If your organization has been smart in the e-business race, it has concentrated internal energies on core competencies and has partnered with other companies to extend its reach, utilizing these companies to develop technologies important to its success. Partnering can bring new products or services to market more quickly and at a lesser cost than "doing it yourself." Partnering is a great e-business strategy, even if some of the companies you partner with are dot-coms.
Of the 30,000 or so dot-coms that currently exist, in-dustry analysts are predicting 75 percent of them will become casualties. Valuations are coming back to earth after their zenith in early 2000. After the Nasdaq decline that began in April 2000, the market no longer values "just another good idea" without a distinct path to profitability. Additional capital funding is hard to come by, and late-stage companies are in a wait-and-see mode regarding their IPOs. Times are tough for dot-coms.
How does your organization survive the potential demise of a dot-com partner? There are some things you can do to manage the risk associated with partnering with a dot-com. Obviously, you need to think their offering, talent and involvement are critical to achieving your strategies. Given that fact, first and foremost you need to assess the financial viability of the company you intend to partner with. Ask them for copies of their financial statements and projections. Do they have a business model that will take them to profitability within 18 to 24 months? Are they delivering on their promises and managing to that business model on an ongoing basis? Are their revenues sustainable? What is their cash burn rate, and do they have viable funding sources to fuel that rate?
It may sound like too much trouble to do this analysis on a potential or current partner. However, if you don't do it, your potential partner could be in a downward spiral without you even knowing it. They certainly are not going to tell you if they are on their last legs. They think the contract with your company is essential to their survival. That may be true, but the last thing you need is to sign a contract and pay a hefty up- front licensing fee with a company that has no way to execute on that agreement. If the company is suspect, you should evaluate other companies/vendors with products that could potentially fulfill your needs. Functionality should not be the sole factor for determining with whom you do business. A company with a product that has terrific functionality but no way to stay in business is not a good partner. How many times have we seen that the best product doesn't necessarily win? A company can overcome incomplete or imperfect functionality with a good business model and ability to execute. Consider the financial viability of any potential dot-com with whom you desire to do business. Stayin' alive is indeed the name of the game. You would hate to wind up with a bankruptcy trustee as your partner!
Any business contract that covers technology should be written so that your company gets access to your dot-com partner's source code if the dot-com should fail or declare bankruptcy. Even a change in ownership could indicate a change in direction or focus that would not necessarily be in your organization's best interests. If you and the partner jointly develop a product, your contracts should address intellectual property rights on what gets developed. You can and should protect your rights. A little thought up front (along with some legal fees, of course!) can prove invaluable in avoiding disaster if one day your dot- com calls to tell you (or worse, you read it in the press!) that they are unable to continue operations.
What should you do if you already have a relationship with a partner that doesn't provide these protections? Consider renegotiating the contract to address them.
Industry analysts predict staggering volumes of e-commerce as much as $380 billion in business-to- consumer transactions by 2003 and as much as $2.7 trillion in business-to- business transactions by 2004. Dot-coms with truly compelling e-business value propositions and business models that take them to profitability will indeed survive. It's still good business to partner with dot-coms, but it's also good business to protect your interests when you partner with them. Dot-coms have had to start worrying about stayin' alive; your organization should do the same.
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