Features Archive |
© Copyright 2004 SoftwareCEO Inc. |
by Bruce Hadley, SoftwareCEO
What do Mickey Rooney, Britney Spears, Liz Taylor, and your systems integrator (SI) partners have in common?
Well, here's one thread: None would win an award for longstanding, committed relationships.
In fact, Britney and Liz may look like paragons of commitment compared to SI relationships—the vast majority of which, say the principal players in software firms as well as SI shops, do not succeed in driving revenue over the long term.
Why are these partnerships so shaky? Good question.
We recently asked executives from software firms and systems integrators to share their ideas as to why these relationships—begun with the highest of aspirations and goodwill—so often come to grief.
For the sake of objectivity, we decided to look at the problem from the point of view of the much-maligned systems integrator. By taking their interests to heart, we were able to boil their comments down to eight reasons why they believe relationships with software companies fail.
Relationship stress point #1: You don't provide executive
sponsorship.
According to James Northern, a partner with IBM Global
Services, a common mistake on the part of software firms is the
lack of executive support.
"Sales is where it happens, but partners must have a relationship of trust with a senior executive if the alliance is going to last," says Northern.
Too often, software firms assign the task of relationship management to sales. But the interests of sales and the systems integrator are often misaligned.
Sales wants to close the deal now. They are under tremendous pressure to get the P.O. for the software license before the end of the quarter.
Systems integrators, on the other hand, tend to look more long term. They seek to establish a position of "trusted advisor" at a senior level within the client's organization. This may be in the long-term interest of the software provider as well, but it demands a level of strategic foresight and long-term thinking that only software executives can provide.
"Our consultants operate at a senior level," says Northern. "Our partners average over 20 years' experience in the industry. Their relationship with the client is their livelihood.
"They need the assurance that senior software management is behind the strategy and that they can go to them if things go awry. That's why the concept of an executive sponsor for key relationships is so important."
Tom O'Dea, Principal of Catalyst Alliances, a strategic alliances consulting firm in Boca Raton, Fla., agrees: "The role of the executive sponsor is critical to successful long term relationships with systems integrators.
"Each firm should designate a co-sponsor of commensurate stature to oversee and guide the firm's key relationships."
O'Dea lists four primary co-sponsor's responsibilities:
"Ramping up to promote and implement a software firm's product is expensive and risky for systems integrators," O'Dea says. "Knowing they have an advocate at the C level makes that risk more palatable."
Relationship stress point #2: You're difficult to work with.
Many vendors have multiple alliance organizations, each reporting
up to a different executive.
Some independent software vendors have five or more different alliance organizations that an SI may need to navigate simultaneously: One in marketing, others in each sales geography, one or more in product development, and another in the vertical segment.
Each of these players has a different strategy, approach, and reporting structure. Worse, many times these organizations don't share information or work well together.
"Once when we wanted to carry a solution that worked well in the U.S. federal arena to governments in Asia, the alliance organization just dropped the ball with the excuse of 'Well, that's not my geography,'" says Warren Harding, an Accenture partner in Asia. "Not only was this frustrating and time-consuming for us, it cost the vendor millions in lost revenue."
"You need an alliance business function at the headquarters level supported by a C-level executive sponsor," says O'Dea. "You need someone who can apply strategy globally.
"Putting partnering entirely in the hands of individual sales geographies encourages intra-company rivalry and lessens a firm's ability to compete globally. Globally integrated IT mega deals are the big fish that large SIs are after. If your alliance strategy stops at the Pacific coast, your deals will, too."
Relationship stress point #3: You lack quantified, consistent
goals.
Many alliance programs lack any semblance of quantifiable
goals. The alliance managers manage "relationships" without a clear vision as to
what that means for the firm.
"W. Edwards Deming said it best," says Art Coombs, CEO of KomBea, an Orem, Utah-based contact center software firm. "'What can't be measured can't be managed, and what can't be managed can't be improved.'
"Too many alliance meetings are touchy-feely affairs with no real goals, no system of measurement, and no gauge of success. They are often seen by execs on both sides as a waste of time."
Some SI partners and executives complain that even when firms have goals, those goals are constantly changing, O'Dea says. "Software vendors often can't seem to agree internally on how to measure such things as influence, reference accounts, and number of implementers trained on the vendors' software.
"It seems that software firms themselves have a hard time deciding what to measure and how to measure it. In one large enterprise software firm, a new global alliance director noticed that millions of dollars in license revenue had been credited to an integrator with a reputation for being particularly difficult to work with.
"Much to this alliance director's surprise, when he called the account manager to learn the details, she no idea of what he was talking about. The SI in question, she revealed, not only did not assist in driving the license sale, but actually worked against the software firm!"
The reason for the error was simple, says O'Dea: It turns out that account managers had a spot on their account plan forms labeled "SI Involved in the Account" where they could enter a name.
In this case, the account manager had entered the offending SI's name, because she knew they eventually won the implementation business. It had never been explained to her that that entry field on the form was meant for friendly SIs who were positively influencing the deal.
"By the time the alliance director got involved, the 'big dollars' the SI has allegedly driven for the software vendor had already been reported up the management chain, all the way to the CEO," O'Dea says.
"In fact, this kind of fatuous data had been driving executive decisions about whom to partner with and where to invest for at least 18 months!"
Of course, influence is very hard to measure. Although we know that consultants and systems integrators influence most enterprise software purchases, few ISVs know how to measure that influence.
"I think the best solution is an executive dashboard on the company intranet that ranks SIs in several categories over time," says O'Dea.
"Across one axis, put the factors you want to measure, such as number of joint accounts, number of SI implementers trained on your product, number of SI business development heads trained, size of the practice the SI has built around your product, amount of bookings and revenue by the SI partner, and the dollar amount of software revenue driven.
"On the other axis, list your key alliance partners. Do this consistently over time for a set of your key vendors, and a picture will emerge that shows their relative strength. From there, you can begin to gauge progress and manage behavior.
"There are a number of software firms out there that make tools for creating executive dashboards. One of the leading data visualization companies that has a real sense of how important this is to a company's success is Corda Technologies.
"Corda's solutions display data as visual images, allowing the SIs and consultants to perform analysis and understand their data more easily."
One of the most important metrics, alliance executives agree, is the number of trained, dedicated influencers in the SI community.
"SI partners are paid on utilization rates," says O'Dea. "I cannot recall seeing an SI recommend a technology for which they did not have a trained bench."
Or, as John Purvis, a former senior vice president of worldwide support sales at Oracle says, "The more resources my partners have dedicated to my products, the less they have to work on my competitor's."
"What matters," says Myles Lynch, an alliance executive in IBM Global Services, "is that software vendors be consistent with the type of metrics they use and how they are applied.
"Don't tell me 'trained business development heads' is the hallmark of a successful relationship one day and then, after I go to the expense of training them, tell me the next day that it is really trained implementers or reference accounts that matters."
Relationship stress point #4: You don't understand the SI's
business.
This is a common grumbling point among SI executives:
Software salespeople simply don't understand what SIs do, or what drives them.
SIs complain of getting calls from software salespeople at the close of the quarter asking for assistance with a proposal in an account where the systems integrator has a strong presence.
"This is a no win situation for systems integrators," says O'Dea. "No matter whom they recommend, someone is going to be mad at them. Besides, if the software vendor was really serious about teaming, they would have approached the SI early in the sales cycle, not the day after they find out their proposal is being canned.
"The answer is to be proactive. Target a set of joint accounts and spell out the unique value proposition that the partners bring to the customer. This is the 'virtual corporation' approach, where the two firms function as one entity for a specific account, set of accounts, or a specific vertical market."
Relationship stress point #5: Your sales team is not on board,
or, worse, compensated to compete with SIs.
SIs complain that many
times they have great launch meetings with senior software executives and
alliance leaders, only to find out later that the sales force is unaware of or
uninterested in the alliance.
In fact, in many cases sales compensation plans run counter to the alliance goals. Software vendors may say they want to team, and alliance executives may sincerely support that, but if salespeople continue to be compensated for selling in-house integration services that compete with the SIs, then coordination in the field is likely to be lacking and the alliance is likely to flounder.
"The sales level is where an alliance ultimately succeeds or fails," says O'Dea, who managed the Global SI account team at Oracle.
"The alliance leaders need to formulate an internal value proposition that speaks to three tiers: executive, geography or vertical, and sales. It needs to address these constituencies in both firms, and speak to why the alliance makes sense for them personally.
"In many cases, the alliance is created in one area of the firm but never catches on company-wide. An alliance may be created by sales without ever seeking the support of other functions in the firm, such as product development, marketing, or executive management.
"Problems inevitably result when, say, joint development is needed, and the reason for the alliance needs to be 'sold' to the development staff."
OK, so what's the fix? It gets back to the executive level, O'Dea says. "That's where the vision is agreed upon, strategy is set, the product is broadly defined, and the message to the market is conceived.
"Once a few farsighted executives see the benefit of the alliance, it is easier to sell the vision down in the organization."
Relationship stress point #6: You don't communicate openly and
honestly with your partners.
Nothing will kill a
relationship—any relationship—faster than lack of trust. Yes, your
software product is important.
Market position is important. But an SI must have confidence that their vendor partner will deliver what they promise to the customer, on time and within budget.
"Your product and your position in the market is less important than consistency, integrity and professionalism," O'Dea says. "SIs always prefer vendors looking for a long-term relationship based on trust over those just looking for a quick close.
"Lots of SIs have tales of being burned by software vendors, and visa versa. Such tales usually involve the product not living up to the pre-release hype, chronic bug issues, poor installation or support, or unprofessional sales teams.
"Among the more serious sins is playing one partner against another—or against the software firm's own professional services function—in the same account. Systems integrators will quickly shut off firms that play these games.
"One systems integrator told me about pitching, to several large firms, including a global telco, a soon-to-be-released CRM package that a large enterprise software company was developing.
"When the enterprise application was unable to perform anywhere near the expectations set, it was a disaster. Both the software vendor and the systems integrator eventually lost the business.
"Here's another example: A large software firm announced they were ceasing the payment of incentives to salespeople for selling professional services that competed with their key partners. Sounds good.
"But a few months later, they quietly re-introduced those incentives, after the systems integrators had brought the vendor into several accounts. In essence, the SIs discovered that their partners had turned overnight into their competitors."
Conversely, firms with a reputation for open and honest dealing move to the head of the line when it comes time to select partners, O'Dea says.
"There is significant exposure when a systems integrator ramps up to support a software product. They need to pull billable personnel off jobs to get them trained. They may need to bring on additional implementation or business development heads. If they don't think the vendor is being straight with them, they are unlikely to take such risks.
"Stephen Covey talks about the importance of a mission statement for businesses. Your 'vertical corporation' should have one as well, in the form of principles of engagement.
"If you start out early in the relationship with a set of principles and an executive sponsor who senior SI executives can call directly when behavior runs counter to the principles, you build and reinforce a high level of confidence early in the relationship."
O'Dea provided the following as an example of what a set of Principles of Engagement might look like:
Relationship stress point #7: You don't know how to pick your
partners.
Today, it seems every software firm has an ever-expanding
suite of products that promises ever greater and more comprehensive solutions.
But too often, such firms strive in vain to be all things to their partners when
they might be better off focusing on what they do best.
Borrowing a metaphor from Geoffrey Moore's "Crossing the Chasm," you should "take the bowling pin approach," says John Purvis, the ex-Oracle SVP who's now executive vice president of Encover, a Silicon Valley developer of software for service providers.
"Don't try to hit every SI with every possible product you can throw at them. Select your partners carefully, and lead with your core competency. This usually yields better results than a shotgun approach."
Every software vendor would like to have an IBM or an Accenture to promote their product, but this is an uphill battle for small and medium-sized ISVs and a risk for large systems integrators, O'Dea says.
"By focusing on a particular solution, and seeking out partners in target geography who complement that solution, you can often yield a much better return.
"First, you need to decide what verticals and geographies you want to play in, and what value you bring to potential customers in those areas. Then qualify and rank potential partners based on how well they complement your vision."
O'Dea's criteria list includes:
Corda Technologies took exactly that approach. Through careful selection and qualification of prospective partners, they have forged deep and profitable alliances with business intelligence vendors as well as regional systems integrators, says Corda marketing VP David Vandagriff.
"We didn't want to compete for attention with the big boys," Vandagriff says. "Instead, we identified SIs in regions and verticals where we thought Corda would be a great fit.
"We realized that ours is an impressive, visual product that can provide differentiation to an SI in business intelligence, executive dashboards, and other applications. For our benefit, SIs offer Corda a cost-effective way to enter new vertical markets."
Relationship stress point #8: You lack a process for managing
partners.
The best alliance managers understand that building and
sustaining profitable alliances is a process, not an event.
All too often, an ISV's alliance strategy boils down to dependence on relationships established by one or two key sales executives. This is akin to putting your financial compliance in the charge of someone in accounting because he or she has a buddy at the SEC.
"Alliance relationships that are based on personalities rather than principles rarely last," O'Dea says. "Perhaps more troubling, they are less subject to review and compliance.
"Still, many vendor executives point with pride to a vice president in sales or consulting who was a college roommate with someone in Accenture, or married to a partner at BearingPoint."
What happens, we wonder, when the friendship turns sour or the marriage breaks up?
SIs say that software vendors with in-place processes for such things as executive escalation, product support, development issues, pre-sales support, and so on, are easier to deal with.
Chilean-born Daniel Landshut, who ran alliances and channels for Unisys in Latin America and the Caribbean, points out that SIs are often the last to know of a technology firm's changes in strategy and direction.
"Mutual trust is paramount in Latin American business relationships," Landshut says. "If it's a true partnership, SIs and VARs need to be part of the strategy and planning process, not just informed after the changes are made.
"Often the same companies that talk about 'open communication' make ad hoc changes in alliance strategy and direction without even informing their partners. This alienates partners and gets them thinking about alternative alliances."
So, how can you obtain and retain the good graces of your systems
integrator partners?
"You start out by selecting partners who
complement your offering and are willing to invest to go to market with you,"
says O'Dea.
"Once you have identified them, you need to adopt the virtual corporation approach. You and your partner constitute a new entity, greater in its ability to solve your customers' problems than either of you on your own.
"Like any new business, you will need to establish a go-to-market plan for the new entity that focuses on initiatives in specific geographies and verticals.
"The ultimate goal is a functioning joint account team that carries the message of our new virtual entity to the customer, and drives sales consistently in new markets and new customers that neither partner could have reached on their own."
The idea of a virtual corporation is echoed in Rick Page's book, "Hope is Not a Strategy": "The successful salesperson of the next 20 years must become a team leader and more—he or she must be the CEO of a virtual corporation."
Is it worth it? After you put the time and considerable effort into creating a happy marriage with an SI, is it likely to pan out in revenue rewards?
Well, in spite of the horror stories, successful SI partnerships drive hundreds of millions of dollars in new sales for ISVs. A May 2004 PricewaterhouseCoopers study of Global 1000 CFOs found that a majority see strategic alliances as having a bigger effect on their firms over the next three years than mergers and acquisitions.
In addition, savvy software developers see effective alliance creation and management as a critical competitive tool.
"Many software executives know that the effective use of alliance partnerships can be a very cost effective way of entering new markets and new geographies," says John Purvis of Encover. "Well-run alliances drive billions in new revenue for both parties."
The secret then, is not avoiding alliances; it's learning how to avoid the mistakes that make them stressful and unproductive.
|
|
|