As your enterprise may have already discovered, Canadian businesses can be extremely demanding (and perhaps exacerbating) buyers of information technology (IT) goods and services. In the course of representing many foreign IT vendors in Canada, I have explained those aggressive customer expectations in terms of two unique, and very closely related, circumstances.
First, IT is a pervasive part of Canada’s economic infrastructure and provides a vital competitive advantage for its businesses. The reason for this lies in Canada’s spectacular growth since 1945. Even though Canada’s population is only 35 million, it has the 15th largest economy in the world and its people are the third wealthiest (based on per capita GDP) among the G20 nations.
For three generations, imported technology – and perhaps most notably information technology – has fuelled that economic growth. Canada’s people are now one of the highest per capita users of advanced communications and information technologies in the world.
Learning from the best
Second, Canada’s voracious appetite for IT goods and services has been satisfied partly by the most dominant and aggressive exporter of IT in the world – the United States – with which it happens to share a 9,000 kilometre border. Through decades of dealing with US vendors, Canadian IT buyers have developed very exacting and acute expectations about “correct” IT procurement processes, contracts, risk management, local vendor presence, and commercial loyalties. Such expectations can become extremely daunting challenges for even the world’s most determined IT vendors.
Getting it right
In the interest of facilitating and improving IT commerce between India and Canada, I have a few suggestions for dealing with Canadian IT buyers. This should minimize any transactional challenges that may arise, as well as expedite your IT sales cycle in Canada (music to the ears of your sales team):
1. The contract: Canada’s well defined corporate governance, regulatory compliance and professional (legal, procurement, accounting, IT management) requirements demand well written, comprehensive and “evidentiary” IT contracts. As such, India’s IT vendors are well advised to follow the buyer’s procurement and contract formulation process to drive the sales transaction to closure. This can be an expensive and time-consuming process – but it is necessary and can have valuable long-term client loyalty pay-offs.
2. Commercial role of lawyers: IT lawyers (in-house or external) in Canada provide sophisticated commercial and management advice that goes to the very heart of closing the IT transaction. An IT buyer’s reliance upon such highly experienced and specialized legal advisers at the negotiation table can create an imbalance between the parties, and can be an obvious disadvantage in the negotiations and resulting contract.
3. Risk management: Buyers often insist that the IT vendor assumes all of the financial risks (and liabilities) for the vendor’s misconduct or failure to perform the governing contract. In my experience, the best way to address this is to ensure the IT transaction includes as many responsive and practical performance remedies as possible (and there are many of those alternatives that Canadian IT buyers are receptive to). The more those practical remedies are designed to respond to, mitigate, and even avoid, precipitating financial liabilities, the more receptive Canadian IT buyers will be to reasonable negotiations related to financial liability limitations and exclusions.
4. Canadian sales are expensive: There are two business adages in Canada that directly apply to foreign IT vendors. The first is, “You have to spend money to make money.” Whether related to marketing and brand awareness, travel across this vast country to meet with existing and prospective customers, drawn-out competitive tendering processes (many of which will not be won), the cost of management and professional services – the expense of selling IT goods and services in Canada is exorbitant.
The second business adage is, “You get what you pay for,” and foreign IT vendors are also well advised to ensure that their investments are as adequate as they are strategic. Many excellent foreign IT vendors have floundered (if not failed) in Canada because they achieved the exact level of poor success that they paid for. It can be very expensive to get commercial traction in Canada, but the robust investment histories of successful companies like Hewlett Packard, IBM, Microsoft, SAS Institute, SAP and Oracle in Canada illustrate that adequate Canadian investment has its rewards.
Duncan Card is a senior partner of Bennett Jones LLP. He is widely regarded as one of Canada’s leading IT lawyers and is ranked in the Leading 500 Lawyers in Canada as “Most Frequently Recommended” for technology transactions. Card represents many international IT vendors in Canada. His best-selling book, “Information Technology Transactions: Business, Management and Legal Strategies” (Carswell publishers) is sought after by both buyers and vendors of IT.