The ability to develop and nurture strategic partnerships can make the difference between success and failure in the high-tech industry. Just ask independent software vendors, a segment of the industry that earns more than 40% of its revenue through successful partnering. ISVs have created an entire "ecosystem" of partners that opens up new opportunities and new revenue streams for them.
The pace of innovation today is too fast for any one IT company to be all things to all customers. Last year alone, for example, the U.S. patent office awarded more than 16,000 patents to the top 10 global high-tech companies for their innovations. Even a brief look at the industry's history reveals a graveyard of once successful companies that failed to adapt fast enough to industry changes.
Despite its long record of success, IBM Corp. suffered a near-death experience in the early 1990s. New leadership and a new strategy were instrumental in engineering IBM's turnaround -- and so was the power of its alliances with more than 90,000 business partners.
Partnering offers a company the power to win with a world-class team. In baseball, for example, winning teams know the value of fielding the best players at every position. A star player may win individual games, but it takes the power of the whole team to win a World Series. The same is true for an IT company that needs to compete every day. Working with your partners, you have the stamina and flexibility of an All-Star team. You can offer a broader range of IT solutions, maximize the value of your customers' investments, and help ensure market success.
How can you develop relationships with partners to increase your competitiveness and win in the marketplace? What have companies like yours done to create strategic partnerships that work? Here are five factors that lead to successful alliances:
- Make the strategic decision to partner at the highest executive level, and secure buy-in from all levels of employees, especially the folks who interact directly with customers. Lori Schafer, founder and CEO of Marketmax Inc., decided partnering was the path to growth for the Wakefield, Mass.-based company that sells software to large retailers, including Home Depot and Kohl's. She regularly attended trade shows and followed up with monthly personal phone calls to develop the partnerships which helped Marketmax accelerate revenue growth, generate industry awareness, and differentiate it from competitors.
- To determine if a potential partnership is the right match, share your business strategy, understand each other's core competencies, and check synergy in goals, technology and target markets. Don Doane, CEO of Newark, N.J.-based OpenDemand Systems Inc., which provides rapid performance optimization software, has a litmus test for partnering. He finds that his company's successful partnerships create benefits for customers that neither partner can deliver alone. Together the partners reach new markets and expand their revenue bases. At IBM, for example, we understood that building our own software applications was not our core competency. Small, entrepreneurial software companies do a much better job. So we chose to work with ISVs, which know how to create best-of-breed applications, and we provide middleware for the e-business infrastructure.
- Remember that an alliance is a formal business agreement, not just a handshake over lunch. Get a contract in writing to avoid misunderstanding, build in rigorous commitments on both sides, and have clear measurements for those commitments. Unfortunately some would-be partners may view an alliance as a way to get sales leads rather than as a joint effort to drive new opportunities. Willie Williams, vice president, sales and business development for OpenDemand Systems, said that partners need to share both the risks and the rewards. So have specific requirements for resources, such as training, technical and marketing support. In addition, have clear revenue targets and regular meetings to monitor progress.
- Be clear that you may still compete with a partner in some areas, while you are collaborating in other areas. IBM, for example, competes directly with Microsoft in some areas of the software business. But we also cooperate on new standards and make certain IBM products run on the Windows platform as well as other platforms. Today you may be competing with someone you could partner with tomorrow. Your business strategy will determine when you partner and when you compete.
- The most common reason for alliances to fail is neglect. Both partners need to put in the time and resources to make the relationship work. The recommended regular meetings help track results. In addition, to keep an alliance healthy and profitable, make an individual executive responsible for results, and put an infrastructure in place to support joint business development and to deal with issues as they arise. Having a formal process in place to renew or exit a partnership is valuable. Partnerships need to evolve with market conditions and be flexible enough to be transformed when necessary. But if both partners decide it makes business sense to exit, then a well-executed plan can save time, capital and human resources. "If you're not seeing revenue within the first six months, then you're not getting traction, and it may be time for both parties to say goodbye," recommended Sandy DeFelice of Marketmax.
These five steps can help put the power of partnering to work for you. With the right partners, you can offer customers more choices, best-in-class technology and world-class service, which are the best plays to execute when you want to compete and win in the high-tech industry today.
Buell Duncan is general manager of IBM Developer Relations, Software Group. He has been with IBM since 1975.