E-Mail SIMULATION EXERCISE: September 26, 2014, 8.45-11.35 pm

Venue: From your Dorm Room/Laptop

CONTRACT NEGOTIATIONS-REACHING OUT TO THE MIDDLE EAST

Instructions for Dr Shekhar- The Hospital Negotiator:

1. Each participant in this exercise has been provided with the following information:

a. Instructions sheet b. Basic information related to the situation given to both partiesc. Confidential briefs to the negotiator

2. The negotiation is between SSI an Indian Software Company and a hospital based in Kuwait for customized software for improving the efficiency of hospital operations.

3. SSI is represented by Dr.Shekhar and the Kuwait hospital is represented by a freelance negotiator Dr.Hashim. The briefs given to the two negotiators are different and confidential. The information available in the briefs is to be used judiciously in the course of the negotiations.

4. The Confidential Briefs defines the respective roles (whether Shekhar or Hashim) so that each participant in this exercise would know who s/he is negotiating with.

5. You may start the negotiations at the earliest after setting up contact with your counterpart as assigned in the exercise at the assigned time during the MN scheduled class.

6. Your Role Brief will be mailed to you at 8.40 am. Read the Brief and prepare for Negotiations using the Negotiations Analytical Framework

7. The Negotiations Pairings will also be mailed to you at 8.40 am.

8. Negotiate by Email with your assigned counterpart and try to reach agreement

9. No submissions required.

Copyright Dr. Jerome Joseph, Professor, IIM, Ahmedabad, India.

REACHING OUT TO THE MIDDLE EAST

BASIC SCENARIO

A modern hospital in Ahmedi, Kuwait sponsored by the Kuwaiti Government set up in 2001 and run by NRIs was headed by a medical professional whose dream was to make the hospital the most modern multispeciality hospital in relation to its competition in the region. There were six other hospitals run by Americans(1), Germans(1), Kuwait Oil Company (2) and other Kuwaiti organizations(2). Several initiatives were being taken by the management team - recruitment of top grade medical professionals from the best Indian medical institutions and hospitals, upgradation of technology, improvement of housekeeping, quality initiative on all fronts. A key ingredient in the overall toning up was the decision to computerize the information flow in the organization with a view to integrating all the departments with the front office in order to improve the quality of patient care systems.

The CMO had a brainstorming session with a Task Force consisting of the heads of departments in order to generate a framework for defining the information requirements of the organization and also to be able to structure the computerization project into various components. The CMO had heard about a software company which had been set up in India about which he had first heard during a get together organized by the Indian Ambassador to Kuwait. The Ambassador had been very helpful in providing information related to this company. And a couple of faxes and a series of telenegotiations and Emails later, a system study was commissioned and conducted by SOFTWARE SOLUTIONS OF INDIA based on which it was decided that the computerization work could be split into six modules. While SSI had recommended that the entire project should be commissioned right away in the interests of integration, the CMO was a little hesitant. This was because the CMO was not sure about the Board's view on computerization at this stage of the Hospital's development. He was also aware about the Board's concern regarding employee sensitivities to the computerization issue and so the Computerization Task Force felt that they could take the project in stages beginning with a "pilot project" by commissioning Module I only. Subsequently, SSI was also awarded the work for the development of Module I against close competition from SINGAPORE SOFTECH GROUP (SSG) based in Singapore for US $ 40000/-. SSG had already carried out similar projects in the region with the backing of a Japanese-American joint venture computer manufacturing company based in Taiwan and, therefore was better known. The Task Force had considered both proposals carefully and had finally recommended SSI mainly because of cost and time considerations.

SSI had been aware of the dominant presence of SSG in the software market in the Middle East as they scanned the Middle East environment. And yet , they knew they had it in them. All they needed was a break - and a foothold. SSI had established itself well for software development work in certain segments in India in the services sector. The Kuwaiti project was the first software development contract outside India for SSI and they were anxious to do a good job.

On the other hand SSG is a very large organization with an established reputation. SSG had earlier lost the contract to SSI on the system study and Module I development on the basis of price, SSG having high overhead costs. However, SSG has now indicated a desire to get the rest of the project (Modules II - VI) as well as the integration job from the Hospital at any cost if not for any other reason but to keep SSI away - whom they perceive as a major upcoming threat.

SSI's proposal for the complete project development (module I-VI and integration), offshore in India including implementation in Kuwait was for US$ 390,000/- plus travel and stay for their Consultants on actuals in Kuwait. They had kept their offer very competitive so as to keep the Hospital from looking at any other competitor and also because they very much wanted to establish their reputation in their first project assignment in an overseas market.

After the initial go ahead from the CMO, the project details were negotiated with the Systems Manager who happened to be an Egyptian national to whom the CMO had delegated the authority to negotiate the modalities of the deal. Once the deal was struck, there was certainly a sense of achievement and a heady feeling of excitement in SSI mainly on account of the prospect of gaining entry into a potential overseas market. There was also disappointment among SSI team members because the green signal was only for the development of Module I and not for the whole project. In spite of sustained efforts by SSI negotiators to get the full contract released to them, the hospital was not able to do so since the top management could not convince their board to go ahead on full implementation. They were also aware that the Board was hesitant even about even Module I because they felt priority should be given to improve the organizational core in terms of medical and surgical systems before embarking on what the Board felt was a peripheral issue like computerization. The Board was also sensitive to employee worries about possible workforce cutbacks, an issue on which were even prepared to call off the project even if this meant a loss of the US $ 40,000/- plus Hardware rental, travel and local hospitality costs incurred separately by the Hospital on Module I. In a neighbouring hospital, computerization had led to heartburn which ultimately led to a substantial increase in the share of wages in the cost of operations leading to increased cost of hospital services and decline in service utilization rates in spite of being equipped with state-of-art medical technology.

SSI went into the Module I job with a nagging feeling that their competence would be under constant "review" even as they went about their work on the first module leading to unnecessary pressure on their performance. The only glimmer of hope they had of clinching the whole deal was based on the understanding the SSI negotiator had reached with the Systems Manager of the Hospital on the SSI suggestion that they take a top down approach to the whole project, that is, work on integration and interconnection of the six modules should precede the development of individual modules. This suggestion had been agreed to in principle in a letter written by the Systems Manager in one of his faxes sent to the SSI negotiator.

As soon as the SSI team had completed 75% of Module 1 after carrying out the initial integration framework, the SSI Chief Negotiator sent a fax to the Systems Manager of the Hospital informing him about the progress of the project on both counts. He also suggested that they could now consider release of the full balance amount for the Development of the remaining Modules of US $ 275,000 as per their earlier Systems Study. The Hospital could also consider releasing the integration instalment of US $ 75,000 before they start work on Module II since they had already incurred heavy expenditure over and above the US $ 40,000 already paid. The SSI Chief Negotiator suggested that they should hold a meeting to commence negotiations.

There was no reply from the CMO for a week. The SSI Chief Negotiator sent a call to the CMO only to be told by reception that the Systems Manager had just left the company and joined the Kuwait Oil Company's Data Processing Cell as Chief Systems Manager. The CMO was not available. He was visiting the Harvard Medical School on a Head Hunting Mission and also to negotiate several strategic alliances with leading Medical Schools in the USA and UK. He would be back in three days time. The SSI fax message had been relayed to the CMO and he will be responding when he returns. No one had been appointed in the System Manager's place as yet.

The news spread quickly within SSI and everyone seemed to have been affected by the mood of uncertainty on the whole project.

Meanwhile, the CMO had been informed both about the departure of the Egyptian Systems Manager as well as about the message from SSI. He decided to look around the Boston area for a possible replacement for the vacant position because he knew he needed a competent computer professional to at least deal with the project as well as to try and build a good systems team in the hospital. It was while he was checking around on this matter that he was introduced to Dr.Hashim, an established and well known computer professional and scholar, who had come on an international assignment to Boston from India. He was now a freelance consultant on various globe trotting missions. The CMO set up a meeting with Dr. Hashim during which he spoke about his project and he made an offer to Dr. Hashim to negotiate the deal with SSI and also to help in seeing the deal through. Dr. Hashim was not only aware of SSI but he also knew and had high regard for the SSG top brass for whom he had carried out a few projects. After the meeting, on further enquiries, the CMO soon realized that the meeting with Dr. Hashim was a heaven sent encounter because Dr.Hashim seemed to be a highly respected professional with a reputation as a tough negotiator in the Asian-American software circuit. He also heard from some friends in Boston that Dr. Hashim was a contender for the Presidency of the Asian Computer Society for which elections were to be held in two month's time. Two days later, the CMO briefed Dr. Hashim about the assignment and made an appropriate offer which included a bonus on savings. Dr. Hashim readily agreed to negotiate the deal with SSI and help in seeing it through.

SSI received an E-mail from the CMO that henceforth Dr. Hashim would be handling the computerization deal for The Hospital. Dr. Hashim had several rounds of discussions with the CMO and other functionaries. After satisfying himself that he had a handle on the nuances of the computerization negotiations, he then sent an E-mail to SSI inviting their representative for negotiations at the earliest.

SSI sent an E-mail back saying that Dr.Shekhar would be their representative in this negotiation.

Dr. Hashim had several rounds of discussions with the CMO and other functionaries. After satisfying himself that he had a handle on the nuances of the computerization negotiations, he then sent an E-mail to SSI inviting their representative for negotiations.

THE SSI BRIEF FOR DR. SHEKAR

1. The breakup of the price quoted for the whole job is as follows :

Module I.............$ 40000.00Module II............$ 45000.00Module III...........$ 50000.00Module IV..........$ 55000.00Module V...........$ 60000.00Module VI..........$ 65000.00Integration.........$ 75000.00

2. The Delivery deadline as agreed was as follows :

Module I.............Aug-Sept 2014Module II............Oct-Nov 2014Module III......….Dec 2014-Jan 2015Module IV...........Feb-Mar 2015Module V............Apr-May 2015Module VI...........June-July 2015Integration...........August-September 2015 (although integration had already commenced as per SSI's understanding with the Systems Manager)

3. SSI has already spent US $ 50000 for Module I which is still under development (and it is now the third week of September 2014 : in SSI's view there is a likely time overrun because of tardiness in information flow on the part of the Hospital due to the inefficiencies of the earlier manual systems) as well as about US $55000 towards work on integration which had already commenced given SSI's view on the issue( that integration should evolve with the development of modules).

4. SSI is willing to consider accelerated delivery if the full order is released.

5. Legally speaking, SSI has a strong case because of the written assurance from the Systems Manager although this is not in the agreement document.

6. SSI Management feels the whole issue has reached the current impasse because of the desperate attempts by SSG to scuttle the project.

7. SSI has quoted prices which would ultimately give only a 15% margin.

8. The SSI CEO is extremely anxious about the whole issue and he is worried about practically everything and he is in a mood to concede anything to retain the project.