CHAPTER END CASE: THE SOFTWARE DEAL

The following case focuses on negotiations.

A US-based high-tech company saw great potential in an idea brought up by an Israeli software firm and decided to contract the company with the advancement of that idea into a new software product. The contractor was allowed to work on two parallel versions, one for their own use to be marketed freely, and one for the American client who hoped that this special software could upgrade one of their products to make it more profitable.

After four years, the loosely controlled contractor-client relationship produced higher costs than expected. For each function that the customer wanted to have, the contractor charged extra because it was outside the scope, or so they said. After five years, the client decided on curbing the cost for that expensive project by assigning a British project manager to the project. He had the objective to negotiate a deal to cut costs. The contractor, however, had it in mind to be acquired by their client. They therefore put themselves up for sale.

The project manager prepared himself mentally for what to expect from the contractor's side by thinking along the lines of: 'I am an Englishman living and working in France. Both nations have gone to war with each other for one thousand years. And I know how difficult sometimes the co-operation between me and the French is. The Israelis are people that have quarrelled with the rest of the world for a much longer period - so I do see a tough time ahead ... '

And indeed, the negotiation offered a couple of challenges. Firstly, the seasoned project manager had a clear plan as to when to finish the negotiations: he had identified the milestones outlining the discussion topics. Secondly, he had a clear agenda for each meeting; after all, he was under pressure from management to finish the negotiations with a positive result as quickly as possible.

One of the milestones was passed after a meeting on a Friday afternoon. Happy to have closed an issue which had been dragging on for quite some time, the project manager spent the weekend with his family. Much to his dismay, though, the contractor came back to him the following week to reopen the negotiation on that same point. They requested better conditions. This was even more embarrassing in light of the fact that the project manager had reported to the project owner that the milestone had been reached.

Apparently, the Englishman had to plan for another meeting. The Israelis, however, had their own negotiation pace in mind. They gathered information about the schedule of the project manager and followed him to India. Indeed, the project manager was most irritated to bump into one of the contractor's managers at a hotel in Bangalore where he was staying to attend to other business. The contractor's manager insisted that he needed to continue with the talks - immediately! The project manager got more and more frustrated, particularly in light of the fact that the contractor now ignored the negotiation plan along with the meeting agendas initially set. Instead, he got bombarded with constantly changing ideas and new items for discussion.

When the contractor saw that a stalemate had been reached, they circumvented the project manager and brought in the higher ranks of the American client. Due to continuous networking, the Israelis had good connections with the American client.

Hearing about this move, the project manager got really annoyed as he felt he was being ignored. He responded with the following countermeasures:

1. He closely involved his internal customers, two members of the senior management. In parallel, he found out who it was in his organization that the contractor was networking with. He made appointments with these people for a phone conversation where he could explain the purpose and background of his project, focusing on the cost-saving target of the project. 2. In addition, he plotted with the project owner, his direct superior. At one of the meetings, the project manager threatened the manager of the contractor by telling him that his company was looking for an alternative and intended to stop the negotiations. The Englishman expected that the contractor would react to this threat by appealing to the project owner. The project owner, however, was already prepared for this move. He had agreed with the project manager beforehand that he would reply to the contractor: 'My project manager is in charge, and whatever he thinks is right will be done at the end of the day - unfortunately ... '

This statement restored the authority of the project manager and put all the pressure back on the contractor. Finally, a compromise was reached: the American client purchased the Israeli contractor, but at a substantially lower price than had been initially requested by the contractor. Part of the agreement was also the contractor's willingness not to charge for two years of work that had been done on extra features.

Questions

1. PESTEL analysis for the above case

2. What negotiation tactics were used by both parties? (see section 9.5 on the textbook International Project Management by Kathrin Kster)

3. Do you see any communication and negotiation patterns related to the national cultures of both negotiation parties? You can draw on additional literature to supplement any missing information in the case.

FURTHER READING

1. Gallois, Cynthia and Callan, Victor (1997) Communication and Culture: A Guide for Practice . Chichester: Wiley. (This book offers a comprehensive overview of the interrelations between culture, language and communication with a direct business application.)

2. Lewis, Richard D. (1999) When Cultures Collide: Managing Successfully Across Cultures . London: Nicholas Brealey. (This book offers easy to read pointers to verbal and non- verbal communication, structured by regions.)

3. Rad, Parviz F. and Levin, Ginger (2003) Achieving Project Management Success Using Virtual Teams . Boca Raton: J. Ross. (Provides the reader with very hands-on guidelines and insights on what to do when successfully setting up and running virtual teams.)