SITA Company

Executive Summary

The current report has been authorized by Stephen Baird, an in-house lawyer at SITA that is currently reviewing a possibility of cooperation with ABC Systems. The matter is that the ABC, a software development company, has approached SITA with an offer to become a sales agent or distributor of a service X, which is new software designed for commercial rocket launchers and simulation experts. Therefore, SITA needs recommendations on how to tackle this opportunity and how should it proceed in case it decides to accept the offer. Hence, the key objective of the report is to answer these two questions by providing some key recommendations with would account for peculiarities of the case. The main limitation consists in the restricted amount of available information, but it has not impacted the ultimate findings significantly. Having analyzed the available information, which is primarily presented in videos by Stephen Baird, and SITA’s official website, the report hereby recommends SITA to take the offered opportunity and become a sole distributor of service X by signing a 5-year contract with ABC Systems. The potential deal promises to be lucrative and profitable for both of the companies as the product is exquisite and has no analogues at the market as of today. However, the companies should close the deal as soon as possible since the software development industry is developing at an extremely rapid pace and rivaling products may appear at any time, which would prevent the two companies from gaining a significant advantage and a big market share in the airspace industry.

Introduction

The telecommunications, airspace, airway, and software industries are rapidly developing in the world and all companies who operate within these sectors have to respond swiftly to the changes of the market and keep abreast of the rival in terms of development and research. SITA is among the leading international companies that specialize in the air transport communications and information technology. In addition to its telecommunications services which once constituted the primary focus of SITA, it started developing a new software business direction about 10 years ago which now generates $800 million annually and is now a priority direction for development in the company. Recently, SITA has been approached by a relatively small company called ABC Systems that has developed an innovative IT service which needs SITA’s sales force, infrastructure capabilities, and connections for marketing and sale of this service at the international market. After testing and analysis of the service, SITA has decided that the service X offered by ABC Systems is an exciting opportunity for further growth and development within the software business sector as it appears to be promising in terms of revenues and establishment of long-term relationships with both the existing and the potential customers. However, there are some issues that have to be agreed upon by SITA and ABC Systems for the deal to be possible, including such matters as exclusivity, conditions of cooperation, sales conditions, competitiveness, some liability aspects, and the nature of cooperation between the two companies should they decide to work together on service X.

The current report has been ordered by Stephen Baird who represents the SITA’s in-house legal department and seeks recommendations on the aforementioned issues in order to draft an informed advise for the sales department of the company. Thus, the key objective of the present report is to give an answer to the question of what SITA should do with the offer provided by ABC Systems and how should they take this opportunity forward. The key limitation relating to the report consists in the limited character of available information concerning ABC Systems and its service X. However, information that is presented by Stephen Baird is sufficient for providing some basic recommendations and answering the question that is the key point of the report. Information sources used for the compilation of the report include two videos by Stephen Baird, official website of SITA, and background knowledge pertaining to the issues under consideration. The report is structured as follows: Executive Summary, Introduction, Discussion that is subdivided into two subsections entitled Overview of SITA and ABC Systems and Overview of the Case under Consideration, Recommendations, Conclusion, and Bibliography.

Discussion

Overview of SITA and ABC Systems

SITA stands for Société Internationale de Télécommunications Aéronautiques and is a international company that primarily specializes in provision of telecommunications and IT services to the air transport industry. It operates in about 200 countries and provides services to 2,800 customers worldwide, which include airlines operators, governments, airports, airspace agencies that choose SITA thanks to the company’s insight into what they need. Despite the presence of a number of large rivals on the market, SITA enjoys a stable share of customers and recurring business deals thanks to its unique solutions and unrivaled experience in the field. The company has been operating for more than 60 years and as of today it is represented across almost all continents of the world with its being located in Geneva. SITA is an innovation-oriented company and it claims that “innovation is one of the key drivers of our business. It’s at the heart of everything we do.” SITA is a rather unusual company in terms of its structure as it is a collective company owned by about 450 of its customers, yet this structure has ensured that the company has a valuable insight into the needs of its customers, which in turn guarantees profits. Since innovation is among the pillars that SITA is based on, its software business has been gaining an ever-increasing importance in the recent years. Nowadays, this segment of the business generates annually about $800 million and is forecasted to become as important as the telecommunications services provided by SITA due to the changing nature and demands of the modern world. That is why SITA strives to expand its business and open new directions so that new opportunities are not lost, competitive advantages are gained, and customers receive a constantly improving service-oriented experience.

In turn, ABC Systems is a relatively small IT company that operates within the market of a single country, but it has recently decided to enter the international market with its innovative service X. Service X is a weather service that allows commercial space rocket launchers to operate more efficiently and that can function both in real-life and in a simulator mode. This service takes into account various weather-related conditions and effects, earth gravity, magnetic forces, and other parameters like winds that can impact rocket launches and allows launchers to adjust to any changes in such conditions. This service has already been tested in the home market of ABC Systems and has proven its efficiency. Nonetheless, the company lacks the necessary resources for entering the international market with service X, which is why it has approached SITA with an offer of making it a global sales agent or distributor for service X.

Overview of the Case under Consideration

Since ABC Systems’ sale force consists only of 2 or 3 persons, it the lacks required infrastructure and experience of operating within the industry of the target customers. It thus needs SITA with its 200 sales people, 4 cloud computing datacenters, and an extensive network of connections. As mentioned above, service X developed by ABC Systems is intended to assist commercial space rocket launchers for them to have more efficient operations with account for changing weather conditions. This weather service envisions adjustment of rockets to changes in conditions with the help of signals transmitted via satellites. SITA has tested service X and considers it to be a good service. Besides, reports about the use of the service X in the home country of ABC Systems prove its efficiency as well. Therefore, SITA should move forward with the deal and become a sales distributor of service X provided by ABC Systems. Target customers include rocket construction firms, simulator experts, governments, rocket launchers, and rocket engine manufacturers. It appears that ABC Systems has decided to address SITA with the offer of cooperation as the latter has a wide network of connections, including the established customer base represented by companies such as Boeing, Airbus, governments, and other companies that would be interested in service X.

Recommendations

Having reviewed and analyzed the available information on the two companies and the proposed deal, it is highly recommended that SITA uses the opportunity offered by ABC Systems and becomes a sales distributor of the service X. However, as mentioned above, there are some issues relating to this deal that should be considered in-depth prior to making the decision. Some of the most topical issues include exclusivity, conditions of cooperation and conditions of sales, competitiveness, some liability aspects, and the nature of cooperation between these two companies. The current report will not dwell upon liability and insurance as these issues have already been resolved by SITA’s in-house lawyers, according to Stephen Baird.

Exclusivity seems to be the most crucial issue in the case under consideration and should be studied from all possible perspectives prior to the two companies signing any contracts or agreements on cooperation or distribution of the service X. Thus, it looks like ABC Systems needs SITA more than vice versa, which is why it may be assumed that this company will be more willing to compromise and be flexible about the conditions in the process of negotiations. Undoubtedly, service X is currently an innovative product that has no close rivals with analogous properties and features. Therefore, ABC Systems may reasonably consider itself as a sole vendor of a unique product, which gives it room for negotiations in terms of price and choice of a sales distributor. However, the IT sphere is developing rapidly and no one can predict with certainty what new developments will appear on the market within the next few years, which is why ABC Systems should use its present competitive advantage right now, before similar products appear on the market. Moreover, SITA is the best possible partner for the software company because of its unique connections with governments and other target customers, as well as its credibility and well-developed infrastructure, which are required for a proper functioning of the service X. Therefore, the two companies are strongly advised to work together. With respect to exclusivity, it is advisable for SITA to demand from ABC Systems to be an exclusive distributor of the service X in the future. Such demand is justified considering the time and efforts that the company will invest in the product. Both companies should agree that they will not compete against each other in terms of products with functionalities similar to those offered by the service X. In turn, SITA may promise not to become a sales agent of another software company that offers a similar product during the term of their cooperation agreement. This way, exclusivity of the offered product will be ensured and the two companies will not compete against each other, avoiding a situation which could be detrimental for them.

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In terms of cooperation conditions, SITA is ready to sign a 5-year agreement on sale, distribution, and maintenance of the service X supplied by ABC Systems. SITA should agree to ABC Systems’ right to participate in the discussion of potential customers and conditions under which the software will be sold to them. However, the final say should belong to SITA as it is the primary sales distributor of the product with extensive experience in the industry, if such decisions do not violate the cooperation agreement signed by the two companies. Besides, SITA should give ABC Systems a right to demand from the customers to sign end-user license agreements as it is a common practice in the industry. In turn, ABC Systems should dutifully comply with their obligation of developing the product in the future with account for the feedback received from SITA and customers. SITA forecasts that on average 5 or more customers for the product and cooperation with these customers will have a long-term commitment. That is why maintenance of the service X should be delivered under the joint efforts of SITA and ABC Systems. ABC Systems has voiced their willingness to participate in marketing and advertising of the product, but SITA should emphasize that final decisions need approval of its authorized employees responsible for the project in order to avoid any confusion and misunderstanding. Withal, the key recommendation provided herein is for SITA to use the opportunity offered by ABC Systems and become a unique distributor for service X. The opportunity should be taken forward by drafting and sining a 5-year contract by the two companies that would include all the essential conditions.

Conclusion

The current report deals with the deal offered by ABC Systems to SITA for the latter to become a sales agent or distributor of service X. As of right now, this service may be deemed unique in the market of commercial rocket launches and is predicted to be in a relatively high demand within the industry. However, it is obvious that ABC Systems lacks the necessary resources for marketing this product internationally, which is why it needs SITA with its customer base, connections, experience, and infrastructure. In turn, SITA is recommended to use this opportunity to develop its software business as this product is a great opportunity to expand the market niche it currently occupies. Therefore, the two companies should move forward on the deal and discuss in detail all the essential issues and conditions that may cause misunderstanding in the future. Some of such issues include exclusivity and competitiveness, but it seems that both of these companies will profit in case they agree not to compete against each other and promote instead and constantly improve service X instead.

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