6.3. Prerequisites and formation of relationship

6.3.1. Complementary needs and resources between parties

Companies try to find partners who are lacking and have the need for the expertise that the supplier can provide. This means that the software company must have some core competence that complements the customer’s expertise. If the customer has already been successful in building new businesses with software suppliers, it is more likely that the customer will benefit from new relationships. However, to get into this kind of a positive situation, the software supplier must know the needs of the partner, and often the needs of the partner’s customer’s, too.

One of the interviewed VPs noted that the customer screening process was completed especially carefully when the customer project would require changes in the supplier’s own plans and road maps. An example would be that the company needed to customize some features or screen layouts of their software, to make the product better suited for the customer. The customer may also demand some special stress tests to be done for the software, or tests on the compatibility of the software with some proprietary equipment. The VP further explained the situation as follows:

“In our company we have a custom to produce a synopsis about the extraordinary business cases. It includes what is coming, how big and what are the risks. Based on this we make the final decision, do we want the case or not [G]. “

These kinds of evaluations are done especially when the customer demands resources that are scarce. If the case is not that special in terms of resources, the company may let their salesmen prepare the deals. One element in this type of screening is also what kind of implications the new partnership may have for the IPR or other kinds of proprietary solutions owned by the software company. This can be a strategy-level issue for the supplier company, because it may open or close future or existing doors with other possible partners and customers.

One interesting finding comparing the Finnish and US business cultures is that in Finland software companies often depend more on some technology, where as American companies are market driven. This can be due to the fact most Finnish software start-ups have been so far founded by technology-minded people, engineers and software development professionals. The situation in the USA may be the opposite, software companies are founded by business-minded entrepreneurs, so that engineers are used as technical resources by the business people. In some cases US companies advertise their future products only with specifications at hand, to find out if the market is interested in the product. Finnish companies would first try to finalize the product with many initial features, even if the market did not yet exist.

6.3.2. Personal awareness of the other party’s goals, needs and resources

Still, the suppliers have to be in the right place at the right time, to be able to create the relationship. In particular, they should try to perceive all the time the markets, especially those companies that they aim at getting as their new customers. The interviewees pointed out that it is particularly important to be well timed with contacts with the prospective customers. If the supplier comes too early with a solution, the customer may not be interested. After some months, the need may already have been solved using some other supplier’s offering. It is therefore of utmost importance to thoroughly know the markets and companies in the supplier’s field of business. As one of the managers explained, the selection of customers is easier if the supplier is a start up and in earnest in the market. Although new customer contacts may come more by accident than by active and systematic selling efforts, it is advantageous, if the supplier could perceive who could be the real future customers. Many times there is a lack of knowledge about what the customer already has and does not have. The supplier may, for example, try to offer something that the customer already possesses.

One of the companies interviewed producing MOTS and tailored software told that past relationships helped them to approach new prospective customers. They utilized these relationships systematically and were, in their own opinion, able to take from the beginning very demanding projects that supported their vision for the future.

6.3.3. Common interest in building a relationship

When selecting channel partners, proactivity appears to be one of the most important elements, even over the exhaustiveness of the channel in terms of the reseller’s geographical coverage or number of shops. This valuation depends, however, on the type of the software to be sold, for example the need of associated services:

“We value skilled, service minded, consultative approach. Our partner must be able to adapt and sell our solutions to the customer, not just wait for the next order. The channel must have its own profile. We are also interested in getting more business in auxiliary services e.g. installation, support, and training [G].”

Customer contacts are interesting, if they bring along projects to develop new products. In particular, companies are interested in joint development projects with customers representing large markets and customer bases. One manager explicated their situation as follows:

”We expect from our customers a strong strategic partnership. We have at the moment certain know-how, we have the technological know-how, and we have to some extent marketing skills, too. Combining this knowledge base into a strategic partnership is the core that we hope will help us to achieve a larger market position. That is what we are after [D].”

6.3.4. Formation stage of partnership development

Lappi (Lappi 2001) used in her study[1] a part of the empirical data (software companies established their operations in the USA) also used in this study, but she concentrated on the beginning of the relationship and on the formation of dyadic relationships in Finnish software companies establishing their operations in the US markets. She used the following three concepts to identify the elements required for starting formation and matching processes: corresponding needs and resources, actor related factors and future expectations, Table 8.

The concept corresponding needs and resources were further identified from the empirical data with the attributes: desired resources and capabilities, customer portfolio and position in the market.

The desired resources and capabilities attributes were the most central element for starting a relationship. The resource need is characterized by the complementation of company’s own resource base with the necessary resources of the partner. For the position in the markets she further emphasized the firms’ need for marketing skills that have not reached the same level as the technological skills among Finnish companies.

This is further brought forth as these companies are aiming towards international US markets. According to Lappi most of the firms questioned choose their partners in order to build a customer portfolio that gave them the possibility of targeting the 500 biggest corporations in the USA. Thus the partners were the stepping-stones to these relationships as alone these new and small Finnish firms would not be able to accomplish this ambition. As one of the managers stated the engineers’ perspective: “The core must be in the R&D, the engineering side must be in a good condition”.

The actor related factors are organizational factors, e.g. size, reputation. Lappi emphasizes the size as an important selection criterion. She explained this with the software companies’ belief in more financial and human resources that these bigger companies are able to afford for the cooperation. Reputation was seen an important factor, too. This may be due to the small firms situation as they were entering new and unfamiliar markets where they wanted to play safe. The personal factors are contacts and interactions between the individuals. These were indicated by previous contacts and in some cases they have been working in the same company as colleagues, which further solidified the relationship and trust. But still joint business goals and ideas were the weighty reasons to start a relationship, but after that personal factors enter into relationships building, developing and maintaining process.

Future expectations are identified by mutual goals, benefits, long-term orientation and commitment. The most important reason in a business context is unquestionably the financial benefits in a long-term period (Lappi 2001). This is achieved most certainly with common and explicitly expressed objectives for the cooperation. Lappi further indicated the companies’ orientation to long-term relationship and commitment building from the beginning.