Bridging the Gap
In your latest financial report the revenue by geographic segment is 39% Europe, 39% US and Asia Pacific 22%. Do you see this changing over time?
The revenue is in pounds sterling, so that the exchange rate has an impact. A couple of years ago you would have seen the US a much larger percentage. The sterling/dollar exchange rate has impacted that. There is an increasing trend towards work being done in Asia Pacific. We are seeing particularly in some of our bigger accounts, where 5 years ago our work with them was 100% in the US, now it may be split 50% in the US and 50% in India or China. We are definitely seeing a trend there in terms of the software use. A lot of design work can be held in the main location but we are seeing a lot of offshore development work. That is a change that we have to be able to make accommodation for in our business model as we build our infrastructure around the world to support those operations. If anything, I see that the trend towards Asia Pacific is (I guess) principally at the expense of the US and also Europe to some extent. This is a trend we have seen and will continue to see.
If you have a customer who has sites in both the US and in India or China, where the labor costs are substantially lower, do you charge the same price for your software?
It is not vastly different but there are small changes. The software is pretty much the same price around the world. Clearly, that is a challenge in some geographies. The big multinational companies understand that and in any case we normally have a price for that customer regardless of where they want to use the software.
It is possible when there is a 5 or 8 hour time difference between sites to use the same piece of code. How do you address that?
That is something that we have to live with as a reality. Our software is a floating license that can be used anywhere on the customer's network, if they allow it to be used in that way. We separate the use of the software from the support of the software. We charge separately for the remote support of these different locations. But the customer has a floating license which he can use wherever he can access the network. It's a challenge the software industry has been facing in recent years. I've spent quite a lot of my time trying to wrestle with that problem. You can either try to fight it and manage it or embrace it. I believe that it is in the customer's benefit and ours to embrace it.
Do you have anything to add that my readers might be interested in?
We have covered some things in parts which I would like to bring together. Flomerics is trying to break down the barriers between the mechanical and electronic engineering functions. That is something we continue to work on. We see with the increasing complexity of design, we see even at the customer level, a blurring in the distinction and the two disciplines coming together. As such we are working to respond to that increasing need through the tools, the products, the functionality within the products, and our engineering around the world to help customers to bridge that gap and make the best of that. That's what we are all about at Flomerics.
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