Do Partnerships Work

Do Partnerships Work

Partnerships are very popular these days.

	Vendors seek partners to develop for their platforms, to assist customers in selecting their products and designing and implementing successful systems, and in distributing their product portfolios.
	ISVs seek vendor partners who will provide access to large numbers of eager customers for their software products. ISVs also want help in understanding these customers’ needs, in marketing to them successfully, and in bringing technically compelling, complete, and error-free products to market.
	Customers seek strategic partnerships with vendors whose vision of the future will support their goals and whose history suggests that they will provide reliable, consistent support and service as well as on-time delivery of their products.

How Many Partners Should You Have?

It’s become a kind of game, with vendors seeking to have as many good partners (“good” being a relative term, of course) as possible. A good partner is, of course, one who helps increase the vendor’s revenue in a significant way, preferably by providing access to new customers and new markets.

ISVs and other potential partners such as systems integrators, VARs, and consultants seek to have deep relationships with relatively few partners. To them, each partnership relationship requires an enormous investment in time and money to hire and train staff. Picking partners is a gamble – they must decide whether a deeper investment with existing partners would lead to more revenue than a investing in a new partner. Knowing when to add partners or change allegiances is always viewed as a risky business.

Customers are also likely to have only a few strategic relationships with vendors and service providers at any time.

It’s all about bandwidth. Big vendors can devote a great deal of bandwidth (resources such as headcount and funding) to supporting recruiting and managing partner relationships. Small vendors can’t spend nearly as much. Both look on it as a necessary marketing expense, extending their brands and products into markets they would otherwise be unable to effectively reach. For some vendors, this means keeping the big deals for themselves and funneling smaller ones to partner channels. For other vendors, it may mean all of their products reach the market through partner channels. Usually, it’s a mix, depending on partner size and skills versus vendor strategy and internal resources.

Partners – ISVs, SI’s, VARs and others – as well as customers are almost never able to find the resources to manage very many important partnerships simultaneously.

At IBM’s Partnerworld

Last week I spoke at IBM’s PartnerWorld, an event designed to attract new partners, while communicating with and informing existing ones. It’s highly informative of partnering in action, the way it occurs when the systems vendor is big, well-funded, and considers partnering a major strategy.

IBM brought many of its senior executives, include new CEO Sam Palmisano, to this event, making it clear just how important they think their partners and the idea of partnering is to IBM.

	Lots of companies, of every size and shape, find partnering with a big company like IBM highly appealing. Just being able to say you’re an IBM partner can instantly elevate a smaller firm’s status.
	IBM has many partnering plans to fit different types of partner relationships. You can read about them at http://www-1.ibm.com/partnerworld/pwhome.nsf/weblook/home.html.
	In fact, each of the major product and service groups at IBM has their own group of partners and their own recruitment and partner management teams. For some potential products, which door you’d need to enter through is obvious; for others, you may want to think this through carefully or even invest in investigating more than one possibility. The PartnerWorld rules are uniform across the company, but (as you might guess) some things can be negotiable.

Rules For Partnering

Basically, all partnering relationships focus on the idea that each partner is putting something valuable into the deal and getting something valuable out. Of course, both sides are hoping to gain more than they invest, which won’t be a reasonable expectation unless the terms of the partnership involve others who will add to the potential rewards to be shared.

For example:

	Systems vendors usually want their partners to implement with their products (hardware and/or software) and to increase the amount of those products which are sold. If that happens, both are rewarded out of a growing revenue pie.
	ISVs often want systems vendors to agree to carry their products into customers with their hardware, either as pre-loaded, included software on every box (rare, except for some infrastructure products) or as applications for particular customers, offering a marketing advantage to the systems vendor in incremental revenue and the potential for additional systems and service sales, while paying sales dollars to the ISV.
	Some potential partners, especially start-ups or young companies are looking for more than channels to market. They may want financial assistance. Let’s say that while this is not unheard of, outright investments are rarer, generally available only when the potential partner offers an important piece which may be missing from the investing partner’s current portfolio. Financial assistance isn’t always in the form of an investment; in might come as funds for marketing or other forms of marketing assistance. In many cases, the fact that a large, established vendor is partnering with the youngster may be as valuable as the funds they’re receiving. It’s a kind of “halo effect.”
	At the high end, between large companies, partnerships can be much more involved, with substantial sums of money being committed to joint development, marketing campaigns, or other joint efforts. This occurs only when both firms are certain that these efforts can help grow existing markets in significant ways or create whole new markets.

Every vendor, large and small, is competing for partners. Smart partners, with good products, expertise in technology or vertical markets, good customer relationships or sales skills know this and are careful to pick partnerships that will be fair, with the potential to reward both partners for reasonable and achievable efforts.

In the final tally, it isn’t how MANY partners someone has, but how good they are at supporting their partner’s goals that count. I’m a lot more impressed with vendors who have a few hundred of the right partners than with the “army of ants” strategies, where the number of partners is very high, but it turns out there are thousands included in the count with minimal skills and very thin relationships to their partner.

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