Entering Foreign Markets in the Software Industry - The BECH Index 2014

Entering Foreign Markets in the Information Technology Industry The BECH Index 2014

Whitepaper from TBK Consult

Author Hans Peter Bech, M.Sc. (econ) TBK-WIPA-024

© Hans Peter Bech, 2015 Second edition Unless otherwise indicated, Hans Peter Bech copyrights all materials on these pages. All rights reserved. No part of these pages, either text or images may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

The Business Model Canvas Framework is made available by Business Model Foundry GmbH, Kalkbreitestrasse 71, 8003 Zürich, Switzerland The copyright of other frameworks and information sources mentioned on this whitepaper belong to the proprietor.

Published by TBK Publishing® (a division of TBK Consult Holding ApS) Denmark CVR: DK31935741 www.tbkpublishing.com ISBN: 978-87-93116-19-1 TBK-WIPA-024

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table of contents: Target audience

4

Abstract

4

Author

4

Acknowledgements

4

Grow fast or die slow

5

How?

5

Where?

6

Table 1: The BECH Index for the Major Markets 2012-14

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Table 2: Top 25 information technology countries in the world

8

Table 3: The BECH Index for the Americas 2012-14

9

Table 4: The BECH Index for The European Union 2012-14

10

Table 5: The BECH Index for The Rest of Europe 2012-14

11

Table 6: The BECH Index for The Middle East 2012-14

12

Table 7: The BECH Index for Africa 2012-14

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Table 8: The BECH Index for Asia Pacific 2012-14

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About the author

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Targeted audience

The target audience for this whitepaper is the board of directors, the CEO and the sales and marketing executives of B2B information technology companies with ambitions for achieving global market leadership.

Abstract

This whitepaper presents an estimation of the relative demand capacity for B2B software and software related services worldwide.

This estimation is called “The BECH Index.”

TBK Consult calculates the BECH index annually based on data published by The Central Intelligence Agency (CIA).

The CIA1 is an independent agency responsible for providing national security intelligence to senior US policymakers. The CIA is separated into four basic components: the National Clandestine Service, the Directorate of Intelligence, the Directorate of Science & Technology, and the Directorate of Support. They carry out “the intelligence cycle,” the process of collecting, analyzing, and disseminating intelligence information to top US government officials.

Author

Hans Peter Bech, M.Sc. (econ.)

Acknowledgements

Design and lay-out: Sordako OÜ, Tallinn, Estonia, info@kompot.ee Proof reading: Emma Crabtree, ecr@tbkconsult.com

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Source: https://www.cia.gov/about-cia/todays-cia/index.html

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Grow fast or die slow

The information technology industry is by nature a global industry.

As the information technology industry is blessed with low cost of entry and simple supply chains, international growth comes much easier in the information technology industry than in most other industries.

Embarking on the global growth journey is also a necessity in the information technology industry. The combination of simple supply chains, economy of scale advantages and “crossing the chasm”2 characteristics make the information technology industry a “winner takes all” game. Information technology companies either grow fast or die slowly.3

How?

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See “Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers” by Geoffrey A. Moore.

“Grow fast or die slow” April 2014 by Eric Kutcher, Olivia Nottebohm and Kara Sprague, McKinsey&Company

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

As information technology companies prepare for global growth the first question to answer is “how?”

We discuss these issues in the first three whitepapers in this series named “Entering a Foreign Market in the Information technology Industry4.”

We recommend that B2B information technology companies verify the viability of their business models in their domestic market first.

When growing revenue has been proven profitable, predictable and scalable then it is time to conquer foreign markets.

Where?

The second question asked before jumping to foreign markets is

“Where should we go next?”

To help information technology executives making this decision based on facts rather than emotions, TBK Consult calculates and publishes the BECH Index annually.

The BECH Index for a country reflects the demand capacity of the country and thus also reflects the share of global demand for information technology related products and services.

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These whitepapers are available for download from www.tbkpublishing.com

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 1: The BECH Index for the Major Markets 2012-145 Region

BECH Share 2014

BECH Share 2013

BECH Share 2012

North America

32.5%

32.5%

32.6%

South America

5.0%

5.1%

5.1%

Americas

37.5%

37.6%

37.7%

EU

23.2%

23.7%

24.7%

Rest of Europe (incl. Switzerland)

5.3%

5.5%

5.5%

Middle East

8.0%

7.8%

7.7%

Africa

1.1%

1.2%

1.2%

EMEA

37.6%

38.2%

39.0%

Australia/NZ

1.8%

1.8%

1.8%

Japan

5.6%

5.9%

6.0%

China

7.2%

6.6%

5.9%

South Korea

2.0%

2.0%

1.9%

Taiwan

1.6%

1.5%

1.5%

India

1.4%

1.3%

1.1%

Rest of Asia

5.2%

5.1%

4.9%

Asia

24.8%

24.2%

23.2%

The World

100%

100%

100%

The world market is divided into 226 countries of which some of the bigger countries must be considered as several markets. Talking about the US market when you haven’t won the first customer or independent channel partner there yet may seem overly self-confident. For most information technology companies, the US is at least 50 geographical markets, Germany is 14 markets (Bundesländer), France is at least 4 markets, the UK is 4 markets, the Nordics are 4 markets and so on.

As can be seen from Table 1, world demand is on the move. The Americas has a stable share of world demand, while Europe is loosing its share of global demand. Nevertheless, Europe continues to be a very interesting area with some of the biggest markets in the world and with a dramatic need for information analytics, process and cost optimization information technology solutions. The slight growth in the Middle East has most likely been affected by the changes in the oil prices experienced lately and we should expect some changes here in the 2015 figures. China continues its growth and is now the second largest information technology market in the world.

These 25 countries make up 85% of world demand for information technology products and services. This doesn’t mean that they are the most attractive markets as other issues than size may play a more important role. www.tbkconsult.com

5

Please note that the numbers in this white paper may differ from the 2013 version since the CIA has reassessed and revised their national statistics.

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 2: Top 25 information technology countries in the world Rank Country

BECH Share 2014

1

USA

2

China

7,23%

3

Japan

5,65%

4

Germany

5,43%

5

France

3,31%

6

UK

3,20%

7

Russia

2,81%

8

Saudi Arabia

2,68%

9

Italy

2,40%

10

Canada

2,27%

11

South Korea

2,00%

12

Australia

1,62%

13

Spain

1,68%

14

Brazil

1,67%

15

Qatar

1,46%

16

Taiwan

1,57%

17

India

1,38%

18

UAE

1,23%

19

Mexico

1,22%

20

The Netherlands

1,20%

21

Singapore

1,17%

22

Indonesia

0,90%

23

Switzerland

0,87%

24

Poland

0,76%

25

Hong Kong

0,69%

Accumulated

30,24%

52% 65% 74% 80% 85%

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On the following pages we will list the BECH Index for each country in the world.

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 3: The BECH Index for the Americas 2012-14 Country USA

BECH Share 2012

30,24%

30,27%

30,34%

2,27%

2,26%

2,28%

32,50%

32,53%

32,62%

Argentina

0,68%

0,71%

0,70%

Belize

0,00%

0,00%

0,00%

Bolivia

0,01%

0,01%

0,01%

Brazil

1,67%

1,70%

1,73%

Chile

0,30%

0,30%

0,29%

Colombia

0,27%

0,26%

0,25%

Costa Rica

0,03%

0,03%

0,03%

Cuba

0,04%

0,04%

0,04%

Dominican Republic

0,06%

0,05%

0,05%

Ecuador

0,06%

0,06%

0,06%

El Salvador

0,01%

0,01%

0,01%

Falkland Islands

0,00%

0,00%

0,00%

Guatemala

0,03%

0,03%

0,03%

Grenada

0,00%

0,00%

0,00%

Honduras

0,01%

0,01%

0,01%

Jamaica

0,01%

0,01%

0,01%

Mexico

1,22%

1,22%

1,24%

Nicaragua

0,00%

0,00%

0,00%

Panama

0,05%

0,04%

0,04%

Paraguay

0,02%

0,02%

0,01%

Peru

0,14%

0,14%

0,13%

Puerto Rico

0,06%

0,06%

0,06%

Uruguay

0,05%

0,04%

0,04%

Venezuela

0,30%

0,34%

0,35%

South America

5,02%

5,11%

5,11%

37,52%

37,64%

37,72%

Canada North America

Americas

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BECH Share 2014 BECH Share 2013

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 4: The BECH Index for The European Union 2012-14 Country

BECH Share 2013 BECH Share 2012

Greenland

0,00%

0,00%

0,00%

Faroe Islands

0,00%

0,00%

0,00%

Iceland

0,02%

0,02%

0,02%

Sweden

0,66%

0,66%

0,65%

Norway

0,73%

0,74%

0,76%

Finland

0,28%

0,30%

0,32%

Denmark

0,35%

0,36%

0,38%

Germany

5,43%

5,53%

5,76%

Netherlands

1,20%

1,24%

1,32%

Belgium

0,66%

0,68%

0,70%

Luxemburg

0,15%

0,15%

0,15%

France

3,31%

3,45%

3,59%

Austria

0,58%

0,60%

0,63%

Liechtenstein

0,01%

0,01%

0,01%

Italy

2,40%

2,54%

2,76%

Spain

1,68%

1,71%

1,84%

Portugal

0,24%

0,25%

0,27%

UK

3,20%

3,19%

3,24%

Ireland

0,35%

0,34%

0,35%

Gibraltar

0,00%

0,00%

0,00%

Poland

0,76%

0,75%

0,76%

Estonia

0,03%

0,03%

0,03%

Lithuania

0,07%

0,07%

0,07%

Latvia

0,04%

0,04%

0,04%

Czech Republic

0,30%

0,30%

0,32%

Slovakia

0,14%

0,14%

0,14%

Hungary

0,20%

0,19%

0,19%

Bulgaria

0,07%

0,07%

0,08%

Slovenia

0,06%

0,06%

0,06%

Greece

0,23%

0,25%

0,27%

23,17%

23,67%

24,71%

The European Union

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BECH Share 2014

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 5: The BECH Index for The Rest of Europe 2012-14

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Country

BECH Share 2014

BECH Share 2013

BECH Share 2012

Switzerland

0,87%

0,89%

0,89%

Cyprus, Republic

0,03%

0,03%

0,03%

Monaco

0,02%

0,02%

0,02%

Isle of Man

0,02%

0,02%

0,02%

Jersey

0,01%

0,01%

0,01%

Georgia

0,01%

0,02%

0,01%

Andorra

0,00%

0,00%

0,00%

Guernsey

0,00%

0,01%

0,01%

Malta

0,01%

0,01%

0,01%

Croatia

0,06%

0,06%

0,07%

Russia

2,81%

2,92%

2,97%

Ukraine

0,10%

0,12%

0,13%

Belarus

0,10%

0,10%

0,10%

Romania

0,25%

0,24%

0,24%

Serbia

0,04%

0,04%

0,04%

Moldova

0,00%

0,00%

0,00%

Bosnia and Herzegovina

0,01%

0,01%

0,01%

Montenegro

0,00%

0,00%

0,00%

Albania

0,01%

0,01%

0,01%

Macedonia

0,01%

0,01%

0,01%

Kosovo

0,00%

0,00%

0,00%

Turkey

0,94%

0,93%

0,90%

Rest of Europe

5,32%

5,48%

5,49%

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 6: The BECH Index for The Middle East 2012-14 Country

BECH Share 2014

BECH Share 2013

BECH Share 2012

Bahrain

0,10%

0,10%

0,09%

Egypt

0,33%

0,33%

0,33%

Iran

0,73%

0,72%

0,78%

Iraq

0,24%

0,27%

0,25%

Kuwait

0,64%

0,66%

0,67%

Lebanon

0,05%

0,05%

0,05%

Israel

0,28%

0,28%

0,27%

West Bank

0,00%

0,00%

0,00%

Jordan

0,03%

0,03%

0,03%

Oman

0,20%

0,20%

0,19%

Qatar

1,46%

1,36%

1,26%

Saudi Arabia

2,68%

2,62%

2,59%

Syria

0,02%

0,02%

0,02%

U.A.E.

1,23%

1,20%

1,14%

Yemen

0,01%

0,01%

0,01%

Middle East

8,00%

7,84%

7,68%

BECH Share 2014

BECH Share 2013

BECH Share 2012

Algeria

0,25%

0,24%

0,24%

Angola

0,04%

0,04%

0,04%

Benin

0,00%

0,00%

0,00%

Botswana

0,02%

0,02%

0,02%

Burkina Faso

0,00%

0,00%

0,00%

Burundi

0,00%

0,00%

0,00%

Cameroon

0,01%

0,01%

0,01%

Central African Republic

0,00%

0,00%

0,00%

Chad

0,00%

0,00%

0,00%

Congo, Republic of the

0,01%

0,01%

0,01%

Cote d'ivoire

0,01%

0,01%

0,01%

Djibouti

0,00%

0,00%

0,00%

Dem. Rep of the Congo

0,00%

0,00%

0,00%

Eq. Guinea

0,03%

0,03%

0,03%

Eritrea

0,00%

0,00%

0,00%

Ethiopia

0,01%

0,01%

0,01% â–ś

Table 7: The BECH Index for Africa 2012-14

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Country

12

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

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Country

BECH Share 2014

BECH Share 2013

BECH Share 2012

Gabon

0,03%

0,03%

0,02%

Gambia

0,00%

0,00%

0,00%

Ghana

0,01%

0,01%

0,01%

Guin. Bissau

0,00%

0,00%

0,00%

Guinea

0,00%

0,00%

0,00%

Kenya

0,01%

0,01%

0,01%

Lesotho

0,00%

0,00%

0,00%

Libya

0,05%

0,09%

0,12%

Liberia

0,00%

0,00%

0,00%

Malawi

0,00%

0,00%

0,00%

Mali

0,00%

0,00%

0,00%

Mauritania

0,00%

0,00%

0,00%

Morocco

0,06%

0,06%

0,06%

Mozambique

0,00%

0,00%

0,00%

Namibia

0,01%

0,01%

0,01%

Niger

0,00%

0,00%

0,00%

Nigeria

0,20%

0,19%

0,18%

Rwanda

0,00%

0,00%

0,00%

Senegal

0,00%

0,00%

0,00%

Sierra Leone

0,00%

0,00%

0,00%

Somalia

0,00%

0,00%

0,00%

South Africa

0,29%

0,30%

0,30%

South Sudan

0,00%

0,00%

0,00%

Sudan

0,02%

0,02%

0,02%

Swaziland

0,00%

0,00%

0,00%

Tanzania

0,01%

0,01%

0,01%

Togo

0,00%

0,00%

0,00%

Tunisia

0,04%

0,04%

0,04%

Uganda

0,00%

0,00%

0,00%

Western Sahara

0,00%

0,00%

0,00%

Zambia

0,01%

0,01%

0,01%

Zimbabwe

0,00%

0,00%

0,00%

Africa

1,14%

1,16%

1,17%

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Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Table 8: The BECH Index for Asia Pacific 2012-14 Country Australia

1,62%

1,61%

1,62%

New Zealand

0,18%

0,17%

0,18%

Australia/NZ

1,79%

1,78%

1,80%

Japan

5,65%

5,94%

6,01%

China

7,23%

6,57%

5,90%

Korea, South

2,00%

1,96%

1,94%

Taiwan

1,57%

1,53%

1,53%

India

1,38%

1,26%

1,15%

17,82%

17,26%

16,53%

Hong Kong

0,69%

0,69%

0,69%

Thailand

0,45%

0,47%

0,46%

Singapore

1,17%

1,16%

1,11%

Malaysia

0,59%

0,55%

0,52%

Indonesia

0,90%

0,86%

0,81%

Philippines

0,15%

0,14%

0,13%

Kazakhstan

0,32%

0,31%

0,29%

Pakistan

0,13%

0,13%

0,13%

Vietnam

0,09%

0,09%

0,08%

Bangladesh

0,06%

0,05%

0,05%

Sri Lanka

0,07%

0,07%

0,06%

Azerbaijan

0,09%

0,09%

0,09%

Trinidad and Tobago

0,04%

0,05%

0,05%

Turkmenistan

0,04%

0,03%

0,03%

Bermuda

0,01%

0,01%

0,02%

Macau

0,15%

0,15%

0,13%

Mauritius

0,01%

0,01%

0,01%

Brunei

0,07%

0,07%

0,08%

Burma

0,04%

0,03%

0,03%

Bahamas

0,01%

0,01%

0,01%

Uzbekistan

0,03%

0,03%

0,02%

Cambodia

0,01%

0,00%

0,00%

Barbados

0,00%

0,00%

0,00%

Armenia

0,01%

0,01%

0,01%

Cayman Islands

0,00%

0,00%

0,00%

French Polynesia

0,01%

0,01%

The Big Countries

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BECH Share 2014 BECH Share 2013 BECH Share 2012

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0,01% â–ś

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

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Country

BECH Share 2014 BECH Share 2013 BECH Share 2012

Korea, North

0,00%

0,00%

0,00%

Nepal

0,01%

0,00%

0,00%

New Caledonia

0,01%

0,01%

0,01%

Niue

0,00%

0,00%

0,00%

Papua New Guinea

0,00%

0,00%

0,00%

Guam

0,00%

0,00%

0,00%

Fiji

0,00%

0,00%

0,00%

British Virgin Islands

0,00%

0,00%

0,00%

San Marino

0,00%

0,00%

0,00%

Laos

0,00%

0,00%

0,00%

Haiti

0,00%

0,00%

0,00%

Virgin Islands

0,01%

0,00%

0,01%

Suriname

0,00%

0,00%

0,00%

Kyrgyzstan

0,00%

0,00%

0,00%

Cape Verde

0,00%

0,00%

0,00%

Afghanistan

0,00%

0,00%

0,00%

Guyana

0,00%

0,00%

0,00%

Madagascar

0,00%

0,00%

0,00%

Tajikistan

0,00%

0,00%

0,00%

Northern Mariana Islands

0,01%

0,00%

0,00%

Antigua and Barbuda

0,00%

0,00%

0,00%

Aruba

0,00%

0,00%

0,00%

Seychelles

0,00%

0,00%

0,00%

Maldives

0,00%

0,00%

0,00%

Saint Lucia

0,00%

0,00%

0,00%

Bhutan

0,00%

0,00%

0,00%

Saint Pierre and Miquelon

0,00%

0,00%

0,00%

Saint Vincent and the Grenadines

0,00%

0,00%

0,00%

Nauru

0,00%

0,00%

0,00%

Saint Kitts and Nevis

0,00%

0,00%

0,00%

Turks and Caicos Islands

0,00%

0,00%

0,00%

Wallis and Futana

0,00%

0,00%

0,00%

Samoa

0,00%

0,00%

0,00%

Cook Islands

0,00%

0,00%

0,00%

Dominica

0,00%

0,00%

0,00%

American Samoa

0,00%

0,00%

0,00%

Montserrat

0,00%

0,00%

0,00%

15

â–ś

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

Country Anguilla

0,00%

0,00%

0,00%

Palau

0,00%

0,00%

0,00%

Vanuatu

0,00%

0,00%

0,00%

The Federated States of Micronesia

0,00%

0,00%

0,00%

Kiribati

0,00%

0,00%

0,00%

Solomon Islands

0,00%

0,00%

0,00%

Saint Helena

0,00%

0,00%

0,00%

Tonga

0,00%

0,00%

0,00%

Marshall Islands

0,00%

0,00%

0,00%

East Timor

0,00%

0,00%

0,00%

Comoros

0,00%

0,00%

0,00%

Sao Tome and Principe

0,00%

0,00%

0,00%

Tuvalu

0,00%

0,00%

0,00%

Curacao

0,00%

0,00%

0,00%

Mongolia

0,00%

0,01%

0,01%

Tokelau

0,00%

0,00%

0,00%

Saint Martin

0,00%

0,00%

0,00%

Sint Maarten

0,00%

0,00%

0,00%

Rest of the world

5,23%

5,23%

4,89%

24,85%

24,85%

23,05%

Asia Pacific

www.tbkconsult.com

BECH Share 2014 BECH Share 2013 BECH Share 2012

16

Entering Foreign Markets in the Information Technology Industry - The BECH Index 2014

About the author Hans Peter Bech has been engaged with international sales and marketing operations in the software industry for more than 30 years.

Hans Peter was instrumental in building the international business platforms for companies such as Dataco (now Intel), Mercante, Dansk Data Elektronik (now CSC), RE Technology (now Barco), and Damgaard/Navision (now Microsoft).

Hans Peter Bech

As a management consultant Hans Peter has been consulting on internationalization to companies Microsoft, Danfoss, Proekspert, Jeeves Information eMailSignature, SoftScan (now Symatec), Netop, EG Scandihealth and Secunia.

providing such as Systems, A/S, CSC

Hans Peter is an advisor to IMMIB, the Turkish ICT Exporters Association. He also lectures in internationalization at the Sabanci University in Istanbul, Turkey.

Hans Peter is the author of several whitepapers on internationalization in the software industry and he frequently writes articles on the subject.

He started his career as a management consultant in 2003 and founded TBK Consult in 2007. Since then he has built the company to its present position with 25 senior consultants in 16 countries.

Hans Peter oversees the development of TBK Consult as well as performs management consulting assignments for selected clients.

Hans Peter holds a M.Sc. in macroeconomics and political science from the University of Copenhagen. He speaks Danish, English and German and is a certified ValuePerform, ValuePartner and Business Model Generation consultant.

More about Hans Peter Bech

www.tbkconsult.com

Other publications by the author

17

TBK-WIPA-024