In today's global economy, most companies are, interested, if not forced, to expand their business internationally. In addition, the international marketplace has been more open to small and medium enterprises (SME), and not only to multi-national enterprises (MNE), which was the situation before. We find it interesting to investigate SME software firms, and their activity on the international marketplace. This since the software industry, still is quite young, and has seen tremendous growth the last 30- some years. Therefore, the over all purpose of this thesis is to gain a deeper understanding in how SME software firms expand on the international marketplace. The extent of our thesis is to find out what mode of entry SME software firms prefer when entering new international markets, and factors leading to the decision of one entry mode and/or the other. We have conducted a qualitative case study by analysing data collected from interviews with two software firms. Our findings of this study indicate that SME software firms have partnership as their default mode of entry and that the benefit, return on investment, from partnerships are greater than from wholly owned subsidiaries (WOS). Furthermore, our findings of this study indicate that it is crucial for a company's success on the international marketplace, to have a clear expansion strategy, and also be able to execute on it. In addition, it is of utter importance to recruit the best possible partner in order to have a successful international expansion.