Don’t Sleep on Strategic Partnerships
By: Ryan S.
Tags: Startup, Partnerships, Product Management, Sales, SaaS

Partnership, however, is a Journey

As a company scales, the simple idea of partnering with others will likely shift as it grows from a product(s) org to a platform org. Below we’ll cover some “tiers” on the spectrum of partner program maturity.

Tier 1 – Channel and VARs.

At this tier, a company is likely still early in its growth. But how can they reach a broad audience (in another geography, let’s say) without hiring an entire fleet of business development resources? The answer is that they can leverage channel partners, sacrificing a small percentage of revenue in exchange for reaching customers who they simply didn’t have the bandwidth to reach.

Tier 2 – Technical alliances, integrations.

Point solutions that solve niche problems (think a single department or a single industry) often work together from a technical perspective to make their offer more appealing, saving customers’ IT teams the headache of writing glue code to make their vendor products talk to each other.

But what’s the benefit to the product companies? The integration partnership reduces the TCO and time-to-readiness for their customers, which means they save money. Chances are, those customers may spend those expenditure savings on something else the product company sells that will bring them value.

Tier 3 – Marketplaces and ProServ.

At this point, a company’s partnerships channel has likely snowballed into its own large piece of the revenue pie.

Organizations can begin to enforce how partners will integrate with their products and will establish standards for how consulting firms will provide guidance on implementation and adoption.

Let’s use Workday as a recent example. They offer a marketplace with several styles of integrations and add-ons, where they dictate who can and cannot publish offer their products inside of it. This is a perfect example.

Tier 4 – Ecosystem and a community of practitioners.

At this stage of maturity, entire organizations may build their business around a company. Think of Salesforce: when it first launched, it was simply a CRM. Now, it’s tough to create a product for revenue teams without in some way touching SFDC.

Start-ups are using the Lightning platform to build their companies on top of Salesforce.com, sacrificing a portion of their own revenue to the platform provider in exchange for a pass to be a part of the ecosystem — knowing it opens the door to all of the provider’s customers and prospects.

Bonus Tier – M&A, spin-offs.

Let’s look at SAP and Qualtrics as a baseline here, a success story for ecosystems. A company that has built a great platform and ecosystem over the years (like SAP) may wish to acquire some of its downstream marketplace partners.

A product within the marketplace may begin to become a competitor of the platform provider, and others — seeing the traction being gained — are eyeballing the company for acquisition. This was the case for Qualtrics. The product company had chosen to become a partner of a larger ecosystem (SAP) and became so popular that the ecosystem provider scooped them up.

We’re now even seeing that the acquired company can have such a loyal partner base that it spins back off into its own brand after the growth.