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Domestic and International New Service Launch for Softtek

New Service Launch Plan Softtek is expanding its service options and its scope by expanding into Panama. The decision resulted from research and analysis of growth rate and customer need. The following sections explain procedures necessary for the successful launch of the new service and subsequent expansion into Panama. The new service launch plan includes product description and positioning, the target markets, an analysis of strengths, weaknesses, opportunities, and threats (SWOT) analysis, competitive analysis,

marketing objectives/strategies, pricing, communication, distribution strategies, financial information, and market research. Service Description and Positioning Statement Mexico Softteks main objective is to expand service offerings to increase business. One way to accomplish this is adding a new service offering to the existing repertoire. The new service option is developing and supporting Business Intelligence (BI) and Business Processing Operation (BPO) applications, and information technology (IT) solutions on Microsoft Platforms (Access/SQL Server). This creates a new market opportunity for Softtek. It also forges an alliance with Microsoft. Softtek will be increasing the marketshare of SQL Server as a database solution in Mexico. It also creates expertise within Softtek affording opportunities to support those applications; to provide technical/professional support for those applications in the Nearshore Outsourcing Division. Panama Deciding to expand a product/service line into an international market requires evaluating a number of different variables. Although Softtek has offices on four

New Service Launch Plan continents, Softteks presence throughout Latin America (especially in South America) covers a large territory (Softtek, 2011d); brand knowledge in the region is an advantage. However, Softteks presence in Central America still has room for expansion and the opportunity to enter emerging IT markets in countries such as Panama and El Salvador (HfS Research, 2011). Comparison of these international markets to determine the location with the highest probability of success and sustainability pointed to Panama. Global IT leaders are increasingly turning to Latin America (HfS Research, 2011). Whether the work is software application development, as an IT/BI/BPO solution provider, or providing customer service through outsourcing, Latin America is an emerging market with low risk. Rather than broaden service into the more competitive and well-established markets of Europe and Asia, the emerging IT market and strong economic environment in Panama, make this country an ideal site for expansion. Market Needs Softteks headquarters are in Mexico. The company provides IT services to

customers locally and throughout the world. Each markets needs are specific and unique to its particular culture and situation. Softtek strives to solve a few of the issues involving computer IT. Listed below are a few market needs Softtek attempts to fulfill in Mexico and Panama.

The Global Information Technology Tenders website lists more than 10

tenders in Panama and 30 tenders in Mexico (Global Information Technology Tenders, 2011). Datamining CentralAmericaData website returns with even more tenders available in Panama and Mexico (CentralAmericaData, 2011a).

New Service Launch Plan Expanding Softteks knowledge of Microsoft platform technologies improves their position to respond to many tender requests for IT services. Lack of informational technology educational funding from the Mexican

government (Gonzalez, 2001): Softtek plans to partner with Microsoft and provide low cost software in many of the schools to help students learn how to use tools that most of the world uses. Low household incomes: About 700,000 children in Mexico dropped out

of school last year [] as poor families pull kids out of school to help put food on the table (Lange, 2010, para. 1). Along with equipping schools with information technology software, Softtek plans to implement internship programs to help children stay in school and to gain skills that will provide higher paying jobs. Panama Canal technology support: Because of its beneficial location,

Panama has become one of the biggest logistic centers in the world. According to Maersk (2011), advanced IT applications/solutions efficiently manage supply chains, operational activities, and as a method that provides information to customers. Softtek plans on providing informational technology support to businesses that travel through the Panama Canal. Social Responsibility: As a Microsoft Partner in Latin America,

incorporating Microsoft products into IT solutions generates revenue for that country. Each dollar Microsoft yields a contribution 14 times that amount to the Latin American country (Rincn, 2011). Market Growth and Potential

New Service Launch Plan The sustainability of Softteks service offerings is promising; the new service creates applications and solutions they can later support. Softtek starts by developing applications and by building IT/Business Intelligence solutions (Office platform/cloud services) that they can later support after the development project is complete. Call centers in Panama are growing at a dramatic rate because recent legislation

promotes expansion of this business sector (, 2011). These laws will give Softtek tax incentives and benefits by creating an information technology support call center in Panama. Lower wages in Panama is another factor that gives Softtek much potential to prosper; the average monthly salary for customer support representative is $500-$600 (, 2011). Cutting labor expenses will increase Softteks chances of success. Moreover, the general economic backdrop in Panama sets the stage for much growth potential for businesses. The Proposal for the Expansion of the Panama Canal lays out evidence of growth trends of increased business traffic that runs through the Panama Canal (ACP, 2006). The swell of business traffic through Panama presents much opportunity for Softtek to provide informational technology support to these businesses. Mexico is Softteks home country and its economy ranks second among Latin American countries (Villarreal, 2011). Even though the Mexican market is still relatively young in their use of information technology, the sheer size of the economy gives much potential growth. Softteks long term strategy is to partner up with Microsoft and expand their service offerings to private industry, governmental agencies, and educational systems. Marketing Objectives, Strategy, and Communication

New Service Launch Plan Softtek developed a tailored marketing communication plan for both its home country, Mexico, and its new expanded territory, Panama. In Mexico many of the businesses have heard of Softtek and are familiar with their services, whereas in Panama Softtek is completely new. Therefore, the first objective in Panama is to increase brand awareness. The second objective is to inform clients about the solutions that Softtek provides. In Mexico, where Softtek is well known, the main objective is to increase customer interest in the services Softtek provides. Advertising, sales promotion, publicity, and sponsoring events are the primary methods Softtek used in the communication mix strategy. The advertisements focus on key attributes of the company (e.g., strong presence in other Latin American countries, commitment to quality, and high level of customer satisfaction) and the unique characteristics that separate Softtek from other industry leaders.

Promotional plans include the offering of discounts on subscription services for a limited time when clients sign on. These promotions give Softtek a competitive edge over competition, especially when bidding on projects looking for low cost/high payoff solutions. See Table 1 for a list of these promotions. Table 1. Softteks Promotions for New Service Contracts.
Service Software Solutions Promotion 6month free software support extendingsolution support subscription sprecial price for 1st yr free upgrades for first year for any OSsystemchange 6month free solution support extendingsolution support subscription sprecial price for 1st yr free upgrades for first year for any OSsystemchange special subscription price for 1st year for new clients

IT Solutions


New Service Launch Plan Social responsibility is a hot topic in todays world. Softtek operates in North America, South America, Europe, and Asia (Softtek, 2011a). The company provides employment for people in those countries. The addition of Panama provides a publicity opportunity to highlight the company as a socially responsible company. The publicity campaign includes information about the company diversity, job creation, and community investment. The public relations specialist is responsible for alerting newspapers and television networks. Trade shows are a cost effective way to showcase services. Softteks partnership with Microsoft provides an opportunity to increase visibility at trade shows throughout the target markets. Trade shows allow more customer interaction and generate leads for the sales team. Table 2 summarizes Softteks approach to communication methods for the new service launch. Table 2. Marketing Communication Methods and Approaches
Marketing Approach Channel Communication Method Advertisements for new service withInternet sites focused on industry such as Advertising Internet Media sites, mainstream Internet media sites Create/distribute communication Softtek's internet portal and Microsoft Partner Sales Promotion describing new service promotions Network (MPN) modified to include new service (listed in Table 1) promotions Publish Press Releases on new service Announcements in: 1) Industry ezines/press release offering websites 2) Microsoft Partner Network and Public relations/PR Microsoft Panama website announcements 3) Softtek's press release portal, 4) Social network sites - Blogs, Twitter Create/distribute new service Publish to industry event/conference internet Events brochure material channels (e.g., Biz Fit conference site)

Softtek SWOT Analyses

New Service Launch Plan Performing a SWOT analysis is a useful exercise to obtain a high-level overview of the internal strengths and weaknesses and the external opportunities, and threats that Softtek faces in its country of origin (Mexico) and in its choice for international expansion (Panama). Table 3. Softtek Mexico SWOT
S trengths Weaknes es s Strong Position in application developm ent, IT Need business expansion in sectors where not solution support, BPO, software testing m arket leader Strong Alliances with several partners (SAP, Oracle, Need m strategic alliances/partners to ore TESCH) strengthen position and increase brand awareness Strong Global Presence 8 countries in South Currently not supporting specific IT solution and BI Am erica alone and internationally in Puerto Rico, platform for Microsoft products (e.g., SQL, Office) s Spain, U.S. Softtek is m arket leader in Nearshore Outsourcing Opportunities Expand IT, BI, BPO m arketshare by building new solutions Microsoft SQL S erver Offer new service to locations outside of Mexico Establish new alliances with Microsoft by joining Microsoft Partner Network Threats Intense com petition in each area of specialization Com petitor is leading in BI/IT Several com petitors have m strategic alliances ore with global industry leaders

Source: Information gathered from Softtek (2011a-d) and MexicoIT (2011) Softtek is top leader in outsourcing service but not other service options. Softteks plan is to expand their marketshare in IT/BI/BPO solutions development and support. Softteks plan is to form a strategic alliance with Microsoft through the Microsoft Partner Network (Microsoft, 2011) and support companies that have solutions built on the Microsoft platforms. Table 4. Softtek Panama SWOT

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S treng ths Strong Latin American presence (Brazil, Venezuela, Costo Rico, Mexico, Paraguay and Uruguay) Emerging market - signs of growth for last 10 years, current economic and technological outlook positive Positive partnership with Microsoft in the past Industry leaders do not have stronghold on business in Latin America yet Opportunities Expand services internationally for application development, IT solution support, BPO, software testing services Establish new patnership in Microsoft Partner Network Large number of tender opportunities in private and government sector Wea knesses No presence in Panama/No brand recognition for software application and IT solution provider Hard to find skilled/trained talent in Panama - labor force is limited Limited knowledge/acument in SQL Server business development solutions

T hrea ts Some competition in each area of specialization (software applications, IT solution provider, BPO and BI business solutions) Global interest in country is increasing, predicted more industry leader's moving into region

Source: Information gathered from Softtek (2011a-d), Microsoft (2011), PanAmCham (2011) Technology leaders such as hardware manufacturers (Dell and HP) and software giants (e.g., Microsoft) have a strong and growing presence in Panama (HfS Research, 2010). Information, Communications, and Technology (ICT) is an emerging technology spreading from the industrial centers out to smaller cities and towns (HfS Research, 2011). Research on ICT development in Latin America is a favorable and profitable investment/expansion strategy for Global IT leaders to infiltrate. If Softtek enters the market at this time and establishes a foothold, as the workforce develops and technology advances, the company will be in a strong position to obtain and retain new clients. Competition Mexico Although Softtek created the Nearsourcing Outsource (Softtek, 2011a) concept, there are many companies in Mexico that have outsourcing clients. They are currently the largest outsourcing provider, but there is significant competition. Similarly, the

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competition for handling IT solution support and development is on the rise. The major IT solution competitors in Mexico are in Table 5. Table 5. Competitors in Mexico
Com petitorsinMexico Dextra Technology - Specializes in nearshore outsourcing, IT support, embedded systems and multimedia initiatives Compucomoffers customers IT support (service desk/tech supports, remote support), applications development and replatforming. Hildebrando offers customers application development, systems integration, testing, IT Outsourcing (ITO) and Business Process Outsourcing. (BPO). Neoris is the largest IT company in Mexico and specializes in nearshore outsourcing and IT solution support/consulting. Partnerships include: IBM, Intel, Microsoft, Oracle, Sun Microsystems, SAP and Yahoo. Quarksoft primarily focuses on developing enterprise software solutions and nearshore outsourcing World Software Services specializes in application design and development, testing, ERP, IT support, BPO and nearshore outsourcing. Alliances include the following industry leaders: HP, IBM, Oracle, Microsoft and SAP.

Source: Information gathered from MexicoIT (2011) Panama Global IT leaders in software like Microsoft encourage partners to base them on Microsoft products (Rincn, 2011). There are some Latin American-based organizations in Panama building IT/BI/BPO solutions in Panama (see Table 6). However, there are relatively few companies and a growing number of IT tender opportunities and the IT industry is in Panama is growing (HfS Research, 2010). Table 6. Competitors in Panama

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Com petitorsinPana a m Industry Leaders presence in Panama - Computers - HP, Dell, IBM, Software - Oracle, Microsoft South American Companies - Software and IT Solution Providers GBM de Panam, S.A. Integrated System Technologies, Inc. integrated software solution providers for hospitals Rootstack S.A. primarily web applications Sonitel provides IT solutions to Information Workers Unisistemas Panam, S.A. IT solution provider Sistemas y Soluciones de Software, S.A. BPO/IT solutions BI Solution providers include DEINSA, Grupo Consisa and Softland Enterprise Solution Providers - Softland and Assist Consultores Centroamerica S.A.


Source: Information queried from PanAmCham (2011), CentralAmericaData (2011b) Pricing Strategy The major principles underling pricing include cost, experience curve (based on number), competition, and demand elasticity (Miller, n.d.). Pricing strategies for Softteks services is different from product pricing because manufacturing/price on goods is not the bulk of the production or distribution costs. Softteks services (e.g., IT solutions) are intellectual property and the majority of costs associated with producing/developing solutions are personnel and administrative costs. Domestic and international pricing strategies differ and pricing managers tend to overlook the international factors. Because Softtek is not, it is marketing a service and the satellite office location is within Panama. Table 7 lists the factors influencing international pricing. Table 7. International Pricing Considerations
International PricingConsiderations Currency Issues - sales are in local currency and are subject to exchange rate variability Transfer pricing- pricing charged by HQ for local supplies and components Regulatory price control laws (e.g., often on transfer pricing) Price coordination - geocentric, polycentric, between locales to prevent "gray trade" Product positioning factors - competitive pricing, market penetration, price skimming Systems pricing- bundling/unbundling

New Service Launch Plan Source: Miller, n.d. Distribution Strategy A marketing channel is the distribution pathway through which goods and services flow between a provider and its consumer. Direct, or zero-level, channel


marketing products are sold directly from the provider to the customer (Kotler & Keller, 2007). Providers must determine the optimal marketing channel strategy for their products as well as monitor/manage the relationships within the marketing channels. The planned marketing channel strategy is a zero-level channel strategy. Softteks services are intellectual property (the project design, development of code, verifying the quality of service). This type of service cannot be sold in retail or wholesale markets; services are custom-tailored for each client. The advantage of a zero-level channel approach is the company retains complete control of the relationship between the customer and the organization. Softteks service offering requires direct contact with its customers because the services provided are custom-built by design/development team. Financial information Marketing Budget Softteks marketing budget for the Panama market includes television, radio, print, and web communications. Most foreign manufacturers of consumer products maintain a high profile presence in the country through newspaper ads, large billboards, sponsored sports events, and TV advertising (, 2011, p. 6). The current budget includes Twitter, Facebook, and LinkdIn. The new budget expands on the current marketing plan to include a larger presence at trade shows. The company has six trade

New Service Launch Plan shows schedule for the year. The trade shows account for 8% of the budget. The advertising plan accounts for 87% of the budget. The remaining budget is allocated toward website and brochure communications. Softtek is part of the Microsoft Partner Network. The partnership requires monitoring of the website. The Softtek website monitoring is on a continual basis. The Market Plan Budget is shown in Figure 1. Figure 1. Marketing Budget Plan
MarketingBudget Plan
Category Communications Website Brochures Event Vendor space Furnishings Audio/Visual Meals Travel Expenses Subtotal Advertising Television Radio Magazines Postcards Newspaper Web Search engine optimizer Social Media Email Subtotal Total Marketing Budget Quantity Cost per Unit 2 3000 2500.35 monthly Subtotal 6 6 6 6 6 2000 1500 1000 200 750 5450 Total Notes 6000Softtek website, MPN site monitoring 10500 16500 12000Six trade shows 9000 6000 1200 4500 32700


6 100000 600000TVN, Telemetro, SERTV 1 600 monthly 7200CPR (Am and FM) 2 500 monthly 12000IT Sitio, Reporte Delta 25000.15 Quarterly 1500 2 200 Quarterly 1600La Estrella de Panama, El Siglo 2 750 monthly 3 250 monthly 1 30 monthly 18000Google, Bing 9000Twitter, Facebook, Linkdin 360GoDaddy 649660 698860

Unit Forecast The assumption/expectation is the Panama sales forecasts are similar to sales data from the Brazilian operations. Sales expectations in Brazil are an increase of 27% over last years figures of 4.6 million (Business News Americas, 2010). For the first year of service, Softtek expects fewer sales in Panama. The annual target for Panama is 4

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million in sales. The sales projection per quarter is of the total annual sales (see Table 8) or $1,000,000; the assumption is a constant rather than seasonal demand. Advertising expenses are 20% of expected sales figures the first year and 10% the next two years (Paul, n.d.). Table 8. Unit Forecast for Next Three Years
Unit F oreca st Yea 1 r Gross Sales Costs Net Sales Yea 2 r Gross Sales Costs Net Sales Yea 3 r Gross Sales Costs Net Sales Q1 1,000,000 174,715 825,285 Q1 1,200,000 87,358 1,112,642 Q1 1,440,000 87,358 1,352,642 Q2 1,000,000 174,715 825,285 Q2 1,200,000 87,358 1,112,642 Q2 1,440,000 87,358 1,352,642 Q3 1,000,000 174,715 825,285 Q3 1,200,000 87,358 1,112,642 Q3 1,440,000 87,358 1,352,642 Q4 1,000,000 174,715 825,285 Q4 1,200,000 87,358 1,112,642 Q4 1,440,000 87,358 1,352,642 T l ota 4,000,000 698,860 3,301,140

4,800,000 349,432 4,450,568

5,760,000 349,432 5,410,568

Marketing research conducted for the plan Extensive market research is important before launching any new product/service. A bulk of the research conducted includes data and analysis from both Mexico and Panama. Table 9 summarizes the areas of research performed. Table 9. Market Research for New Service

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Ma et R rk esea Area - D estica Interna rch s om nd tiona l Market need assessment for new service Market penetration and potential for growth Competitive landscape - evaluation and comparison Social awareness and responsibility connsiderations Distribution method assessment - channel and intermediary necessity Communication strategies for new service launch - internal/external Advertising methods and promotion of new service Internet communication methods/implementation Microsoft business strategies around in IT/BI/BPO solution development Microsoft Partnership Network benefits and requirements Cost and pricing strategies Data required for SWOT analysis Demographic factor analysis Technology Trends Technology Tenders - projects and applicability assessment Financial considerations and budget requirements Budget projections


Market Research International Determine location for international expansion - Latin America versus Europe/Asia Industry trends differences in international landscape Labor force assessment - local versus hiring abroad, skills/training programs Language, socio-cultural difference assessment

Mexicos demographic and economic benchmark data show some interesting results. The population and the labor force increased steadily over the last five years. The inflation rate is following the same trend. However, the industrial production growth rate shows a significant decline in the last three years (see Figure 2). Figure 2. Historical Demographic, Economic, and ICT Data for Mexico

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Source: Data gathered from queries to IndexMundi (2011) database The economic conditions in Panama are more favorable than in Mexico. Panamas predicted economic growth for 2011 is higher than any other Latin American country (Winner, 2011) and is leading the way in terms of IT development (LBC Staff, 2011). The annual GDP growth for 2010 placed Panama in the 25th position globally. Other economic indicators also show improvement. The workforce population is rising and the unemployment rate is at an all time low (6.5% in 2010). Figure 3. Historical Demographic, Economic, and ICT Data for Panama

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Source: Data gathered from queries to IndexMundi (2011) database Examining the differences in revenue and wages between Mexico and Panama shows that normalized revenue for Panama is higher than Mexico. However, the wage index is consistently lower in Panama (see Figures 4 and 5 for graphic representation of the revenue and wages data). Figure 4. Revenue (Percent of GDP) Comparison between Mexico and Panama

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R evenue %of GD0 2 P5 0 Panama 22.43% Mexico 21.05%

20 06 24.99% 21.81%

20 07 27.81% 21.96%

20 08 26.17% 23.49%

20 09 26.03% 23.70%

21 00 25.67% 23.00%

Source: Data extracted from IDB (2011) Figure 5. Wages index Comparison between Mexico and Panama

Real Wages Panama Mexico

2005 91.92 122.33

2006 94.59 128.59

2007 95.77 135.06

2008 92.79 136.2

2009 94.64 135.31

Source: Data extracted from IDB (2011)

New Service Launch Plan Demographic factors such as literacy and level of education are socio-cultural factors affect methods of communication for the new service. These two factors are similar in the two countries (IndexMundi, 2011). Conclusion Softtek has determined that Panama is a market with need for the companys services. Demographic data assisted in the decision to expand into the Panamanian market. The preceding sections addressed topics such as product description and


objectives, marketing plans, growth rates, financial data, and pricing strategies. Part of a successful service launch is the research conducted prior to market entry. Softtek understands the market and has planned accordingly. The company expects strong growth in sales and customer satisfaction.

New Service Launch Plan References (2011). Landscape of Information Technology in Panama. Analysis: National IT Strengths and Weaknesses. Retrieved from ACP. (2006). Proposal for the Expansion of the Panama Canal. Retrieved from:


Business News Americas (2010) Softtek expects Sao Paulo revenues to expand 27% this year - Brazil. Retrieved from: ues_to_expand_27*_this_year CentralAmericaData (2011a). Tender in Information & Communication Technologies in Panama. Retrieved from: q1=content_en_le%3A%22tender%22&q2=mattersInCountry_en_le%3A %22Panama%22 CentralAmericaData (2011b) Companies. Retrieved from: (2011) Selling U.S. Goods and Services in Panama. Retrieved from: Global Information Technology Tenders (2011). Information Technology IT Tenders. Retrieved from: off=10&inc=n&global=1&region_name[]=MX&notice_type=1,2,3,7,10,11,16,9,4 ,8,5&sector=27

New Service Launch Plan Gonzalez, A. (2001). Wired. Mexican Schools Embrace Windows. Retrieved from:

21 HfS Research Team (2010). The HfS Research 2011 Outsourcing Predictions. HfS Research. Retrieved from: HfS Research (2011). How Latin America Powers Global IT Delivery. HFS Research Industry Report. HfS Research. Retrieved from: IDB (2011) Inter-American Development Bank. Retrieved from: Indexmundi (2011). Historical Data Graphs. Retrieved from: Kotler, K. & Keller, K.L. Marketing Management (12th ed.). New Jersey: PearsonPrentice Hall. LBC Staff (2011) Panama: Latin Americas Technology King. Latin Business Chronicle, Special Reports. Retrieved from: Lange, J. (2011). Reuters. Mexican kids drop out in doves on weak economy. Retrieved from: Maersk Line (2011). Milestones. Retrieved from: page=brochure&path=/about_us/milestones

New Service Launch Plan MexicoIT (2011) Mexico IT Companies. Retrieved from: option=com_content&view=category&layout=blog&id=2&Itemid=4 remove hyperlink Microsoft (2011) Microsoft Partner Network. Retrieved from: Miller, F. (n.d.) Global Pricing, Global Marketing Management. Retrieved from: NewsRoom Panama (2010). Martinelli hands-on to Mexico. Retrieved from:

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New Service Launch Plan (2011a). Nearshore Outsourcing. Retrieved from: Softtek (2011b) Outsourced IT Services. Retrieved from: Softtek (2011c) Softtek Perspectives, Media Room. Retrieved from: Softtek (2011d) Brochures. Retrieved from: Villarreal, M.A. (2010) The Mexican Economy After the Global Economic Crisis. CRS Report for Congress, R41402. Retrieved from: Villate, R. (2011). Top 10 Predictions IDC Latin America Predictions 2011. IDC. Retrieved from: Winner, D. (2011) Economic Growth in Panama Will Lead Latin America at 8.5% in 2011 - ECLAC Report. Welcome to Panama Guide. Retrieved from: Retrieved from: