Junket jury

In a global market worth almost US$825 billion, vendor-sponsored trips and freebies are inevitable. But where should CIOs draw the line? Eliot Beer reports.

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By  Eliot Beer Published  October 23, 2005

|~|Labban,-Youss_m.jpg|~|“A lot of vendors are surprised when we refuse gifts, but the ones we deal with most often know our stance.” - Youssef Laban, manager of Banque Saudi Fransi’s (BSF) IT division.|~|Freebies, junkets and jollies: they’re a fact of life for the majority of CIOs, at least to some extent. And few would find much fault with accepting a key drive, a novelty pen or even the odd meal from a vendor. But what about high-end laptops, first-class flights, or five-star hotels? And what if a vendor offered you an all-expenses luxury trip for two to a soccer World Cup semi-final? This is exactly what happened to an American IT professional recently. Will Weider, CIO of Affinity Health System, was so shocked to receive the invitation from a major infrastructure player, that he posted an article on his Candid CIO web log (blog). Weider turned down the particular junket, although presumably, plenty of others will be going, and have squared it with their consciences. This raises important questions as to what the ethical implications of these freebies are. For Youssef Laban, manager of Banque Saudi Fransi’s (BSF) IT division, the issue is very clear: “My staff and I usually refuse all gifts from vendors as a matter of policy. A lot of vendors are surprised when we refuse, but the ones we deal with most often know us now, and don’t offer us anything. The only reason we accept gifts is if it would cause offence if we didn’t. In that case we put smaller items into a raffle for our staff, and the larger ones just become assets of the company.” Laban says this policy helps both the bank and its vendors, as it produces a more comfortable atmosphere for both parties. He also says in his experience, extravagant freebies such as laptops and five-star hotel stays are rare. In the last five years, he has only had one such offer, which he refused. From a vendor’s point of view, there is also a difficult line to walk between being hospitable and being seen as overly generous. There is potential for more than embarrassment if a company is accused of bribery, especially with government contracts. Many companies, especially large multinationals, have very strict internal rules about spending levels on hospitality and gifts, and what types of gifts can be offered. “We have very strict limits as to what we can spend when we’re giving hospitality to government officials,” says Graham Porter, marketing manager for Sun Microsystems MENA. “Sun has rules on all gifts and hospitality for customers, to ensure it’s appropriate. At this year’s Gitex the most valuable gift we gave away was worth less than about US$50.” Porter says he believes it is more helpful for vendors to focus on the incentives they offer their channel partners than on trying to influence customers directly by means of junkets and freebies. A motivated sales team, he says, is much more valuable to a company than hoping end users choose a particular product because of a junket. Another manager at a vendor, who wished to remain anonymous, agrees with this, and says it is reasonably rare for IT vendors to offer lavish trips and gifts: “For this sort of thing, it is more often the distributors and resellers who ply the clients. Occasionally a distributor will ask us to co-fund a site visit to our US offices, but mainly it is between our partner and the customer; we do not get involved.” When it comes to vendors offering hospitality, though, many seem to have a clear division between inviting existing customers and inviting prospective ones, and most end users would seem to respect this distinction. Habib Habib, head of IT at Oman Air, certainly sees a clear difference between the two. “I would say it is much more acceptable if a junket is within the context of an existing project, or with a current customer,” he says. “If, on the other hand, the vendor is trying to win over that customer, then that’s not acceptable. People in my department wouldn’t go on a trip with a prospective vendor.” Porter agrees: “In my view, hospitality is about bonding with a customer. We take clients out to the races sometimes, and we will occasionally invite a few out to the Grand Prix at Bahrain, but the real value of these trips is that we get to know our customers much better, and they get to know us. After these trips, it makes it much easier for them to call us up, and vice versa, and talk about various issues with much greater ease.” When companies are trying to develop a close working relationship with customers, a social element can prove very important. Also, with IT departments facing internal scrutiny over their purchasing decisions, many companies have more than adequate systems to check no underhand behaviour occurs. According to one industry insider, unscrupulous vendors in the Middle East out to sway corruptible CIOs are more likely to resort to a straight bribe rather than a junket, although he emphasised this situation is not at all common. But in a global market projected to be worth US$825 billion this year according to Gartner, some vendors will do almost anything to secure a contract. One thing all agree on is that the issue of freebies is an issue of trust. Vendors and CIOS must find a balance between fostering a trusting relationship with each other, and maintaining an image of probity. How each party does this is a highly individual matter: BSF’s absolute refusal to accept gifts and junkets is extremely effective at maintaining probity, but runs the risk of offending well-intentioned vendors. Having a written policy on these matters can help, but perhaps the best arbiter is common sense, on the part of both vendor and customer.||**||

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