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LOLIMSA Carmel2012 EssaludSoftware Competitiveness
LOLIMSA Carmel2012 EssaludSoftware Competitiveness
LOLIMSA Carmel2012 EssaludSoftware Competitiveness
Teaching case
Correspondence:
E Carmel, Kogod School of Business, American University, Washington DC, USA.
Tel: þ 1 202 885 1928;
E-mail: carmel@american.edu
Abstract
In 2005, a successful Peruvian-based software company was seeking to grow by
exporting its software products. The case illustrates the entrepreneurial challenges in
selling software products from a developing nation that is not on the forefront of the
technology world. LOLIMSA has successfully grown its market into several Latin countries
outside of Peru. The firm is considering trying to enter the lucrative American market for
the second time, but knows that the investment in market entry is substantial.
Journal of Information Technology Teaching Cases (2012) 22, 110–114.
doi:10.1057/jittc.2012.12
Keywords: Peru; software exports; market entry
Introduction
his is the year of the launch of Peruvian software, two main software products: LOLFAR 9000 for drugstores
firm in the Peruvian software marketplace (the largest paid ‘about nothing’ for the franchise, but then had to pay
Peruvian software firm had 300 programmers) and one of 50% of each sale back to LOLIMSA.
the largest in the health-care vertical. Indirectly, the firm By 2005, LOLIMSA had numerous clients: 125 hospitals
had even more employees with another 50 employees in its and 3000 drugstores spread out over the continent. Besides
franchises throughout Latin America. Mexico, Latin operations included franchises in two other
Interestingly, by 2005, LOLIMSA performed almost no important markets: Colombia and Brazil. The most profit-
software development itself, but outsourced development able markets were the two largest ones, Brazil and Mexico.
activities to a network of friendly Peruvian software firms – LOLIMSA also had customers in Ecuador, Bolivia,
to PacNet, Medisys, and Novatronic. Venezuela, and the Dominican Republic. In each country,
LOLIMSA was changing its business model: from dealer, to
branch, to franchise. Several of these markets were too
small to justify a branch.
Exporting software In early 2005, the company conducted a market study on
‘In Peru, we already had a large share of the market and entering the US market and determined that LOLIMSA
began exporting in 1995 to Ecuador, Colombia, Venezuela could need as much as $12 million for that venture. ‘This is
and Bolivia. Three years later we began to export to the totally unreal for us,’ said the CEO, ‘it is too much.’ ‘But,’ he
Dominican Republic and México,’ said Liendo. ‘Yes, we continued, ‘the health-care sector is standard in the world:
tried to penetrate the USA market in 2000,’ he recounted. the processes are standard, the software should be
He continued: ‘We had a branch in Miami. We thought standard. The American market should be our main
Miami would be our Latin headquarters but we made many objective.’
mistakes and then closed our Miami office in 2001, only As he finished his Pisco Sour cocktail, he concluded with
eighteen months after.’ a question: ‘So, is 2006 the year we launch in the USA?’
‘We discovered our strategy by chance,’ said Liendo. The
Mexican market was the company’s learning field in which Questions for discussion:
it stumbled by trial and error. After failing in Miami,
LOLIMSA hired a distributor in Mexico City in 2000. 1. Should the company focus resources on the United
By 2002, however, the distributor was assessed to be States when there are large markets in Latin America?
performing poorly. The distributor had too large a product 2. What is the difference between selling IT services and
portfolio and was not pushing the LOLIMSA products. In selling software products?
2002, LOLIMSA discontinued the distributor relationship. 3. Peru is a small, unknown tech nation, one of 100 that are
It then decided to make a financial commitment and open competing in the global marketplace, while India is the
a branch in Mexico City. LOLIMSA sent Roberto Garcia giant in the IT marketplace. Can this company compete
from Peru. But Roberto proved to be expensive and in the global marketplace? Doesn’t it lack the national
ultimately did not sell enough. Thus, having exhausted branding to succeed?
many of the classic options for international expansion 4. How would your recommendations change in the light of
and market entry, LOLIMSA looked to an unusual new technological developments and new sourcing models
approach and decided to franchise. that emerged since 2005 when this case took place?
‘The franchise worked in Mexico because we found the
right people. And then we found the right people else-
where,’ said Liendo. LOLIMSA’s franchise owner in Mexico About the author
City was Antonio Menache. Liendo recounted that Antonio Erran Carmel is a Professor of Information Technology at
sincerely believed in the firm’s products. Antonio was Kogod School of Business at the American University in
further evangelized by watching Liendo himself selling his Washington DC. He studies various kinds of sourcing in the
software products to a Mexican hospital. context of the globalization of technology work. He has
Mexico became the largest foreign site for LOLIMSA with visited hundreds of firms in over 20 countries. He writes
10 large client hospitals and 10 employees in the franchise. occasional case studies about these firms as well as a blog.
Menache had two other co-owners to the franchise. These Professor Erran Carmel recently completed his third book
were two former employees of LOLIMSA in Peru who about the special issues that time zone separation imposes
were lured to Mexico by the higher wages. The franchise on global coordination of work. His previous book is titled
arrangement was quite liberal. Menache, in Mexico City, Offshoring Information Technology.
Finding a niche in the global software marketplace E Carmel
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Appendix C