International Business Project: Deltek

Introduction

Deltek is a company involved in the development and sale of a wide variety of integrated software products that offer project-focused business tools that help them to better manage and expand their operations (Allen & Scott, 2006). Deltek products provide solutions to enterprise-level requirements of the project-focused businesses and enable them to manage financial and project accounting, calculate costs and return on a project-to-project basis.

This enables these organizations to submit accurate and well-prepared bills, comply with sophisticated industry-specific and regulatory requirements, manage employee time collection, and valuation of labor costs and preparation of payrolls, automation of management activities and empower the administrators with timely and relevant activities (Ciborra, 2007). Deltek also provides a variety of consultation and maintenance services to assist its customers with system execution and integration as well as the provision of training and continued support for the company software products.

 

Deltek Business Project

Deltek sells its products and services via its direct sales channels to project-oriented businesses such as technical and professional service providers, including environmental and engineering firms, R & D firms and contract services institutions and non- profit organizations. Since its establishment, the company has installed over 1950 systems for a variety of project-oriented organizations of different sizes. The majority of these organizations are located in the United States. Bell Atlantic Federal Integrated systems Inc, Cooper and Lybrand, LLP, Computer Science Corporation, Lockheed Martin Corp and Northrop are the main clients of Deltek Company.

With the ever-increasing competitive business environment, there is unprecedented pressure for business organizations to better use information technologies to improve their efficiency in service delivery, reduce their operational cost in order to remain competitive as well as provide their employees and management with up-to-date and relevant information. For this reason, more and more organizations are executing a new form of business-level systems that are based on transparent customer-server structure, to automate their activities including accounting, finance manufacturing and also human resource management functions.

According to International Data Corporation, customer-server market enterprise-level applications surpassed a 3.8 US dollar mark by 2005, and it is poised to grow by an approximate annual rate of 37 % by 2015. Whereas organizations are striving to increase their customer-server enterprise-level business systems, the majority of these systems are general purpose and have failed to address the majority of the unique requirement of business involved basically in the provision of goods and services to clients under the project-tailored contracts and other engagements. These project-oriented businesses include a wide range of professional and technical service providers such as environmental and engineering firms, R&D firms as well as contract service institutions and also construction companies (David et al, 2008). The majority of these firms provide their services on the contract base.

Project-oriented businesses have numerous project-tailored requirements such as the need to trace costs and profitability on a project-to-project basis, provision of updated information to managers and clients and submission of accurate and comprehensive bills in compliance with sophisticated industry regulatory requirements. The project that is charged with the responsibility of accounting for these institutions often requires the utilization of complex methodologies for calculating business costs and revenues (De et al, 2008).

The consumption of project-oriented business systems is gradually expanding owing to numerous trends experienced in the global economy. As a matter of tradition, service organizations are more vulnerable to use project accounting because of their need to tailor their services for each and every customer and proper distribution of related expenses. For that reason, as the shift from manufacturing-grounded economy to a service-based economy continues to gain momentum, the market for project-oriented businesses is experiencing phenomenal growth (Pub Fletcher, 2004). Moreover, the trend towards outsourcing a wide range of activities expands the market project-oriented businesses as both clients and sellers need to trace the costs associated with their project.

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Lastly, the majority of organizations with important internal development functions can gain from the utilization of project accounting systems to closely track their progress and costs. As the number and variety of project-oriented businesses continue to increase, they also require a complex tool to cater to their main information and accounting needs, such as project accounting, employee time collection and project reporting, and budgeting. Simultaneously, these organizations are taking cognizance of the fact that most aspects of their business depend on their project orientation and that they can attain efficiency in a variety of other accounting and commercial functions including general ledger, material and human resources via utilization of software designed with the unique needs of the project-oriented businesses in mind (Hall, 2009). Just like other businesses, project-oriented organizations are looking for solutions that enable them to link their business software applications into a unit integrated enterprise-level system.

The lately emerged customer-server software, as well as other modern information technologies, provide organizations with a strong transparent data structure via the use of relational databases that permit expansion and growth. Bigger project-oriented businesses are re-engineering their business information and management systems to wade through the intense competition, smaller ones are up-scaling customer-server environments while other organizations are embracing a more project-focused approach to their business. Owing to this, these organizations are looking for integrated, enterprise-level software remedies that are uniquely designed to cater to information and accounting needs of project-focused businesses that will offer their manager updated and timely information (Heap, 2005). Moreover, project-oriented businesses are also demanding a variety of implementation, training auxiliary services provided by organizations that are practiced in dealing with the needs of project-oriented businesses.

A significant part of Deltek's solution is to offer high-quality services and aid directly to its clients. These services may range from execution and consultancy, training and continuous maintenance and support. The company is of the view that implementation expertise coupled with its focus on the special need of project-oriented organizations will ultimately result in quicker and more efficient system implementation which is characteristically achieved by companies that opt to embrace general-purpose business systems to the requirements of their project-oriented organizations. Once a client's implementation if fully completed, Deltek offers continuous support services to enable the client in maintaining and updating his systems, training of his employees as well adding functionality as the client’s business grows and needs changes.

As a matter of strategy, Deltek's objective is to carve its unique niche as the leading supplier of enterprise-level software systems for project-oriented organizations. Deltek plans to continue to reposition itself from general-service software application providers by focusing its efforts on the provision of cost-effective solutions that meet the special and ever-changing needs of project-oriented businesses. To this end, Deltek has in its pipeline a listing of strategies it intends to implement to achieve this goal. One such strategy is to target more project-oriented markets. Deltek unrivaled expertise in project accounting and information systems if the results of its years in offering solutions to the sophisticated needs of project-oriented businesses having government contracts.

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Over the years, Deltek has widened its product and marketing strategy to a variety of project-oriented industries as the technical and professional service provider for engineering and environmental firms, R&D firms as well as non-profit organizations. Deltek intends to continue with its strategy of targeting additional project-oriented markets like construction and design firms, government firms, and organizations that manage large internal projects. To take advantage of large installed client-base, Deltek installed a base of approximately 1700 active clients which enabled it to generate revenue from auxiliary and maintenance services offered to these clients. Deltek strategy also comprises the need to affirm its relationship with customers through the provision of these services and offer additional software licensing and consulting revenues just as these organizations continue to grow and change in their requirements.

A very important element of Deltek's strategy is to license its cost point products to already existing systems as these clients re-engineer their information systems to shift to new client-server business software solutions. Deltek plans to continue with its campaign to develop and acquire more products and modules so as to offer more comprehensive enterprise solutions to cater to the ever-changing requirements for its current and prospective clients. For example, Deltek has lately expanded its product line through the addition of a more comprehensive human resource module by acquiring Allegro Resource Management Product. To maintain its technological leadership, Deltek intends to invest heavily in research and development as well as advance its products information technologies. Deltek has an elaborate plan to differentiate itself from its competitors through the creation and maintenance of customer loyalty through the provision of quality products.

In its ambitious plan to stamp its authority in the information technology industry, Deltek has to expand its operation to countries that it has hitherto been unable to reach. Entering the German market is currently a top priority on the company's agenda. For this reason, this research paper aims at exploring the German market in an attempt to put into perspective the opportunities as well as the challenges inherent in this particular market. Specifically, this paper will address overall market research of the German market. To this end, it will seek to provide answers to the following questions: what competitors does Deltek face? How big is the market? (Both low end & high-end Sub-segments), who are its potential customers? What barriers to entry does the company face? Should Deltek enter the market directly or use a local partner? What is the market culture? What is the role of local government? Is it a protectionist market? to mention but a few.

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Deltek Competitors

Granted, the world enterprise application market for project-oriented market organizations has over the years become very competitive. While competing for high-end market segments, that is, enterprise customers who have over 1000 employees, Deltek faces stiff competition from big and well-capitalized rivals like Oracle, IBM (including Cognos) and SAP ( incl. Business Objects). Of late, these considerably big organizations have concentrated a segment of their sales effort into the middle market, in which Deltek has a comparatively substantial position. These companies look for ways to influence the clients' purchase decisions by underscoring their more comprehensive lateral product portfolio, more global presence, and more complex multinational product capabilities. Moreover, these companies often wrap their enterprise resource planning with a wider set of software applications, such as middleware and database applications, and in most cases discount their individual solutions like part of a potentially large sale (Jussawalla et al., 2007).

With respect to middle-market customers, that is to say, those whose number of employees ranges from 100 to 1000, competition is likely to come from a few vendors who provide an industry-tailored solution. In this segment, Deltek’s main competitors are Japanese companies Symantec from the US and Fujistu. Characteristically, middle-market customers are looking for industry-tailored functionality, ease of deployment as well as a lower total cost of ownership with the potential to add functionality as their businesses continue to grow over time.

When competing for the small market segment, that is, the market segment which comprises of organizations with less than 100 employees, Deltek faces completion from some providers of solutions targeted at small businesses. These companies include JAMIS, Microsoft and BST Global. Needless to say, customers in all the market segments are looking for solutions that provide new functionality that assist to automate business processes and increase operational efficiency. Notwithstanding the fact that some of Deltek’s competitors are large companies that have marketing resources as well as a wider spectrum of applications and structures, Deltek believes it can effectively compete on the basis of its high-quality proposition, in-built compliance functionality and large market client base, and domain expertise.

Germany ICT Market Size

Germany's information and communication (ICT) sector are in the lead in shaping Europe’s digital future. It continues to be among the European countries leading exporters for ICT products and services for both customers and producers. Approximately 98 percent of companies in Germany are either small or medium-sized enterprises. This has enabled the creation of a specific innovative atmosphere, with the majority of small and medium enterprises acquiring specialized expertise in high-tech product and services development. The German market is endowed with specialized and skilled employees particularly in the ICT sector (Low, 2012).

Presently, Germany's ICT industry is the second-largest employer with a workforce of approximately 876,000 employees. Volume-wise, it takes up approximately 20 percent of the total European Union ICT market volume and it is poised to generate a turnover of at least 139 billion Euros by the end of 2013. Being a number five in the world, the German ICT market is rated at 5.5 percent of the global market. Over and above that, it has done very well in terms of innovation registering close to 10 percent of all the ICT associated patents registered at the European patent Office in 2010. In fact, Germany's ICT sector was ranked number one in Europe and third in the world (McKenney et al., 2012).

As for the market development, Germany has a diversified economy which permits it to survive any economic downturn better than any other European nation. Its ICT sector, in particular, has proven to be an instrumental catalyst for the rejuvenation of the economy. The most prominent market trend in the ICT industry is the progressive implementation of technologies like cloud computing and developing mobile data service segments (Papp, 2012). According to research by the German Federal Association for Information technology, Telecom and New Media in the German ICT market are projected to grow by 1.8 percent in 2013. ICT specific branches, on the other hand, are expected to grow by 3.4 percent where most of the growth will be triggered by the sales of terminal devices.

This year, that is 2013, telecommunication is expected to grow by 0.5 percent according to the German Federal Association for Information Technology. Moreover, information technology is projected to grow by 3.0 percent this year. According to the European Information Technology Observatory, the German information Technology market will progressively gain a more positive investment atmosphere and steadier consumer confidence in juxtaposition to the rest of the Eurozone. This investment growth is attributed to high employment and steady exports which have cushioned the German economy from the European economic crisis.

According to European Information Technology Observatory, the German IT market will be highly affected by strong forces that will steer the social sector, like cloud deployment, mobility, and social and analytical technology. According to EITO, this will most likely change demand in fields such as infrastructure management and IT. The IT service sector is poised to grow by 3.2 percent in 2013. A great deal of this expansion will come from IT consulting majorly cloud as well as virtualization. The entire German business process outsourcing is estimated to grow in 2013.

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Over the years, companies are more than ever before opting to locate in Germany as the economy gears towards high innovation competences, a splendid workforce and modern infrastructure with low wage cost development and the highest productivity rate in Europe. Germany is well known for the highly expansive and state-of-the-art infrastructure that integrates modern transport network and telematics (IT) and telecommunication systems. The Government’s ‘Wide Strategy’ encouraging the growth of high-speed broadband access in rural and urban areas underscores the commitment to technological infrastructure (Picot, 2011). This broadband strategy aims at making high-speed connections accessible to 75 percent of the German household by 2014.

Key opportunities are evident in the following areas:

  1. Cloud computing - It rates first among high-tech trends in Germany. According to the German Federal Association for Information Technology, the turnover of cloud computing is expected to hit 13 billion Euros mark by 2015.
  2. IT security - IT security is one of the major issues in Germany. Security services gain from the growing trend of cloud computing as well as high consumption of internet services as these companies demand reliable IT security.
  3. Mobile computing - According to Gartner, an IT consulting firm, over 185 billion worth of download and mobile apps are expected by 2014.
  4. Social media - Social networking instruments are increasingly finding their way into every business as a means of internal communication. Approximately 10 percent of German companies employ staff committed to social web applications.

As has already been noted, the ICT market is a very developed and competitive market. It is, in fact, controlled by globally operating soft and hardware giants. Moreover, the majority of SMEs concentrate on application or niche market segments. Companies hoping to gain a foothold in this market will only be successful if they are able to provide quality technology and tailor their markets to the German market.

Potential Customers

Germany prides itself on Europe leading the ICT market in terms of volume accounting for 20 percent of the European market ( Poppel et al, 2012). In 2009 alone, it recorded a turnover of over 128 billion Euros. German ICT market, as already noted, is rated fourth in the world behind the US, Japan, and China. Potential consumers of ICT include but not limited to the following areas:

Innovation

Approximately 24 percent of all German patent applications made at the European office in 2012 were ICT-related. Roughly 80 percent of all innovation depends on ICT technologies making Germany a leading destination of ICT firms. This provides good opportunities for foreign-based firms like Deltek.

Internet Activity

Internet penetration in Germany stands at 70 percent of the population by 2012, making it the largest market in the European Union and, therefore, creating a very potential customer base. Broadband consumption stands at an impressive 97 percent with the German population accounting for approximately 67 percent of broadband uptake in the European Union. German internet provision market is expected to grow by 503 percent in 2013.

IT Security

The technology security market can be categorized into eight segments (Prins, 2012). The majority of these segments are poised to register significant growth going into the future, with particular emphasis on IT security in terms of market potential. IT security segment of the market comprises IT products meant to guarantee privacy, accessibility and data integrity. This involves areas such as anti-virus software commonly referred to as malware, content spam filtering, mobile security, remote access, firewall, and intrusion prevention and other security soft-wares and applications. The overall market for technology security is expected to generate close to 10.6 billion Euros by 2015. This expected growth is largely attributed to increases in security risks.

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Cloud Computing

In the coming five years, the demand for cost-effective services and cloud solutions is expected to register phenomenal growth. This increases the importance of all sectors of the German economy and the public sector alike. Approximately 10 percent of the entire IT spending is projected to be in cloud computing by 2015 (Reed & Kohler, 2012). Roughly half of the sales will be created through cloud computing services. As the most significant sector, software services are poised to grow from 550 million Euros registered in 2010 to approximately 4.8 billion Euros by 2015. Out of this, a third of the total amount will be allocated to the expansion of the cloud infrastructures, that is, primary data centers.

Cloud-enabling services like consultancy services are expected to grow from the current value of 20 Euros to approximately 800 Euros by the year 2015. Clients for these kinds of services will come from insurance, banking and other sectors of the economy. Currently, great potential is seen in the area of cloud solutions particularly tailored for the German market needs. This market comprises numerous cost-sensitive small and medium-sized companies. A recent study showed that companies with 100 to 500 employees are specifically dynamic with regard to their utilization of technology and attendant services. Today, CRM application, finance, and accounting solutions are the main cloud computing services on demand. Owing to expanding IT workloads and costs, the majority of the companies are now focusing on cloud infrastructure and cloud platforms as the main development tools geared towards more integrated, managed and secured services.

Games

Germany boasts of approximately 21 million gamers and this makes it remain the largest and most attractive market in Europe. Growth in the online gaming segment particularly the ever-increasing popularity of social networking sites like Facebook presents a wide market for IT products and services.

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Barriers to Enter German Market

What makes European firms less visible as leading innovators in the IT sector? The most plausible answer given for this question is the difference between the dynamic frameworks in the US and that of the European Union. According to Salazar and Sawyer, in the US there is a greater willingness in the financial markets to fund projects in the new sector than is the case in Europe (Salazar & Sawyer, 2012). Fragmented nature of European markets and, by extension, the German market is quoted as the main potential barrier to enter the German market. This is especially true for markets, where initial users are receptive to development and innovations. Unlike in the US, where there are low exit and re-entry costs and greater labor mobility, German market entry costs are comparatively high, which likely to be the greatest impediment that Deltek will face in its attempts to enter the German market.

Another unfortunate thing about the European market and, by the same token German market, is the failure of the European Union innovation ‘atmosphere’ to properly link its players. Granted, an effective interface between science and corporate sectors is paramount for emerging technologies which are usually important in developing insights into frontier research. With regard to market entry and growth, the existing relationship between incumbent and new market entrants matters a lot. All these factors are notably absent in the German market, thus, making it difficult for any firm aspiring to enter the market.

Should Deltek Enter the Market Directly or Use a Local Partner?

The world of business nowadays calls for expansion of sales and profits for the purpose of achieving increased earnings. Business managers all over the world have to seek opportunities in order to keep or expand their existing market share (Schultz, 2011). New markets provide the possibility of expanding total revenue and reducing costs and, consequently, expanding profit margins. Entering a new market may as well allow a firm to track existing clients abroad, beat its rivals in the home markets, guarantee a regular raw material supply as well as diversify geographically. In the majority of cases, there isn’t sufficient demand in the domestic market forcing companies to increase their market by expanding abroad. Upon making the decision to make entry into the overseas market, the next question that comes to the minds of the mangers is ‘how’ that is going to be done.

Selecting the approach for entering or expanding in the foreign market is one of the most significant decisions any company is to make. A good choice of the mode of entry may result in significant competitive advantages. On the contrary, a poor decision may result in the ‘death’ of a company. As already noted in the introductory part of this research paper, Deltek's strategy is to enter the market via its direct sales channels to project-oriented businesses such as technical and professional service providers. The German market, in fact, guarantees foreign-based firms a conducive environment to establish their operation in Germany. For this reason, Deltek might be able to enter the German market directly.

German Market Culture

Among the European countries, Germany has the most attractive market cultural practices. Germany Trade and Investment's foremost task is to promote German competences as the best prime location for foreign investors in information technology. To this end, this organization provides consultancy and support services to international companies that seek to establish operations in Germany. Additionally, it provides information regarding business opportunities in Germany to companies that have already established operations in the country. Over and above, it is also charged with the responsibility of collecting and processing economic data and information regarding the industry, tendering procedures, legal structures and custom regulations in the domestic market. Germany Trade and Invest as well focus on its knowledge within a wide spectrum of industries to offer support to the investors.

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Role of Local Government

The government of Germany offers huge support to foreign-based companies through the provision of incentives. Incentives are available in Germany to help to meet the immediate capital needs of these investors. Provision of interest – reduced loans, as well as public guarantees, supplement the initial investment support. Cash incentives go as high as 50 percent for small businesses and 40 percent for medium-sized firms (Storz & Moerke, 2012). The amount granted as an incentive depends on various factors like project location, the size of the company, the core activities the company will involve itself in as well as its investment volume. Once the company rolls out its operations, labor-related incentives programs are instituted. Research and Development operations receive financial support via different programs oftentimes in the form of grants. Essentially, the role of the government revolves around the provision of establishing a favorable environment for companies to do business.

Is German Market Protectionist?

It is usually important for any foreign company wishing to establish operations in any foreign country to fully understand what policies and business practices that the country promotes. This helps the company to better prepare itself for opportunities or challenges likely to be occasioned by those policies. In the European region, the policies that each country pursues are more or less similar since they are derived from the European Union chatter that the member countries have ratified. For a number of decades now, protectionism has been overshadowed by free trade in the European region.

Germany and the UK are the two main countries that have led the pack in the promotion of free trade policy. To a smaller extent, the Netherlands and Denmark have also joined the agitation for free trade. Believers of free trade argue that restrictions bear a negative impact since they result in a high price for consumers (Weill & Broadbent, 2011). For them, local markets must remain free whether or not their trade partners have liberalized the market or not. They hold the view that Europe must be at the forefront of promoting the free market, a notion that is premised on the view that their trade partners will realize that protectionism misguides (Varian, 2011).

Conclusion

In conclusion, this paper has analyzed the German ICT market, revealing that it has great potential for growth in the ICT sector. A number of foreign-based, as well as local, IT firms, have already penetrated the market but, be they as it may, the ICT sector is projected to grow astronomically and, as such, will provide a good market for Deltek. The same is supported by statistics which point to a very promising future in this sector. To complement its current profit margin, the German market is one that Deltek can successfully enter and derive profit from.

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