market entry in India."
According to Linssen, the problem of most European companies is that they have too little knowledge of the Indian market and therefore try to make their entrance with an overpriced and advanced product. "The solutions that ARS develops in India for Europe are also far too high tech and an absolute mismatch with the Indian market. But we have a team of developers there who know our product and understand the local requirements. With their input, we can therefore develop cheap and simple solutions that do have a chance of success. If we hadn't started outsourcing to India, we would never have entered the market with so much knowledge and that is a huge advantage."
Indian tenders
Government initiatives such as the Smart Cities Mission, a programme of the Indian government to make cities across the country more liveable and sustainable, have created a great need for innovative products that can improve living standards. Yet, according to Linssen, it is difficult for European companies with no experience in India to compete as serious candidates for such contracts. "We sell our solutions mainly to Indian governments, which means we often go out to tender. In such tenders, the lowest bid automatically wins and as a European company you simply cannot compete with the Indian price standard. The prices are so low that it is impossible for international companies to deliver a good quality product. You therefore have to talk to governments in advance to ensure that specific quality requirements are included in the tenders. That way you can compete on quality, and demonstrate that you have a better product, rather than competing on price."
According to the ARS foreman, it is also very important to explain concretely how much the European product will save in the long run. "In India, people often prefer to buy a bad product that works for one year but is cheap, rather than make a big investment for ten years. But if the customer already has experience with European products and you can show that your product lasts longer and is therefore cheaper in the end, they will really take you seriously."
In India, you cannot leave the sale entirely to your sales team'.
According to Linssen, the responsibility of selling an expensive, European product cannot be left entirely to the local sales team. "In India, it is very important that you build up a good relationship of trust with the highest boss. When selling a more expensive product, you want to be sure that they really understand the added value of your product. A good conversation from boss to boss can help with that. In addition, the relationships within Indian companies are quite hierarchical, which means that middle management cannot make a purchase without confirmation from the CEO. To get an appointment with that CEO or director, your local sales team is extremely important. Only with their good network and local knowledge will you actually get that done."
According to the ARS director, this also applies to tenders. "To win a tender, you have to be there before anything is announced. Local companies therefore always have an advantage, because they can already make appointments with the right people and do the groundwork before the tender actually starts. After twenty years in India, ARS is now also considered a local player, a position that you cannot buy but really have to acquire. You have to invest time in India as a company before you can reap the benefits."
Payment problems in India
Another challenge that Linssen struggles with in India: getting paid on time. "It is important that the completion of the deal, including the payment, is laid down in detail in the contract. Help from local lawyers is no luxury here." According to Linssen, these payment problems do not stem from unwillingness, but are a consequence of the strong hierarchy in Indian organisations. "India is still very top-down, so a big decision, like the purchase of one of our solutions, is taken by the CEO. Then, when the product is received, it has to be paid for. But at that point, people are not 100 per cent sure that it will work as hoped and therefore do not dare to pay. Because what if, three months later, the boss turns out not to be happy at all with the product? Then he will ask for clarification from the employee who made the payment. This ensures that often no responsibility is taken and you as a company should make strict agreements if you do not want to wait months for your money.
India has a clear vision for the future, clearer than the Netherlands'.
Despite India facing major challenges in terms of climate and the effects of the pandemic, Linssen has great expectations for the country's development in the years to come. "India has a very clear vision. It has sharper goals for the future than we have here in the Netherlands. The Smart City Mission is a good example of this; it pushes cities to develop into modern metropolises in all kinds of areas, from climate to infrastructure, within a short period of time. This of course offers great opportunities for international companies with smart solutions. If you invest now, you will soon benefit from the great improvement India is going through."
A successful market entry in India depends on a solid strategy based on knowledge of the local market. Gaining this knowledge takes time, because it requires experience with the Indian business culture. Are you considering taking your first steps into the Indian market and could use some guidance in shaping your strategy? We will set up special workshops to give you insight into what is involved in your market entry in India and you will receive valuable feedback on your plans from our independent experts.