July 26, 2022
By Bob Layton
The channel is in a historic market inflection as it evolves into “the ecosystem.” Multiple converging developments are driving this inflection, from transient supply-chain woes to a permanent, generational shift in buyers and companies demanding different kinds of value be delivered in new ways. The pandemic accelerated the inflection. Now it’s being driven faster and deeper as the SaaS software industry enters the dreaded Valley of Uncertainty.
That’s the good news: We are in a crisis . . . of opportunity.
Four years ago, 76% of global business leaders told Accenture their then-current business model would be unrecognizable in five years. The pandemic and its aftermath made 2018’s prophecy come true early. The channel business model of 2018 is certainly unrecognizable.
The visual metaphor of “channels” — inflexible, geometric lines connecting a company to a few other companies that resell its products — has been replaced by a sprawling, brawling, open-air souk where companies combine opportunistically with ecosystem partners to imbue each other’s products and services with greater business value, creating stronger solutions, consistent value and deeper satisfaction for customers, and more revenue for themselves.
As long ago as his channel predictions for 2021 (written in 2020), the former Forrester analyst Jay McBain (now of Canalys) reported such market giants as Microsoft/Azure, Google Cloud, and Salesforce were luring ecosystem partners by stressing the potential additive value – $4.65 to $9 – available to partners for every $1 of cloud project spend. Ecosystem partners would realize this revenue by wrapping additional hardware, software and services around those central cloud dollars.
The 7 Golden Rules of Choosing Ecosystem Partners
With the inflection’s evolution from channel to ecosystem accelerating, the core question becomes: with so many companies seeking partnerships to build optimal ecosystems, how should a smart organization choose winning partners?
Somewhat counterintuitively in this free-wheeling, open-air marketplace, strategic discipline plays a central role.
Here are seven rules to evaluate partners for a software-as-a-service (SaaS) company:
We are living in a subscription world where we’ve got to keep the customer buying every 30 days until the end of time. So, in addition to solutions delivering continuous value, partners’ must in parallel drive such strong adoption, integration, and stickiness that customers will never want to unplug.
In partnership, trust is everything. Once any element of the ecosystem loses customer trust, game over. In choosing partners, consider not only the quality of their services and solutions, but also of their values. Every partner should be one we are delighted to introduce to our most-valued clients. We must hold ourselves to the same standard.
Whether the months ahead bring a recession, correction or just a momentary stutter-step, customer satisfaction will become increasingly important compared to customer acquisition. The best partners, then, are ones that deliver the highest and most consistent levels of customer satisfaction.
In the immediate future, customers will probably spend less on new licenses and more on making sure everything they have already bought works well together to solve their business problems. Which partners can we combine with to help our customers achieve that goal?
Increasingly, SaaS solutions aren’t IT buys, they’re business buys. Which partners can make us more attractive to business buyers as SaaS climbs the organizational chart?
In real estate, it’s location, location, location. In the SaaS world it’s scale, scale, scale. Which potential partners are ready to scale up with your business and your customers? Sure, it’s great to find and attract partners, but not simply for the sake of gathering partners. Make extremely careful choices: Don’t go for all the Easter eggs. Just the solid gold ones.
The current inflection point will reward complete top-to-bottom rebuilds of companies’ go-to-market architectures. The winners will be those who move away from selling traditional IT solutions and create a partner ecosystem founded on advocacy, advisory services, brokerage, and consulting. Ecosystems built to ask customers, “What are you trying to do right now?” and having all the resources to make it happen.
As we enter uncertain times, I encourage my team — and every team in the marketplace — to take advantage of this crisis of opportunity and go on the offensive. Disrupt yourself radically, all at once. Rip off the Band-Aid. What better time than now for a bold new direction?
Bob Layton is chief channel officer at eSentire. His 20-plus years of channel experience includes stints at Digital Defense, Centre Technologies and Alert Logic. You may follow him on LinkedIn or @eSentire on Twitter.
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