An Alliance Model That Works: Teaming Systems Integrators and Technology VendorsBy Channel Insider Staff | Posted 2004-03-11 Email Print
Vendor alliances are never easy and frequently fail. But blending vision, process, strong leadership, accountability and a good measure of flexibility can improve the odds of an alliance's success.
Whether aiming for increased revenue or market share, most technology vendors have initiated –or are planning-a major alliance with a big systems integrator (SI) and vice versa. These alliances are never easy and frequently fail. Both internal and external pressures work to drive these two organizations apart. However, blending vision, process, strong leadership, accountability and a good measure of flexibility can improve the odds of an alliance's success.
Technology vendors have a love-hate relationship with systems integrators. While they value successful implementations of their products, they question whether SIs drive revenue for them or merely make money off their product's acceptance by the market. This suspicion is felt most acutely where the IT firms have in-house consulting functions that compete with SIs for scarce implementation dollars.
These internal obstacles are familiar to vendor alliance executives. Vendor account managers are often wary of systems integrators' motives in the account. Additionally, they do not always see a value at the transaction level. The vendors' in-house consultants, meanwhile, charge that SIs "take money out of our pockets" by doing work that the consultants could do as well or better themselves.
Systems integrators face a different set of obstacles. Their consultants see the problem from a different perspective: Software firms unrealistically expect consulting firms to shed their veneer of impartiality or simply provide leads for new sales opportunities. They rarely understand what drives consultants' behavior, and the resultant joint initiatives rarely address the consultants' needs.
Visionary senior executives instinctively understand that a powerful joint value proposition can be created based upon the complementary strengths of technology firms and SIs. The alliance executive fosters this understanding by identifying, analyzing and presenting examples of successful joint engagements or best practices within their own firms or in competing companies. Many companies have scattered examples of such successes in the field. Farsighted leaders will come to understand that there is money being left on the table when a strategic, programmatic approach to alliance management is there to recoup it.
Three –Tiered Alliance Strategy
Three –Tiered Alliance StrategyA successful alliance works well at three levels. At the Executive level the vision is agreed upon. Strategy is set. Product is broadly defined and the message to the market is conceived. From the decisions reached at this level, we can begin building the infrastructure within both firms to facilitate driving revenue at the customer level.
Industry partners and regional sales heads come together to determine how to implement the vision in their specific market. Here key linkages are made around specific verticals, such as government or telecommunications, and a framework for going to market together is created. It is at this level that the broad vision is molded to local market conditions. For example: Is manufacturing the best vertical to pursue in Latin America? Do mobile commerce initiatives make more sense in Europe than in North America?
The most important level, in terms of achieving the goal of increasing revenue for both firms is the Account/Client level. Here respective account/client managers, and their sales support teams, leveraging the vision and infrastructure created by management to facilitate their success, meet early in the sales cycle to target specific accounts. The keys to success at this level are a joint account plan with a joint value proposition and specific, measurable sales goals. The alliance executive can play a valuable role at this level by providing leadership and direction across vertical industries and geographies.
Three-Tiered Alliance Strategy
Industry / Region
• Go to Market Plan
Account / Client
• Joint Sales Plan
Concurrently, there may be ongoing tactical and opportunistic teaming at the account level beyond the scope of the solution envisioned in the Go To Market Plan. This may be as a result of interaction fostered by the alliance strategy, or through earlier interactions. This is to be encouraged. Intelligence gained today through successful engagements at the client level, whether as a direct result of the strategy or not, drive tomorrow's global initiatives.
Executive SponsorshipSponsorship is a key component of a successful alliance strategy. Top-level management of both firms needs to be seen throughout their organizations as fully supporting the alliance, since it requires changing longstanding behavior in both organizations. Each organization should designate a C-Level executive as overall sponsor of its most significant or promising alliance relationships. The role of the Executive Sponsor, with assistance of the alliance executive, is to drive execution down through the organization and remove roadblocks when they occur. The two executives should take ownership to communicate and meet quarterly to monitor the progress of the alliance and remove obstacles to implementation.
Once senior executives in both firms understand and support the need for an alliance strategy, it becomes easier to achieve support at other levels of the organization. Indeed, for an initiative to have a high probability of success, it must have support throughout both organizations. Ownership, through sponsorship, guided by an overall executive sponsor and driven by the alliance executive, is a proven way to achieve this.
The sponsors assigned to a joint go-to-market initiative around CRM in the telecommunications vertical in Europe, for example, may look something like this:
EVP Global Sales
VP Product Dev., or VP Europe Sales
Industry Lead Partner or Geog. Lead Partner
Account or Regional Mgr.
Bus. Dev. Or Client Partner
The alliance executive leads the identification of sponsors at the regional level based on criteria such as area of responsibility and interest. In the above example, the VP of European sales would be the likely candidate for this particular initiative, but other executives such as the VP of Product Development or even the VPs of Support or Professional Services might be good candidates, based on their interest in or support of the alliance. The overall executive sponsor should be encouraged to make clear that, in their sponsor roles, the responsibility and impact of the initiative sponsors will extend beyond their normal bailiwicks. The European VP, for example, will take the lead in launching and guiding the telecommunications initiative beyond the borders of Europe by sharing best practices, reference account information, lessons learned, sales plans and contacts. The alliance executive will insure that these "best practices" are disseminated in other geographies or verticals that look to be fertile new ground for the initiative.
Principles of Engagement
Principles of EngagementThe overall executive sponsors agree upon the behavioral guidelines of the relationship early on. They serve as principles for engagements and a benchmark against which subsequent organizational behavior can be gauged as conducive or harmful to the development of the alliance. The alliance executives should promulgate these principles within both organizations. The initiative drivers have the responsibility of seeing that the principles are enforced within their area of responsibility or, in the case of the overall executive sponsors, organization-wide. The principles are a good tool for dealing with resistance to change, particularly if they are seen and acknowledged as reflecting C-level executive sponsors' view of the new style of alliance.
Principles of Engagement
o We engage as early as possible in the sales cycle:
§ we target accounts to pursue jointly
§ we have open & honest communication
§ we cooperate and commit early
o We are preferred partners in the selected accounts and market segments, meaning:
§ we commit to win together or lose together
§ we have a non-compete agreement
o We have a principle for a 50/50 deal on total revenues generated jointly
o We have a partnering agreement & process in place and execute accordingly
o There is executive sponsorship and an escalation process
o We invest in each other's organization in line with our ambition level
Often a history of competition or antagonism in the field can be an obstacle to implementing the principles. Ignorance of the scope of the new alliance relationship or simple resistance to change can also hinder progress. Problems left unresolved can fester and poison the overall alliance. A skilled alliance executive can usually overcome these organizational challenges by educating on the wider goals of the alliance. A discrete escalation process can also be a useful tool. The process facilitates the communication of problems in the alliance up the management chain until they are resolved. The escalation process designates representatives from both firms at each level of escalation, as well as time limits at each stage to insure that issues are resolved expeditiously.
ExecutionThe vehicles for the successful implementation of the alliance are: a) the joint workshops and b) the joint account planning session, and c) the quarterly review. The product, or deliverable, of the first is a Go To Market Plan. The deliverable of the second is a joint account plan for a specific, targeted account.
The workshop is the domain of the Industry/Region tier of the alliance strategy. Workshops are planned by the alliance executives around a proposed initiative or set of initiatives that are expressed in terms of solution, target vertical and geography. Ideas for initiatives come from the overall executive sponsors, sales, clients or the alliance executives themselves. Workshop attendees are senior level; they represent the decision maker level of the constituencies whose cooperation is needed for the initiative to succeed. For example, a proposed initiative to focus on business intelligence in the retail sector in North America may consist of the VP of North America Sales, the VP of Product Development, the Director of Retail Marketing or their senior level designees (depending on the size of the vendor).
From the SI side, the retail partner, BI partner and key client partners may participate. The goal is to validate the market potential for the initiative(s), agree on the outline of a value proposition, and assign one individual from each firm to drive a Go To Market plan that can be rolled out to the sales and/or business development functions in each firm. So, it is essential that executives with the authority to make these kinds of decisions participate in the workshop.
The workshops should run no longer than a half day. The workshops require a great deal of preparation and follow up by the alliance executives. In order to make these sessions most productive, initiatives must first be identified and discussed with the attendees individually to gain consensus and eliminate non-starters prior to the meeting. The field sales and business development organizations in each firm also need to be polled on the feasibility of the initiatives. They should also be asked to recommend target accounts for promising initiatives prior to the workshops.
At the conclusion of the workshop, the alliance executive from each firm will have the information necessary to produce a written Go To Market Plan containing: a) the solution/vertical/geography(ies) b) the joint value statement c) a preliminary list of target accounts and d) a measurable objective for the initiative over a specific period of time, and e) the names of a sponsor or driver for the initiative from each firm. The alliance executives will then work with the drivers to roll out the initiative to the sales regions.
The tool for success at the account level is the joint account plan. The alliance executive and/or the initiative driver get the SI and vendor account teams together to create this. Prior to that meeting, the alliance executive will present the goals of the alliance to the sales force at the regional or account level. The objective is to gain their support for the initiative by apprising them of: a) the goals of the overall alliance b) its importance to the firm c) executive sponsorship d) principles of engagement e) escalation process f) the joint initiative, and g) the combined value proposition. This is also a great opportunity to provide a partner overview; best presented by a partner representative, to cover a description of the organization, advantages of working with the partner, and a list of key partner contacts.
The joint account plan will include much of the same information contained in any other account plan. For simplicity's sake, the format used should mirror that of the existing account plan format. The key difference is a joint value proposition, which is the value proposition of the joint initiative tailored to the specific business requirements of the target customer. In addition, the plan will be the responsibility of the account manger and the SI partner or business development manager, and it will contain specific, measurable goals. Among the first of these goals will be a joint presentation to the customer, stressing the advantages of a combined value proposition.
Structuring the Value Proposition
Structuring the Value PropositionThe alliance value proposition needs to be expressed in terms that appeal to all constituencies without whose active support the combined sale cannot take place. Most value propositions are crafted exclusively for the customer, and focus on customer return on investment. However, a well-crafted customer value proposition may not necessarily sell the SI industry partners on the idea of working with the vendor sales team, or vice versa. A joint value proposition needs to take these other constituencies into account as well to be successful. There must be incentive for all these groups to work together.
For the customer, the joint value proposition must show the advantage of dealing with an alliance rather than with each firm separately. The proposition should be framed in terms of offering a greater solution than either firm could on its own, resulting in better or quicker ROI.
For the consultant, the value proposition of teaming must address factors such as longer and larger engagements, improved client relationships or differentiation vis a vis competing firms. For the technology sales community, the value proposition can be crafted in terms of access to new markets, shortening the sales cycle or improving the hit rate. Both groups need to believe that partnering will advance their particular agendas.
Technology sales people are often faulted for emphasizing features of technology at the expense of business value. A marketing professor I once had used to underscore the importance of crafting the value message to customers' needs with this pithy aphorism: 'customers don't buy drills; they buy holes.' SI firms, on the other hand, are adept at expressing the benefits of technology in terms that C level, Global 1000 executives understand. Vendor sales teams need to understand that this can be a critical element in creating a value proposition that differentiates them from competitors.
Quantifying SuccessUsing a dashboard with a set of metrics to indicate the health and progress of alliances over time is the best approach. These should be benchmarked to similar alliances to determine whether the effort is bearing fruit. The dashboard needs buy in from both organizations. It should be a central part of the quarterly alliance review with the executive sponsors to assess progress against assigned goals and make the necessary course corrections. Key dashboard metrics from the vendor are: revenue driven in targeted accounts, revenue in the joint pipeline, number of joint proposals, number and quality of reference accounts and how all of these change over time.
SIs have an advantage in quantifying the success of the alliance if they have an established vendor practice that accounts for service dollars tied to that vendor's technology. If the services bookings and revenue number for the vendors' products are available, that is a good place to start. The SI can also usually provide the number of dedicated consultants, the number of trained consultants and the number of dedicated business development heads promoting the vendor's product or devoted to the alliance.
The health of the SI's vendor practice should be a significant predicator of its influence in driving vendor revenue, even if the link between practice growth and vendor product revenue is not easily quantifiable. Research shows that SIs or consultants influence most large technology purchases. As one executive sponsor stated: "If I know their practice is growing heads, that's less people assigned to our competitors. If these consultants are not working on our projects, they are going to be working on competitors'."
Alliance executives may display alliance metrics in an internal, web based knowledge exchange featuring the dasboard, key partner contacts, Go To Market Plans and other relevant partner information. Internal users, such as account teams and sponsors, can access the page to get an up to date snapshot of the state and comparative health of key alliances.
Revenue driven is easily measured when it is the result of a joint proposal or lead, but what about measuring influenced revenue? Short of teaming early in the sales cycle - the most desirable arrangement for the vendor- SIs can influence technology revenue in other ways. For example, they can recommend the technology as a valid solution to the client's requirements. They can provide valuable intelligence to the vendor on client pain points or a client's receptivity to the vendor's product or sales approach. Partners often provide valuable feedback on the effectiveness of a proposal or demonstration; information the prospective customer may be reluctant to share directly with the technology vendor.
One rough method to quantify influence is to use the rule of $1 in license revenue for every $3 in services, and divide the service bookings number by three to gain a rough estimate of the license revenue influenced. However, this method has flaws. Typically, implementation projects are won after the license are sold, and the partner may have exercised no influence at all on that specific transaction. However, SIs point out that they cannot recommend what they do not know. Knowledge gained in a successful installation needs to be employed elsewhere. Perhaps more to the point, consultants tend to steer clients toward technology for which they have a bank of trained personnel at the ready, and to discourage clients from technology for which they lack heads. Or as one sales veteran put it succinctly, "I have never seen a large SI recommend a technology for which they have no bench."
A Look at What Works
A Look at What WorksThe key lesson learned is that an effective alliance strategy means consistent, programmatic engagement at the executive, divisional and client relationship levels. A strategy that demonstrates value at all these levels stands the best chance of producing profits consistently for both firms over any significant period.
Challenges to a successful, long term alliance are legion. Many firms' cultures and reward systems don't encourage teaming. Commission plans assign quota and/or pay commission for activities that compete with partners. Often the sales culture discourages account managers from partnering by questioning their contribution when a partner assists in closing a sale.
This is probably why tales of consultants 'losing' deals seem far more widespread in vendor sales organizations than those in which they win deals. Yet logic dictates that if consultants have such a pervasive influence on the client buying decision, that their influence can just as well be used to promote as dissuade. If vendors are serious about encouraging their alliances, they will tweak their commission plans to encourage teaming.
Vendors and SIs often forgo a strategic, programmatic approach to alliance teaming by depending on one or two executives with "contacts" in a particular SI. This is a short term solution that over time limits the organization's ability to react to changing market conditions and take on new alliances and new initiatives. And, like any strategy based on personalities rather than principles, it is only as good as the person in charge. When that person leaves, the alliance is at risk.
The culture within SI consultants is very different from that of most technology vendors. Organizations tend to be highly matrixed. Partners are owners of the business and often monarchs in their particular domains, not easily directed by managing partners. The alliance function within the SI needs to be especially strong and skilled to sell partners on the alliance and to motivate key partners to support it. It is essential for alliance executives to understand how both consultants and salespeople are paid in order to understand and influence their behavior. Since partner committees often design SI incentive plans, they may be very difficult to change.
Overcoming these challenges requires strong executive commitment and dedicated alliance management. Consistent alliance engagement cannot be sustained at the field level alone. A cross-functional alliance executive is key to driving the alliance by, among other things, identifying and publicizing best practices and driving initiatives. The role of the alliance executive is sometimes likened to that of a marriage counselor, resolving disputes, encouraging communication and always keeping the organizations' focus on the ultimate goal: driving revenue.
Ties at the Executive level need to be particularly strong. This is where the vision is agreed upon, strategy is set, product is broadly defined and the message to the market is conceived. From the decisions reached at this level come the infrastructure and reward systems needed to facilitate success in the field.
At the industry/regional level the Go To Market plan is refined and tailored to the specific needs of the target market. Here key linkages are made around verticals, such as telecommunications and finance, and agreement on target accounts is reached.
The most important level is the account level. If engagement is not successful here, we cannot achieve the goal of driving revenue. These are the front lines. Here the respective client relationship managers, leveraging the infrastructure and competency created to facilitate their success, meet early in the sales cycle and carry a joint message to target customers.
Engagement in the field doesn't always play out as planned; but that's okay. Circumstances and priorities at the client level change too quickly to be managed effectively from afar. Von Clausewitz said that even the best strategy is useless once the first shot is fired. The same holds true for alliance strategies. A business intelligence initiative might be designed for the transportation market, but the field has success with it with a telecom firm, which leads to a new product opportunity. That's fine. What is important is to keep the ultimate goal in mind, keep the lines of communication open, maintain executive involvement and advance a multi-level, programmatic approach to teaming. Once successful, it will develop a momentum of its own.
Thomas O'Dea has more than 17 years' experience in strategic alliance and international sales management. He has led global channels and alliance organizations at Oracle, Sequent and Unisys. He is currently Executive Vice President of Sales for KomBea Corporation. He can be contacted at email@example.com.
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