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The Strategic Alliance Conundrum

Posted by Steve White on Apr 30, 2015 12:38:57 PM

Guest Blogger: Steve White, Program Director, Strategic Alliances Research, IDC

Strategic Alliances continue to be an important mechanism for leading technology companies to improve competitive positioning and grow market share. These Strategic Alliances are generally entered into as they are seen as major force multipliers. However, the inherent complexity of forging an effective alliance relationship between large businesses means that not all alliances deliver on their promise or potential.

 Previous statistics have suggested that over half of Strategic Alliance relationships fail, although these figures are hard to prove or disprove without clear agreement and definition of what success is, or looks like?

It’s this challenge that underpins the conundrum. It’s very clear that these Strategic Alliances should have value, extend reach, take partnerships to new customers and markets, and even serve to create a business platform on which to develop joint solutions, but the challenge of measuring their success is the limiting factor.

The most common types of Strategic Alliance where this happens are technology vendors partnering with Global Systems Integrators (GSI) and Independent Software Vendors (ISV). In both of these cases, the vendor is utilizing the relationship to extend their reach - but each in a different way. The GSI’s lead with their consulting and services revenues, and ‘pull’ the product from the technology companies. The ISV’s might ‘embed’ the technology, or just build upon, around or interact with the technology of the vendor. In both cases, there might not be a measurable resell of the technology vendor’s product to be tangibly measured, and ultimate success measurement could come down to ‘Influence’ or ‘Co-Sell’ measurement, which can be complex.

Most every leading technology vendor faces this issue, and it is handled in various ways. Some have a mechanism to register deals, and then identify partner role in the purchase, and eventually report out ‘Influenced’ or ‘Co-Sell’ revenues alongside the direct resell revenues of product which are obviously far easier to measure. On paper this can be a good solution, however it relies on a ton of trust and goodwill between all parties that every single deal is registered, and in our experience (and feedback from Alliance partners) this is an almost impossible probability. The reality is that this process can work, but is onerous and labor intensive.

With the way the ICT market has evolved over the past few years - driven by what IDC calls the 3rd Platform, a combination of key technologies like Cloud, Mobile, Social & Big Data/Analytics – the need for these strategic relationships has become more important. To sustain competitive advantage in some cases, but also to defend against the many new ‘born in the cloud’ entrants who have less rules to adhere to.

These issues are not new at all, but today’s environment creates maybe a new pressure on them, and within technology vendors, there continues to be the underlying need for real data. At some stage, just about every technology vendor gets into a conversation about the realness of influence revenue vs. direct revenue, and the conversations are rarely fun.

Over the past few years, IDC has seen Avnet create some interesting solutions to bridge this gap. What Avnet has, as a special sauce if you like, is the ability to ‘join up’ the two sides with the common factor being the customer. In the GSI case, the GSI sells services to customer A based on technology also sold to customer A – and Avnet can act as the facilitator of visibility to both sides. In this scenario it is a true win-win-win. Technology vendors get to see the product shipments directly associated to the customer of their GSI partner. GSI’s also gain the ability to show how their services have pulled product with less overhead. And of course Avnet gets to create a value chain based on their core distribution competencies.

Having seen this combination in principle and in practice over the last few years, IDC has been happy to facilitate introductions between potential Strategic Alliances with the confidence that it provides measurable value for all parties. Of course we do have to give the health check that it may not fix all of the conundrum all of the time, but it certainly addresses the core issues, probably more efficiently and more importantly visibly than other methods.


Tags: Cloud, Mobility, Business, GSI, IDC, ISV, Technologies, Virtualization, 3rd Platform, B2B, Big Data and Analytics