Rivals team up for IT Gold

Rivals team up for IT Gold

Industry insiders call it convergence. Some customers call it an integrated solution. In the old days - which, by the way, were just a couple of years ago - it was an unheard-of practice. Today, formerly fierce competitors are joining forces to deliver robust solutions to some complex technical challenges.

"This is a new area for a lot of folks," says Jack Claypoole, client executive at US-based systems integrator Electronic Data Systems. "It's a great admission to say we're not all Renaissance people."

Not everyone understands the cultural and legal pitfalls to avoid in inter-company strategic technical partnerships. However, more and more companies are grasping the business and technical advantages of working with organisations that bring different technical and industry expertise to the table.

"We don't always have all the competencies to provide my client with the best solution," says Claypoole, who oversees the IT and business process support for EDS client General Motors. In his client's best interest, Claypoole turns to people who historically have been competitors of EDS. "I look at the needs of the customer, then I look at the competencies we can bring. Where there are fundamental complements, we will go into a partnership."

Such a technical partnership exists between consultants PricewaterhouseCoopers LLP (PwC) and EDS, which are "robust competitors in the IT market", Claypoole says. GM wanted to implement a set financial process using SAP AG. "We felt PwC had the financial, audit and tax background within the industry that we needed. We had the particular subject matter expertise at GM. We saw an opportunity to leverage [combined PwC and EDS] competencies, rather than compete, to bring a better and more economical solution."

Tearing down the walls

As the competitive walls come down, managers must address legal, business and cultural fine points of strategic technical partnerships. For example, how do these companies prepare a proposal and still protect their special skills and talents?

The reality is sometimes "you have to share information [that would otherwise be hotly guarded from the competition] to move forward," says David Zolet, vice president and general manager of civil systems program divisions at TRW Systems & Information Technology Group, in Virginia.

"[Subcontractors] will want to protect their intellectual property, and the [primary contractors] will [typically] demand reuse rights to a product or intellectual property" says Mark Bloom, vice president of the Web e-commerce and enterprise systems group at CACI International, an IT contractor, in Virginia.

Frequently, the subcontractor that holds the intellectual property will charge a licensing fee for its use. If the contract is executed successfully, the subcontractor will be called back for another venture "because they have the intellectual property (IP)", Bloom says.

Who wears the pants?

Managers must also address the cultural issues. "Someone must be in charge to administer the terms and conditions" of the contract so that all team members are moving in the same direction with the same milestones and goals for accomplishment, Zolet says.

The prime contractor, Bloom says, must be forceful with the subcontractors at the beginning of the teaming arrangement to get the desired terms and conditions on the statement of work or be willing to "go for another source", Bloom says.

Working with your technical partner of choice is not always possible. The client may dictate which organisation the IT solutions provider must use, Bloom says. There are many reasons why this can happen. Sometimes a client has a previous investment in a company's product - not necessarily financial. There are times, too, when the client has a long history with a particular company.

In cases in which contractors have worked together before but experienced an "ugly divorce" in the end, the client expects the teaming companies to put aside differences that existed in the past. "This is where the discipline and rigour begin. More often than not, the [subcontractor] appreciates a set of established requirements and will typically try to conform to the [primary contractor's] process," Bloom says.

These guidelines are what many IT executives say lead to teaming success and long-term relationships. "Everyone walks into [teaming arrangements] with open eyes," Zolet says. Non-disclosure and joint venture agreements are signed. These "non-technical firewalls" must be respected. "Employees understand what can and cannot be shared," he says.

The cultural obstacles "aren't so much on the actual execution but more about getting set up to begin", Zolet says. He believes it is important to get team members engaged as quickly as possible to overcome these cultural issues and encourage team bonding.

Zolet compares new teaming arrangements to pre-season football. "You're in a horrible situation. You've got 20 to 30 days to produce," Zolet says. With the goal of moving down the field to score, inter-company teams bond quickly. Not only is the project moved forward, but "you end up building lasting relationships", Zolet says.

Team starters

Often the convergence process begins with a dance - a conversation among company representatives about an upcoming request for proposal. "We begin feeling each other out to see if there's a reason to team for success," Zolet says. Reasons to team up could be shared technical capabilities, and industry or sector expertise.

If the conversations move to the next level, in which companies want to formalise an intent to work as a team, the legal song and dance begins with non-disclosure and joint venture agreements. Then teaming agreements are signed and a statement of work is established.

"Clearly, proprietary data isn't shared; and we never discuss rates in government contracting," Zolet says. When both sides of the technical strategic partnership review the project contract, "sanitised versions" are distributed, so competitor's "financials are never shared", he says.

With all the song and dance, all the preparation, nothing can shut down teaming talks faster than the word that one potential partner's reputation is less than stellar. "This is a very close community and word travels fast," Zolet says. The groups that play well with one another get called back to the sandbox. The ones that do not play well often get left behind.

"A lot of it has to do with personal relationships," EDS's Claypoole says. "Companies are a bunch of individuals; at this point, because this [business model] is so new, it's a commitment that develops from a personal experience. We know we can count on the PwC guys to be there, and that's ultimately in the best interest of EDS."

The custody battle

As technical collaboration becomes the norm, a serious question can be asked: Who gets custody of the intellectual property - the valuable competitive edge?

With the transformation of the IT environment, "there's a tremendous need for companies that can provide high-performance-based technology that can enable the infrastructure" and at the same time propel the growth of the new economy, says Dan Pelino, vice president of IBM's technology group, in California. "The value of IP in the infrastructure then becomes very important," he says. IBM knows. According to IFI Claims Patent Services, IBM received the most US patents in 1999 - more than 2700.

That year also brought in another big number for IBM. The company inked a seven-year, $US16 billion OEM deal with Dell Computer. Not only are the companies partnering to deliver technology quickly but they have also joined forces in research and development.

So how will ownership of the partnership's intellectual property shake out?

Henry Garrana, vice president of legal at Dell Computer, says that the ultimate ownership will depend on who brings what patentable product to the arrangement. "People bring different strengths to the table. IBM has strengths in research. Dell has strengths in its closeness to the customer, direct model, and ability to bring products to market quickly."

This cooperative research deal, according to Garrana, will help "commercialise IBM technology" and will no doubt generate new patentable intellectual property. When all is said and done, Dell will keep the continued intellectual property it brings to the table, and IBM will keep theirs.

However, it is rarely so cut-and-dried. "This leaves an area in between. So what comes from that joint collaboration will be jointly owned by the two parties" and will certainly be detailed in documents drawn up by the organisations' attorneys, Garrana says.

"These are crown jewel issues," CACI's Bloom says. In joint ventures, "it's not as simple as making a software licensing agreement".

Bloom says that how companies protect their intellectual property must begin with employee education. "We need to create an awareness program for our employees" because in relationship dynamics friendships abound and, over a quick beer, information - sometimes of a critical nature - gets shared inadvertently. "Our people are instructed to be aware of it. Knock on wood, we haven't been bitten by it as yet," Bloom says.

Establishing technical partnerships

Understanding and taking steps to avoid certain issues will help establish a successful teaming arrangement.l -Strategic partnerships are temporary work agreements to carry out a defined project within a specific time period.l -Establish day-to-day management procedures early in the process.l -Define intellectual property issues early and head-on.l -Set achievable project milestones and deadlines for the new team.

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