In the IT services
business, the propensity to purchase services is often different to what might
logically be expected. This is particularly obvious in the extremely diverse
Asia Pacific region.
For example,
organizations in the Philippines, a relatively immature economy with lower labour
costs, are more likely to purchase services than organizations in Korea, a
mature economy with relatively high labour costs. Why is this? Nobody knows for
sure but it appears that the propensity of organizations in a country to
purchase services is heavily influenced by 3 cultural and economic variables as
follows:
#1 The cost of
labour. In mature economies, the cost of employing people with technical skills
is often significantly higher than the cost of buying access to skills from a
third party. Hence, the countries in the world with the highest propensity to
purchase IT services are those with high labour costs. In the Asia Pacific
region, the best example of such a country is Australia.
#2 The influence of
the Anglo Saxon business culture. Buying IT services from third parties is most
widespread in countries that are often described as Anglo Saxon, led by the
United States and the United Kingdom. The business culture in these countries
has, over the last 25 years, focused on outsourcing ‘non core’ activities. A
common belief in the Anglo Saxon business culture is that sourcing services externally
can drive down costs, give organizations access to ‘best of breed’ services and
offer greater flexibility.
#3 The influence of
the Confucian business culture. In the Confucian business culture, which exists
in most of Eastern Asia, service is widely perceived to be something that is
free. Services are considered to be critical to the differentiation of
products. The loss of control associated with sourcing services from third
parties is thought to remove a key differentiator from corporate control.
Furthermore, paying for such services is anathema to many organizations in East
Asia.
Organizations that
wish to understand how to sell services into countries in the Asia Pacific
region must consider these variables carefully as they develop their marketing
strategies. This is particularly important for organizations that generate the
bulk of their business from parts of the world that are heavily influenced by
the Anglo Saxon business culture.
In a country where
the cost of labour is low, the influence of the Anglo Saxon business culture is
low and the influence of the Confucian business culture is high, such as
Vietnam, the challenges of effectively marketing IT services are profound.
Conversely, in a
country where the cost of labour is high, the influence of Anglo Saxon business
culture is high and the influence of Confucian business culture is low, such as
Australia, the propensity to purchase IT services is extremely high.
A lot of American
and European firms are particularly interested in countries in which the cost
of labour is high, the influence of the Confucian business culture is high and
there is also some Anglo Saxon influence seeping into the business culture.
Perhaps the best example of such a country is South Korea. South Korea is
Asia’s fourth largest economy and offers significant opportunities to foreign
firms. However, selling services in South Korea is proving to be a highly
vexing challenge to many US-based IT firms which have the Anglo Saxon business
culture in their DNA.
So how should a
US-based IT firm, market its services offerings in South Korea? Firstly it must
recognize that South Korean customers will expect services to be free, and will
show little willingness to pay for them. Thus it makes sense to describe services
offerings as products. Perhaps, services offerings could be descried as ‘value
enhancement products’. Maybe, if service is bundled with a product, the
combined offering could be described as a ‘premium or platinum product’.
Basically, services
marketers must consider the Confucian influence on buying behaviour in South
Korea and act accordingly. How does the convergence of Anglo Saxon business
culture, Confucian business culture and the cost of labour, impact the
propensity to buy IT services in China, India and Japan?
