Government Projects : Tough To Crack, Rich in Rewards

Radhika Nallayam July 1, 2009

While the government sector remains one of the largest buyers of IT products and services, only those who know the art of dealing with them could win the deal.

Anantharam was not at fault. But he lost the deal. One of his competitors mistakenly forgot to add two zeros (quoted Rs 5000 instead of Rs 500000!) in the quotation and the customer naturally opted for the competitor’s solution. This may sound a little dramatic. But if the customer was from the government sector, most may not get surprised.

While the government sector remains one of the largest buyers of IT products and services, only those who know the ‘art’ of dealing with the government would win hands down. The intention is not to blame the bureaucracy, red tape, and their impact, but to find out the various challenges involved in government deals and how to tackle them. All said and done, government has been an intricate customer and still remains intricate, due to various reasons. But if one has the passion, patience, and determination, none can be as rewarding as the government.

VV Anantharam, Director of Webcome Technologies, the very person who lost a government deal because of somebody else’s mistake, still focuses on the government sector. Webcome derives almost 60 percent of its revenue from government sector customers. “A customer in the government sector is easy to retain and the deal gives us very high margins. And most importantly, I know I would be able to realize my money from the customer even though it might take more time. You need to take some amount of risk with a private sector customer as he may default,” he says.

Government sector also remains as a relief for many partners at a time when all other sectors are cutting down their IT purchase. This precisely means that the government sector offers an ocean of opportunities for the channel partners in the country. DK Bajaj, Director of Delhi-based DM Systems says, “Companies in every other sector have squeezed their IT budgets. Government is the only sector that continues to buy IT. Though we have been catering to the government sector right from the start, we decided to increase our focus of late.”

However, there are certain dos and don’ts while approaching and selling solutions to a government sector customer. And, once the account is cracked, partners should be ready for long decision-making procedures, complex documentations, and delayed payments. But if one is ready to be more cautious and well planned, doing business with the government customers can be a delight.

Know the Complexity
The first and foremost thing is to identify opportunities in the various departments of government sector. It is a very large and potential vertical that includes PSUs, defence, R&D establishments, space research, and other industries like steel, coal, oil, minerals, etc. Partners need to identify tender enquiries and get prepared to participate in various bids.

Anand Rao, Managing Director of Par Data Systems, explains the procedures, “There are no significant hurdles associated while selling to the government, but the gestation time for the businesses to start coming and building relationships is longer. Results are not instant and it’s a procedure-driven business. The enquiries in the government sector will be either open tender, limited tender or global tender. Once you identify the opportunity, you need to participate in technical and commercial bids. One has to give the best competitive offer (lowest bidder or L1) for technically getting accepted for final negotiations.”

This means a partner should not be quoting blindly without having any idea about the budget availability for that project. And if you quote a price that is higher than the available budget, chances are you may not even get listed as a participant for the bid, or the customer would take a long time in going back to the authorities to get the new budget sanctioned, resulting in unnecessary delays. Subashini Prabhakar, Chief Technology Manager, Dax Networks, says, “We suggest our partners to first see the budget available for a particular government deal and prepare the quotation accordingly. We have prepared a set of questions for our partners, which will help them see the larger picture of the deal and analyze actual requirements.”

Arvind Chandrasekar, General Manager – Business Development, AMD India, says it’s also important to identify ‘sanctioned’ projects. “There are sanctioned and unsanctioned projects in the government sector. The partners need to find out whether the deal that they are planning to bid for has already been sanctioned or not. If you choose to go with an unsanctioned project, you can’t expect the project to be successful and rewarding.” He also adds that the government is far more transparent these days, and it should not be difficult to identify sanctioned deals. “It’s all about your dedication and the due-diligence you perform,” he reminds.

In some cases, the vendors lend a hand to their partners by providing special pricing for government customers and helping them identify the needs of the customer and ensuring they present the right specification to the customer. Neeraj Lijhara, National Channel Manager, India, ADC Krone, explains, “The partner must learn the end objective of the solution. Normally government procures to solve multiple region requirements, connectivity, interstate, interoffice, etc. This information is very crucial for successful implementation of the solution. Finding out the entire requirement from the end user and agencies will help prepare a final proposal of solution.” AL Srinath, CEO of Hyderabad-based Shell Networks, says, “We need to have the patience to go through these procedures. Government deals won’t happen overnight and you can’t put the client in pressure under any circumstances. You need to have a lot of flexibility.”

Due to long and complicated procedures, a partner needs to have a designated team to provide more focus and dedication. Besides, they also need to have the ready money to submit security deposits and performance bank guarantee (both are generally 10 percent of the order value). “We have at least about Rs 4 crore with our government sector customers as various deposits, at any given time in a year. Our capital definitely gets blocked due to this, but that’s how government deals work,” says Ananatharam.