24 November 2007

Partnership Myths – part 2

Partnership Myths – Part 2

6. Partners usually embark on a simplistic Go To Market: This is probably what I am most passionate about. Great business plans are almost never worth anything once the partnership has been announced. The go-to-markets vary from the banal “I will take you to my account and vice versa” to more lofty “we will integrate our products/services”. Simple integration usually does not lead to too many gains. Part of that comes from the fact that now you have two companies fighting for the same (or nearly the same) budget that the customer has. And inherently, each will try to maximize their share.

7. Making a partnership work takes a lot of hard work: If anything, this is the single most reason why partnerships do not pan out. It is not easy to keep so many divisions of two different companies in constant touch points and ensure are working [part of their time] on common goals. It takes a lot of commitment and trust from each partner. Setting up a Partners division usually does not do anything other than the fact that you at least have somebody who will try to follow up on action items and try to keep the “relationships” live. However, this organization usually has absolutely no authority to get anything executed thru the line managers. Successful partnerships have commitments right from the top who is willing to demonstrate it too.

8. Success from partnership requires patience: This goes with the previous point. My experience has been that C-level executives expect results – in terms of sales dollars – too quickly from partnerships. It takes a few years to get a coherent story to the market that customers find appealing. And this assumes all the backend from sales commission to product integration has been worked out. However, usually, executives start questioning or second guessing within 6 months of announcing a partnership.

9. Successful partnerships take very deep skins in the game: The only kind of “deep skin in the game” I know of is hard money. There are two cases where I have seen partnerships have the rare success. The first is where a company not only announces a partnership but at least one of them takes a stake in the other (sometimes both take stake in each other). This is commitment at the highest level. There is a tangible way of benefiting from each other’s success. In case of vertical partnerships (e.g. one is a software company and the other is a services company), it gives the much sought after “exclusivity”. The second model – which I have seen lesser number of successful cases – is when the sales organization is commissioned on selling the partner’s offerings. The reason it is less successful is pretty obvious – at the end of the day, a company will pay more to a sales person for bringing green dollars to the company.

10. Two and Two has to add to Five: Finally, a partnership, from a customer’s point of view is something interesting (and the whole partnership will eventually come unstuck if customers do not buy) if the sum of the two is truly more than the parts individually. Other than the marketing slides, the customer needs to be convinced that this truly solves their business problems more and at an advantageous rate. Most importantly, the two teams together can do a better job than if the customer has to buy them separately and put them together.

I do want to point out that there are partnerships in software world that have succeeded. I consider the Big-5 partnership with SAP as a big success. From what I saw, I think Accenture with Retek was a good success too. I am told IBM and Dassault had a very successful partnership too. But they are few and far between. If you or your company are thinking of getting into a partnership that is to bring in any meaningful money, think about it carefully and convince yourself that you are willing to put in the money and the effort. For the fun truly starts after the initial euphoria of PRs and handshakes are over…

11 November 2007

Partnership Myths – part 1

Most of my commentary here is based on my experience in the software sector. It perhaps can be extended to other sub-sectors in the IT world but probably not any further. However, in the software sector, I have seen the patterns repeat often enough to convince myself these are not accidents.

If you have ever led a software company or even worked in one, you definitely are aware of your Partner/Alliance organization. I have not come across too many companies where this department has been a very effective department. When I was a senior manager, most of the time, these were huge drains of time in attending meetings, making presentations and all that – and very rarely a lot of bottomline revenue to show for it.

Having said that, there are a handful of small companies I am told have made this succeed and I had the pleasure of setting of one very successful partnership myself (but that’s all 😉 )

Here are my Top 10 observations (in 2 parts):

1. Most partnerships are between “unequals” : The basic reason why software/service companies partner is to get access to each other’s customers or technology. Usually, the higher priority need is access to market. Therefore, the smaller partner is more interested in getting the partnership going. The bigger guy has little interest unless access to this technology opens up a large market for them. (which is rarely the case). When the bigger partner is a service company, they have even lesser interest to tie themselves to only one technology vendor. It is in their revenue interest to partner with any number of technology competitors – hoping they can win in either situation. More often than not, the smaller company keeps trying hard and eventually loses interest (not totally though – they need the big partner’s logo on their website J )

2. All partnerships start with a “feel good” factor: Regardless of past experience, all new partnerships start with a lot of expectations and self-deluding visions of conquering the world. For the larger company, the deal maker senses that a great line item has been added to the portfolio for the sales people to sell to everybody. The smaller company, of course is highly elated that finally the doors to the entire world has been opened up with them. While a few do work out that way (in a very restrictive model though), after a few of those “Steering Committee” meetings, reality starts setting in reasonably quickly.

3. In a large number of cases, partnerships start because of a personal relationship at a high level: Big or small, most of the partnerships are put together because somebody high up knew somebody high up in the other company. In general, business runs that way – through networking and personal relationships. In cases of partnerships, this is even more important since the trust and faith factor is taken care of from the word get go. In my experience, some of the more successful relationships have that one common thread. There is a deep personal relationship between the two persons who put it together in the first place.

4. There are enough second guessers on any partnerships: The above point has some unintended consequences. Since two partners often are brought together because of some existing relationships at high level and some truism behind Murphy’s law about “there are as many deeply rooted beliefs as there are possibilities”, there are always other people with different opinions on the partner. Unfortunately, partnerships take a unified line of execution across multiple divisions of a company – marketing has to support with marketing materials, sales has to support by educating sales/presales and pushing the partner, development has to work on integration etc. Unless this is driven right from the top, usually there is enough passive opposition that these get slowed down. Usually a few quick wins at account level helps speed things up

5. Most partnerships are opportunistic: At the end of the day, everybody wants a free ride. An ideal scenario for the companies is “I do not have to spend too much time on you but your sales will bring me to a lot of accounts”. And if that is not happening in the next 2-3 quarters, we need to think about it. I once worked for a reasonably large size company which was known to be a very opportunistic partner. This used to be held against the company. Contrary to what most people think, I do not see why this is a great problem. My view is business is business. Companies partner for a good reason – not because they feel good about each other. As long as there is no unethical or illegal behavior, I personally do not see any problem with partnerships bring put together driven by market opportunism

(to be continued)