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Business Management

Krishna Gopal (Middle East) - Negotiating and Closing Deals with Middle East Telecoms

"Where is the Letter of Intent (LoI)?" I asked my Account Manager. He shook his head, made a face and said, "Decision put off by a week more". This is a common refrain in the Middle East and I am sure many other emerging markets too. Interminable delays, unclear buying processes, several cycles of negotiations, and a lack of appreciation of engaging in IT projects are some of the characteristics of selling IT solutions in the Middle East. The Middle East region has been a region of trade through the centuries and hence Middle Easterners have a trading streak in them. This means you should expect bargaining as in a bazaar, especially with the decision maker.

In the heydays of the oil boom, the Middle East may have offered bounties for the early vendors who arrived to sell there. But over time, the Middle East has become price sensitive, and with increased competition do expect multiple iterations in the negotiation process. In the Western world you might expect a published procurement process, even for a one-off large outsourcing deal which will likely be adhered to and there is usually very little beyond the published process. Not so in the Middle East, though there are exceptions.

Now coming to the brass tacks when negotiating a deal, make sure you agree on the ground rules -
• If you are authorized by your company to take calls, do demand that you only deal with someone on their side who is similarly authorized.
• If you are not authorized, which is likely the case in an MNC, then have the key people on standby on your side and find out how decisions will be made on their side.
• Agree on a rule that you will touch a clause in the contract only once, and after you conclude and agree you will move on to the next. Revisiting a clause should be a rare exception that is to be done after mutually agreeing that is required to be done because of some extraneous reason. I have seen irritated legal hawks who thought that a clause was agreed upon find new mark-ups come up against it in a revised version sent out.
• Be aware and call out against the practice of "creeping" negotiation with your counterpart. This happens where at every meeting s/he adds a new requirement at the same price, or says the price is inclusive of taxes or that warranty is for 24 months instead of 12 months.......you get the drift?

The Middle East telco market is characterized by the presence of several group telcos that have operations across the region and in Africa as well - Saudi Telecom, Zain, Etisalat, Qatar Telecom, Batelco, Oger etc. So one of the standard lines you will hear when you are engaged on an IT project with any one of them is, "You have to INVEST in us. Do the deal at no margin or preferably free and the word of mouth will get you deals at other opcos in our Group."

I would retort that at this rate each vendor would have to do 5-6 deals free before they even start to see any sign of revenues from the region. If you have sold your compelling value then it's possible to handle this conversation point and make it sound as a very silly suggestion by them. If not, it becomes difficult, especially if some Mickey Mouse vendor shows willingness to INVEST and do a free job.

The other issue that comes up is when you quote for a Fixed Fee project. A typical ploy by the customer would be to come up with a thumb rule estimate of the number of people to be deployed on the project, the estimated timeline, and do a back of the envelope calculation to arrive at a price using a ball park person day rate. To get out of this trap you have to engage in a discussion that will hopefully educate him/her on the difference between a Fixed Fee project and a Time & Material project and why the back of the envelope estimate is way off. I have had the experience of several sales people in my team come back stumped with this customer tactic and it takes quite some coaching to help them believe that they can counter it.

Another sticky area is around Warranty and Support. If you are not careful you can be in an endless period of free support after the implementation phase because they will continue to point out one issue after another and avoid a cut over. So it's important to nail down the conditions for cut over clearly and crisply before you start the project. In this context it is very important early on to ensure that the project is considered as a jointly owned project. I always had this joke that the MSA, which stands for Master Services Agreement, upon being signed and sealed quickly transforms to a Master Slave Agreement if you have not formally and informally established the joint ownership bit with the customer.

Finally, you need to clearly agree and define what constitutes a Change, and agree on the Change Request process. It is worth spending more time than it seems reasonable on this aspect and prepare yourself with data and examples on why this is necessary. The usual trap is along these lines, "You are the IT and domain experts and you should know what you are doing, and if there is a change it's because you either made an error or you didn't know. So we won't pay for changes."

I believe that all this happens because unlike the Western countries where IT projects have been going on for a few decades and there is an understanding at all quarters, that is not the case in these emerging economies. Moreover, in a trading kind of situation the comfort level is, take delivery of goods, examine them and pay for them. In software projects there is nothing tangible to be seen for a long, long time.

This also therefore results in a tendency to put across payment terms that say, 20% towards project mobilization, 60% on achieving User Acceptance, 10% on Go Live, and balance 10% after one year of Go Live.

If you combine this with the INVEST logic I wrote of earlier, what it means is that unless you know the ropes and are savvy, you should also be owning a bank to be able to do business in the region.

By Krishna Gopal, Independent Consultant in the Middle East and Africa. Follow him on Twitter @krishg40 or read his regular blog here.

 

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