Tag Archives: Window

How do You Manage a Key Partner Relationship? Five Points

Situation: A company was created from IP originally developed by the founder at a large corporation that was not interested in commercializing it. The new company has now become successful and visible, with the large corporation as an important partner. The CEO wants to make sure that she has all bases covered to secure the future of the new company. How do you manage a key partner relationship?

Advice from the CEOs:

  • There must be clear agreement between the company and partner on ownership of the original IP – a legal document signed by both parties. You can bet that should a conflict arise, the lawyers representing the larger company will argue that their client owns the IP. Once this is secured, focus on developing and licensing software that you clearly own.
  • Develop contingency plans should the key partner decide to exit the business on which your relationship is based. Identify what other companies could replace lost revenue. Start to build these relationships.
  • If the partner helps to fund current development, take the money that you save and develop your own IP, independent of the partner relationship. As an alternative, at least develop critical components of the software as your own IP, without using the partner’s funding.
    • This will free you to develop other customer segments to broaden your business base.
  • What concerns does the partner have? Strategically, large corporations can be uncomfortable if they feel dependent upon a much smaller company. There are two things that you do:
    • Makes a concerted effort to assure that you are essential to the large corporation’s overall business.
    • Make change as painful as possible.
  • How would you get paid if the large partner exited the relationship?
    • Negotiate a contract with a 2-year window to any change that partner wants to make. This will provide you with the room to develop new clientele should the partner exit.
    • Have contingency plans to rebuild capabilities that might be lost and sell it to other clients.
    • Customize your software by client. In the process, you will develop new methods to keep your edge over competitors.
    • Keep critical parts of your processes “manual” so that they are essentially trade secrets and not easily replicable if the partner were to try to take over the IP.

How Can You Accelerate Offshore Learning Curves? Four Thoughts

Situation: A company has an offshore operation with 10 engineers and a good General Manager. They will hire five more engineers in the next month. Their target billing rate is projected to be profitable when they reach 15 engineers. Their challenge is that they need to bear the investment loss to have an offshore capability, but are not sure that they’ll see a pay-off. How can you accelerate the offshore learning curve?

Advice from the CEOs:

  • Given the current situation, give yourself a window of 60 to 90 days. Create a go/no go decision point and let the General Manager know this. It will provide motivation for the off-shore operation to come up to speed faster.
  • Another company projected a 2 year break-even based on others’ experience in the geographic location.
    • They are nearing the 2-year point with the office up and running, on target with schedule, under a General Manager with proven experience.
    • They see payback on their initial investment at the 2.5 to 3 year point, and thereafter duplicating their payback every 6-12 months or better.
  • It is important not to undercharge for off-shore work.
    • One company charges $125 for work done in India that they would have charged at $180 if done in the US – a 29% discount. This is for high billing rates, with spreads even better for lower billing rate work.
    • If a client pushes for offshore rates, bargain for a lower initial discount for off-shore work compared with US-based work, but combine this with an offer to generously share additional discounts as the offshore location improves productivity.
  • Bottom Line: Stay the course. Long-term this investment will pay off.