In 1969, the largest computer company in the world at that time, IBM, decided to unbundle its software from its hardware. This opened up the world to a new business – the independent software vendor – and led to partnering between different vendors. By the 1990s, many IT companies were establishing formal partner or alliance teams to ensure that the partnerships they entered into were successful and delivered value to the business and customers.
Software users may not realize this, but it will benefit them to understand how partnerships may affect them, and what they should do to manage them for the business.
The role of partnerships
Strategic partnerships are agreements that enable the strategic efforts of two or more companies with related products or markets to be aligned. Partnerships are not a new phenomenon, there are historical examples of trade associations like the early Dutch guilds. Partnerships have existed for a long time, but in the last 20-30 years the focus and reasons for strategic partnerships have evolved very quickly.
In the software industry, the reason that companies create partnerships is to create greater efficiencies that will benefit the partnering companies and their customers:
- Greater value. A partnership can provide a more all-around product that will have greater value for customers.
- Lower risk. For customers, it provides a solution extension that has been tested and validated. This certification between the two companies provides a level of trust to the customer that the two applications will work together to support customer success.
- Opening up new markets. It also offers customers industry-specific or last-mile solutions. Instead of a generalist application, oftentimes adding a point solution allows the best of both worlds.
- Pooling resources. By partnering, companies can get access to skills and resources that might not be easy to acquire otherwise. Customers get access to these skills and knowledge without having to go out of the principal vendor’s ecosystem of solutions.
- Collaborating with partners can introduce innovation in terms of new business processes, products and services, and ideas for overcoming other issues or problems.
The new software partnership model
The rise of the big cloud vendors (Amazon, Google, and Microsoft) has extended the scope of partnerships for software companies. In the past, software companies with highly targeted but valuable solutions had to have the resources to develop in-house solutions to accommodate several IT environments. Installing the software and delivering updates to customers was a challenge.
Now with the cloud, those same companies can deliver a solution anywhere in the world, with the economies of the cloud. For larger vendors looking for partners, it means they can look for and provide more niche-focused, forward-thinking and innovative solutions to customers than before.
What customers need to do
For customers considering a partner product of their primary software vendor, certain criteria should be established.
- Is the partnership real? The primary vendor needs to have information sources that verify their partners.
- Customers should insist that the terms of partnerships are clear, so they can judge how a partnership can work in the customer’s interest.
- Certification of the integration between the two partners should be front and center to provide you peace of mind.
- Questions such as who is the seller, the terms of the contract, and who does the invoicing should be communicated by the primary vendor.
- When you download an app from an App Store you don’t expect to have to sort out problems – you either live with it or delete the app. But with business software, support should be included in the contract. Be clear what type of support is available, at what times, who provides it, and if there are additional costs.
Relationships over transactions
A software partner should be there for your business when you need them. They should work with your business to make sure the software they provide helps you achieve your goals and enables your business to thrive.
You don’t want to trust your business with a company that just sees you as another sale, or with a company that doesn’t share the same vision or goals as you. Acquiring software is not like an app on an App Store that if it doesn’t work for you it is discarded. Selecting business software is often a years-long relationship, so the software partners must be equally committed to the partnership as you are.
Selecting a partner solution for your ERP system
All ERP vendors have software partners because they have a particular product or industry focus that fills a gap in the vendor’s market. As an ERP customer, it is quite likely that you will use one or more of the vendor’s partners at some time. ERP vendors are aware that a bad experience a customer has with a partner reflects badly on the vendor as well, so the vetting and approval process for partners is vigorous. However, it is up to the customer to assume some responsibility when choosing a partner application.
A wise ERP vendor ensures that the partner’s culture aligns with theirs and that they are not just ticking a box for a certain product or industry functionality.
- They will make certain that the integration with partner solutions is provided as part of the whole product.
- When looking at support responsiveness, partners should have a Service Level Agreement that is enforced by the principal.
- A partner’s performance should be measured on outcomes rather than just output. The output might be the number of new features the partner introduces, on the other hand. Outcome measures can indicate a customer-centric approach, such as a reduced number of support calls.
Understand the partnership
Research has shown that enterprises with a dedicated partner function can achieve significant revenue and market value. As a customer of an ERP vendor, you need to understand how partnership deals work. Most CIOs and CTOs would know about this, but business decision-makers may not be aware of it. The key issue to verify is that the ERP vendor, whose system you use, realizes that for long-term success, they need to focus on improving the customer’s performance – not merely selling products.