Size Matters
What does it take to do business with the government? If you are delivering a product or service that is a popular commodity, it might not take a lot of preparation. On the other hand, if you want to provide them with enterprise software and services, you must have critical mass. You had better be ready for some stiff competition, because there can be some large sales involved. Got 40,000 users? At $1,500 per seat, that’s a $60 million account. With that kind of revenue at stake, there will be heated competition for these customers.
1) Every major software company either has a separate corporation or at least an office in D.C. Why? Competitors will make sure that you have enough contrived issues pending with the federal customer to require that they be addressed (i.e. litigation). Federal problems escalate to D.C. You had better be ready, preferably partnered with a Prime Contractor prepared for such tactics.
Intellectual Property
2) Just like the rest of us, intellectual property attorneys want to increase their revenue. This means they tend to cater to software company interests– they can pay $20,000 per week, just for discovery. It is simple economics– they have the deeper pocket. They have already won, even before you have had time to wonder if you have an issue with them. If at all possible, argue from their point of view.
3) The only thing a software company needs to do, in order to get a federal check for a few million dollars, is to have a software audit (entirely legal) of the federal customer. Federal agencies have their own federal standards to meet, and their own Inspectors General. But a software audit has an entirely different agenda– for that, the only issue is sales revenue (see i, j).
Elephant Fight
The solution–
a) There is an African proverb that says: “When two elephants fight, the grass suffers.” So, pick your elephant wisely, and avoid petty issues. You must achieve critical mass— you can’t do it alone. There is a huge difference between a small company of one person, depending on his software vendor for support, and a small company of 300. If the software company changes their mind, the small company of one individual is out of luck. No one ever got rich by being the owner of a corp that has no revenue– Who does he call for backup?
b) Expect competition. Any large customer (not just the government) is an attractive prospect, and someone else wants it. Mark Cuban gives some appropriate advice: “Work like there is someone working twenty-four hours a day to take it all away from you.”
c) Once you have critical mass, you are going to need to have a legal team in place, or you will never see any revenue from software sales. There are simply too many other people in your market wanting those commission dollars to expect them all to sit on the sidelines and politely let you get paid. If such an aggressive competitor were removed from the picture tonight, someone would be there by tomorrow morning to take their place. It is the nature of large sales.
Cash
d) Keep an open mind on sources of venture capital. Cash is close to the top of your list of priorities– without working capital, you have no company. Perhaps oxygen is a higher priority, but cash is not far behind.
e) Choose a Marketing Strategy that will work. The market is flooded with 8(a) vendors, and it is a temporary status. It is much more important that you target a market niche where you would have a specific strategic advantage. Like Blue Ocean Strategy, if you can find why you are uniquely qualified to do a particular piece of work, you have a much better chance of success. You are a unique individual, with a unique contribution to make. Celebrate your uniqueness.
f) For market tactics, you have a unique customer– in that there is only one U.S. government. In marketing your services, better to be a
i) farmer (long-term, capital-intensive, transparent), instead of a
ii) hunter (deceptive, surprise attack, shoots at things that move) or a
iii) street-fighter (quick, totally unexpected, uses illegal weapons).
In the federal market, change is slow and decision cycles are long and complex. It is the extreme opposite of impulse sales at the grocery store checkout line. What you can keep as a business secret is limited. In marketing to the public customer, your specific qualifications are most likely to get published. Take a long term approach.
Unjust Criticism
g) The only thing that is important about your services contract is how it ends. Expect to defend your work. To borrow a phrase from Stephen Covey, “Begin with the end in mind.” To at least one of your competitors, any account you think is worth having, is worth taking away from you.
i) Be prepared for unjust criticism of your work, even if you already have had your contract adjudicated. Capricious, prejudiced, and disparaging criticism is not the norm, but it only takes getting burned once to wish you had taken precautions. It has crossed the mind of at least one of your competitors– if they are on straight commission, and it is the end of a quarter, beware! You didn’t do tasks “x, y, and z” because you were specifically instructed that they were out-of-scope for the project. A desperate competitor doesn’t care; their criticism is part of their process of prospecting for business. Hopefully, they do not know your scope-of-work. At the extreme, they might even make an emotional appeal to your employer, customer, or business partner, arguing that you are entirely incompetent, a complete idiot, and should be drawn-and-quartered for not doing “x, y, and z.” All they want is to take your business.
ii) Take the high road in responding. Take it as a compliment. Thank them for their “praise of your stellar work.” They wouldn’t be critical if you did a bad job– they want your piece of work. The opposite of love is not hate– the opposite of love is indifference. Build mutual respect, and the understanding that there is room for both of you to succeed in this market. Perhaps the best example of how to respond is Payton Manning’s 2008 New World MasterCard Commercial.
Discrimination
iii) If you are left-handed and from New Jersey, your competitor may try to marginalize you, saying you should only do business with similar people. Don’t let them stereotype you, or dictate your market. Be cognizant of the personal brand that you project on social media and other associations that you have. Don’t even wear a class ring. No bumper stickers. Make them respect you as a permanent part of the marketplace.
iv) You are only competitors, not enemies. Remember, “You don’t play against opponents, you play against the game of basketball.” — Coach Bob Knight. Your biggest competitor is yourself– there is no requirement to have a dualistic, two-sided argument on every issue. There can be genuine solutions.
v) Suppose a competitor creates the illusion of impropriety, and the deceit damages a competitive employee’s reputation. Where is the accountability? Is there a plan in place to confront social engineering, contrived issues and malicious mischief? Is there a mitigation plan in place for those threats that are not caught?
Deception
h) It is conceivable that competitors at this level might try to deceive each other for short-term gain. Deception is a common military-grade tactic, and all government vendors are required to have a business code of ethics, which usually prohibits it. Most agencies would strongly discourage vendors from deceiving each other; but expect it. Look for legitimate tools that can pre-empt or replace the need for deception, like:
i) Weekly Reporting. A one-page, PMI-styled summary of assigned tasks, agreements and immediate plans keeps the customer informed.
ii) IPR— the In-Process Review. Keeping your customer informed is paramount. You might want to ask for one, in addition to having some scheduled. Your customer doesn’t like surprises.
After Action Report
iii) AAR— the After Action Report. Use this tool to document that Statements of Work, Task Orders, and any other deliverables were in fact, delivered. You could also use it to explain that you didn’t do tasks “x, y, and z,” because you were specifically instructed that they were out-of-scope.
iv) Partnering with your competitor, or “competing privately, ahead of time,” is a consideration, where applicable. If software companies want their sales execs to “play within the rules” and also pay straight commission sales incentives, they will often get unintended results. To the sales executive who is paid on straight commission, “getting fired” is a non-event– he gets paid on contract. Two heads are almost always better than one.
v) There may be times where “competing privately, ahead of time,” is collusion, and you are only going to find your solution in a legal setting. This is another cost barrier for smaller competitors. (The simple solution is to have a Consortium which includes those federal officials most likely to call a foul.)
Litigation
vi) Litigation. This presents a cost barrier for those lacking critical mass. It is where contract and intellectual property attorneys make their living. At least the battle is among competitors, instead of among mortal enemies. You will have many areas that you agree on, start with these.
vii) Preparation. When a sales quarter is closing, and sales quotas have not been met, there may be the rare instance that someone tries to create an emergency, in order to get someone to buy on impulse. This can be a very difficult situation to resist. While this is not a “farmer” sales tactic, they are still not your enemy. They came to you out of respect– treat them like the neighbor that they are and help them find a legitimate alternative, even if it is only a cup of coffee and ten minutes of your time.
viii) Use outside software and services account managers as assets– they can be a huge help. Establish contractual agreements with each, pre-empting deceptive practices with more practical, transparent alternatives. They can take the same Ethics Training others are required to take. Hold them accountable– you might have them attend specific meetings.
i) A simple Google search of “software over-billing” will demonstrate the expected fact that the government has endured a lot of software audits. At the D.C. level, there have been some $500 million awards to the government for software over-billing. Having worked with a couple hundred sales execs, and having been in the role myself, this means charge-backs. The only thing worse than losing a sale, is losing a sale that you had already been paid for. To put it mildly, it can ruin your day.
j) Licensing sales executives, and making the sale only happen in D.C. demonstrates a government desire to control the over-billing. Here is why it won’t work– The software sales exec not in D.C., the architect of the sale, is simply going to make a private deal with that licensed sales executive, or the partner group he works with, or his management, and proceed exactly as he had before. Nothing has changed.
Ethics
k) How does the federal manager keep the local sales exec from “firing” or poaching his federal employees or contractors because they are not “certified” by that sales exec, to use the software? The Ethics Policy is a non-issue for the sales executive who works on straight commission. Here are some suggestions:
1) Encourage the software industry to see that straight commission sales incentives do not achieve their corporate goals. If they instead pay base salaries to their sales execs, and involve seasoned sales managers for bonuses and commissions, they will get the advantage of their sales team working in concert, instead of simply stealing business from each other. It will also reduce their cost of turnover, and tap into their Intrinsic Motivation to do the job. The great majority of sales execs would prefer having a base salary. Of course, it is up to the vendor, but this could be good for all concerned.
2) Instead of getting the sales exec fired (totally ineffective for the straight-commission sales exec) for violating his company’s Ethics Policy, fine the company. The smart company will let the sales exec know that any fines will be charged back to him or her.
3) If the sales exec is going to “control” the employee, he should have to hire him, or partner with him, not just keep moving him around indiscriminately, without being accountable for them.
Contract
4) By contract. If you are a large customer, and you negotiate a contract with your software vendor, protect your employees and contractors that might use the software. Are you buying so you can use the software, or are you buying so the vendor can control your agency? Have a Most-Favored-Customer Clause, not just on price, but on certification to use the software, and access to training, also. Specify a financial penalty that discourages their firing and poaching your people. Federal contractors use anti-poaching clauses all the time– do the same to protect your interest in federal employees and contractors.
5) Take a class on contract negotiation. Your vendor already has, and could teach the class. Get some negotiating skills! A great place to start is Harvard Law Professor, Roger Fisher‘s Getting to YES. Study up!
An Illusion
6) Take note of the double standards. If there is even the appearance of impropriety that your employee or contractor is not doing a task that is actually out-of-scope, they demand that the person be fired– but if they themselves create such an illusion– well, you have to keep that a secret, because it might cast them in a bad light.
7) Bullying Prevention. It doesn’t happen just in schools, and it is just as preventable in your federal marketplace.
l) That “controlled” employee had better befriend the sales exec, because if he does not proactively engage him, the sales exec is likely to “get him fired” every six months, and shift him around, depending on the sales exec’s market demand (more in a future rant).
There. I said it. End of rant.
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