By Gianluca Marcellino, post originally posted at Gianluca Marcellino - Business Notes
I am gathering insight on enterprise Information and Communication Technology (ICT) alliances and channel evolution in Italy. Information comes from selected local and global market analysts, large and small systems integrators, resellers and distributors, Independent Software Vendors (ISVs) and software platform vendors.
More evidence will be required for meaningful conclusions, still I am finding early results interesting and useful for our daily work, as my organization evolves to develop our alliance teaming and high value added resale capability.
My personal understanding so far: ICT partner management, including both asymmetric, one-to-many channel relations and symmetric, one-to-one, peer-to-peer alliance relations, is going through intense and disruptive evolution. I believe this evolution is stronger than standard sales discipline and even response to a challenging economic environment can explain. New categories of enterprise ICT partners are emerging to compete with existing ones, while incumbents are developing new behaviors to answer this competition.
In Italy, this is providing ICT market players with new opportunities to overcome historical fragmentation. Over time, it might even become possible to define new partner business models that leverage local specifics in original ways, somehow like networks of small enterprises in regional districts had innovated manufacturing around the 1980s.
To set the context, I see two distinguishing features in the Italian ICT partner ecosystem:
- it is highly fragmented, just as our enterprise ICT customer market (analysts monitor and report on more than a dozen thousand suppliers and intermediaries, and on a number of enterprise end customers that is in the same order of magnitude).
- credit access is relatively complex for large and medium enterprises, so resellers and distributors put significant resources to bridge customer and supplier requirements on payment terms.
This combination impacts channel operators as well as enterprise platform vendors at the supplying end of the channel.
Resellers and distributors must focus on breadth and transactional efficiency, which reduces resources for offering innovation and differentiation in the channel and alliances.
Platform vendors, on the other side, struggle to distinguish among partners, recognize, reward and drive the most effective behaviors, innovation and efficiency in their channel.
In this context, I see two major global trends causing disruptive change, that can have special results in our country.
The first is cloud-enabled globalization: cloud architectures and business models for both enterprise and consumer ICT are helping fulfill the long promise of global, fully location-independent service delivery for advanced small and medium market players. An independent software vendor from any country can combine their own innovative solutions with relevant innovations from others elsewhere, then deliver the result to customers of both, and to new customers in new locations. This has allowed success of Software as a Service vendors, and much greater market reach for more traditional on-premise software vendors.
The second is really the partner management side of consumerization: new ICT platform vendors coming from the consumer market, with their business models and their different, direct or channel-based partner models, have entered the enterprise market with a vengeance. After few years, we see they have significantly adapted their partner models to this new environment. Established global platform vendors and their channel and alliance partners have been adapting, sometimes scrambling to adapt, applying their partner models more rigorously and innovating them in the process.
Working mostly with large enterprise platform vendors and their channel and alliance partners, I have seen some incremental results of these two trends, and some more innovative, truly disruptive.
First, enterprise platform vendors have increased their investment in partner management discipline, to identify and grow partners that provide the most value. They have introduced, or significantly strengthened, such standard partner management tools as competency certification; they have increased certification requirements, and made competencies more specific and differentiated. They have improved lead registration and reward programs, and the few who could afford to ignore them are adopting them. Those that had long privileged asymmetric channel relations with smaller, more pliable partners have now opened up to managing selected relations as more symmetric alliances, each with its specific set of values, objectives, and management practices, tuned to the business model of both partners. Some platform vendors are now segmenting their partner portfolio just as carefully as they do their customer portfolio, and matching partner segments to customer segments more carefully. Many are now much more deliberate in how their direct sales and indirect sales separate, or cooperate.
Most of this is the result of global best practices. Applying it to Italy’s special environment has been complex, with a significant change management effort, if it promises more valuable change in the medium term. Some vendors for instance are still working to obtain from their greater partner management investment and discipline the ability to find and develop those special partners who “pull the most weight”, in terms of vendor business they embed and drive in their own.
Other results of the same trends appear to me more disruptive and innovative.
An important one has been making repeatable, formally defined solutions an essential part in how platform vendors and their partners deliver value to their customers. In addition to improving delivery efficiency, this is helping partners differentiate from each other and platform vendors perceive this differentiation. Solutions make a more tangible, understandable and rewarding object to team around, sell together and measure success of, than prescriptive behavior models. Also, a solution focus can apply both to channel relations and to alliances.
For smaller partners, solutions are really vendor-supplied solution blueprints; each platform vendor challenges and encourages all partners to take up these blueprints, add value to them, and sell the result.
For partners with more complex business models, it’s the partner that proposes solutions to team around to the platform vendor.
In alliances, the approach is closer to joint solution development by both partners, who then cooperate in selling and delivering it, together and in parallel.
For all kinds of partners, solutions become the catalyst of teaming: solutions are what teaming is really about, what makes a given partnership stand out from other similar relations.
Perhaps the most interesting development from innovation trends in enterprise ICT partner management I am seeing in Italy involves Independent Software Vendors. ISVs often benefit from these trends in many ways, for instance:
- platform vendors, seeking to understand partner value and distinguish among partners, find ISVs and their solutions easier to assess, compare and manage. This helps them choose among ISV solutions, and most importantly makes it easier to measure and reward success.
This is much clearer for both parties than measuring the actual value that a distributor or reseller, or a systems integrator, adds to a platform vendor or ISV sale. - Small, niche ISVs are in a great position to leverage the opportunity for location-independent value delivery that cloud platforms and internet channels are providing. Truly innovative, valuable ISV solutions can reach global markets with very limited effort.
In my experience, this has happened mostly with international – single-country or global – ISVs entering the Italian market. Personally, I have yet to see as many examples of Italy-based ISVs taking similar approaches.
What is the result for enterprise ICT partner management overall? It seems to me that this greater mutual clarity, and better ISV access to market, are allowing more and more, smaller and higher value ISVs to compete with distributors and resellers for platform vendor support and for customer access. In some cases this better access to platform vendor rewards is encouraging ISVs to choose sides and focus their product strategy on a single platform among competing ones, as a way to forge more direct connections with that platform’s vendor.
Conversely, I see platform vendors who used to be skeptical about ISVs and propose implementations of their own solutions instead of ISV solutions, now gradually opening to the value that an ISV solution can provide on top of the platform it leverages, and so teaming more and more with ISVs for sales.
This evolution challenges more traditional channel and alliance partners, such as distributors, resellers, and general-purpose systems integrators. This works in at least two ways. On the one hand, it provides additional competition for them from solution-based partners such as ISVs themselves and more solution-focused systems integrators. On the other hand, ISV and systems integrators still find great value in teaming with each other. In pursuing this, ISVs can provide a further stimulus for systems integrators to focus their offering in solutions, built more and more around selected ISV solutions.
Early discussions suggest this requires significant investment at platform vendors, ISV and traditional partners, including changes in how offerings and partner relations are defined, managed, and even communicated to partners and the market. In our fragmented Italian market, I am seeing evidence that some platform vendors, ISVs, and systems integrators are strongly interested in this.
