Modern partner ecosystems offer multiple advantages to software firms—but many struggle to build one. Here are five critical strategies for success.
As technology becomes ever more crucial for business, companies face many challenges in realizing its benefits. Buying centers proliferate across their enterprise, data security and privacy face increasingly sophisticated threats, and modernizing legacy systems and moving to cloud is a protracted process that becomes more complex each year. By building a robust ecosystem of partners, software firms can better help their customers navigate these challenges—and enjoy a clear competitive advantage.
This is possible because of the diverse capabilities of robust, modern ecosystems that have emerged with the shift to cloud and subscription models. No longer are software firms’ partners merely “channels” for transacting and fulfilling sales in traditional sell-and-service business models. Instead, they can now play an end-to-end role across the entire lifecycle, helping customers accelerate their digital transformation.
These ecosystems deliver real benefits for software firms. Partners can:
- Expand reach by generating demand in new customer segments, markets, and industries. Partnerships have always allowed software companies to extend their footprint in markets where they have limited presence—a faster and simpler alternative to starting up their own sales team. But many partners now also possess the expertise to help companies gain credibility in specific sectors like health care or financial services where buyers’ expectations are impacted by specific regulations.
- Evangelize and influence purchasing decisions to create opportunities for products; for instance, if the partner is driving a large-scale digital transformation. This can be particularly helpful for new players whose partners can win influential customers that may otherwise be wary of relying on software from market entrants.
- Co-innovate and expand solution capabilities to add depth, relevance, and stickiness to software vendors’ offering. Software businesses may build on partner offerings, integrate them with their own, or extend them. More companies are turning to strategic partnerships and alliances to tackle innovation rather than risking unproductive efforts and missed opportunities in rapidly transforming business and technology landscapes.
- Accelerate time to value for customers by advising customers on how to migrate and manage their deployments. This is particularly true in X-as-a-service business models.
Welcome to the Multipartner Environment
As the partner ecosystem model has demonstrated its value, the agency of partners has increased. Customers have embraced partners in roles across tech strategy, design, vendor selection, migration, adoption, and management for the differentiated value that they bring. Often these partners help connect a project to broader digital initiatives.
This means there are often multiple partners engaged across the life cycle of a single piece of software. In addition, CIOs are increasingly deploying a myriad of approaches to managing their software and cloud estate, further multiplying the number of potential relationships. In this complex environment, it is vital that all partners have the skills and expertise to deliver the proper advice and work harmoniously with in-house talent.
Not surprisingly, customers see some partners as delivering more value than others. Our survey of buyers of software and cloud infrastructure conducted in 2021 showed that partners vary in importance as the customer buys and then uses solutions—underlining the importance of coordination among the different parties.
Systems integrators, who play right across the project from strategy formulation and roadmapping all the way to usage, are seen as the “orchestrators” of the ecosystem, with some 68% of buyers allocating them this critical role.
Managed service providers (MSPs) were a close second, reflecting their important role in managing today’s complex cloud and application environments. It is noteworthy that customers rank systems integrators and MSPs as more important orchestrators than the software and cloud vendors themselves. Astute tech players have been quick to leverage this trend by attracting and investing in partners with these services capabilities. Other tech organizations can capture value in analogous ways, underlining the possibilities inherent in a vibrant ecosystem with a broad mix of partner capabilities.
The Barriers to Ecosystem Growth
Building and maintaining the right ecosystem can be challenging for tech companies, large and small.
Larger, more mature software firms are often insufficiently equipped to evolve their ecosystems and get traction with partners at crucial inflection points in their businesses, such as launching new products and changing business models. They must recruit new partners while helping their existing partners transform. In addition, they may face problems of internal buy-in shifting to the full ecosystem model.
Smaller companies often have a limited network of partners, preferring to interface directly with customers. This is easier than ever in the world of cloud and subscription software and leads some to believe, incorrectly, that partnerships are unimportant. However, we often see these companies struggle to maintain growth beyond a particular stage. At this point, they need to assemble an ecosystem quickly. These companies then face the “chicken and egg” challenge of an ecosystem. They struggle to get the attention of the largest, most influential players and lack the critical mass to attract other partners.
Both types of players can overlook or underestimate the time and effort needed to establish a robust ecosystem. Building an ecosystem or taking it to the next level requires driving change externally and internally—and this can be a 12- to 18-month journey.
By Nipun Misra, Akash Bhatia, Federico Fabbri, and Philip Zakahi
Courtesy BCG. Article available here