Sweeteners common in IT sales

With large clients in the US and Europe setting one technology services firm off against another to extract discounts while negotiating multi-million-dollar outsourcing contracts, a salesman’s job can be nerve-wracking, say industry executives, some of whom rose through the ranks doing sales and managing customer accounts.

And pressure on salespeople from top managers to achieve targets does not help, said the three executives, who held senior-to-top positions in Tata Consultancy Services Ltd, or TCS, Infosys Technologies Ltd and HCL Technologies Ltd in earlier jobs.

Transgressions, minor or major, ethical or legal, may not be rare, especially among smaller companies with more ambition than years in the business, said the executives, all of whom spoke on condition of anonymity. Still, the larger companies in the business, including their former employers, had processes in place to minimize the chances of wrongdoing.

The former executive from Bangalore-based Infosys, India’s second largest tech vendor, said some companies did pay “extra attention to customers".

“Some customers ask for first class travel when they come to inspect (Indian facilities) or ask to be taken around. At some companies, account managers are empowered to sign off on such expenses if the deal is big enough," said this person, who worked at Infosys until about eight years ago. “At Infosys, it was a centralized process."

At TCS, Infosys’ bigger rival, the guidelines for sales personnel were as conservative, a former senior sales executive with the firm said. “Even the Wipro example is shocking because the company has practices and top managers who are 100% above board," this executive, who has worked closely with Azim Premji-led Wipro, said. “The World Bank should hold a mirror to itself and ask how this happened to its people."

In New Delhi, home to the fifth-ranked tech services vendor, HCL Technologies Ltd, a former top executive said there might have been instances of salespeople being reprimanded, but overall “big Indian IT companies have sales practices fairly similar to what an IBM or Accenture would".

IBM is short for International Business Machines Corp., which runs the world’s largest tech services business by sales, and Accenture Ltd is its closest rival.

Still, the aggression with which the companies, especially those that rank lower among the top 10 by sales, pursue deals can be high. Instances of salespeople offering sweeteners such as offers to do additional work around the core project gratis or share significant upside benefits in fixed-price contracts are common, these executives and analysts, interviewed in the past, said.

“In a few instances, HCL and Tech Mahindra Ltd have said—if you give us so much work, we will share equity with you," the former HCL executive said.

In 2004, for instance, SBC Services Inc. was offered shares—9.9 million, according to a Tech Mahindra initial public offer filing in 2006—in a joint venture between BT Group Plc. and auto maker Mahindra and Mahindra Ltd as part of a services contract.

SBC and AT&T Corp. merged in 2005 to form what is today AT&T Inc. The services agreement is valid until December 2009, according to the same filing, but it was not immediately clear if AT&T still owns the shares.

Such sales drives have seen companies getting involved in what analysts call “revenue purchase" deals. Tech Mahindra, in the quarter to March 2008, paid $100 million, or Rs440 crore then, to BT as a so-called “exclusivity payment", winning, two months later, a $700 million outsourcing contract. The payment, the company’s vice-chairman Vineet Nayyar said that March, was part of “giving some savings (from the contact) upfront to the client".

josey.j@livemint.com

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