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Partnering is an attractive, flexible way for IT companies to develop new markets and new revenue. Working together, partners can combine strengths in critical areas such as product development and marketing, spread their business risks, benefit from larger scale efficiencies, and increase overall profitability. Independent software vendors (ISVs), for example, earn more than 40 percent of their revenue by creating entire “ecosystems” of partners. IBM’s 90,000 business partners were instrumental in fueling its dramatic turnaround back in the 1990s and partners continue to be major players in company strategy today.

Most important, IT companies can offer greater value to their customers when they opt to work with partners instead of going to market alone. With partners, large and small companies alike, can provide a broader range of IT solutions, maximize the value of their customer investments, and boost their market success.

Working with a larger, well-known vendor means a smaller vendor gains greater credibility with customers. Larger vendors benefit from the deep industry knowledge a smaller vendor typically brings to the table. Within the business application market, savvy ISVs work with partners in order to serve a broader range of industries. For example, with partners, an ISV can extend its market reach by customizing its CRM solution for the banking, retail and health care industries.

To reap all the benefits of partnering requires mastering the fine art of relationship building. Here are six characteristics shared by successful partnerships:

Six traits of successful partnerships

Six traits of successful partnerships

1. Top management demonstrates strong commitment to the partnership, and helps infuse that same commitment through all levels of employees. “Top management needs to set the vision, commit the resources and people, and then line-up the organization around the success of the partnership,” says Ryan Saunders, marketing manager for Interchange Solutions, a Canadian-based ISV who works with partners around the globe. He cautions: “If you don’t have executive buy-in, when the partnership faces a major challenge, it fails very quickly.”

2. Partners, who complement each other’s strengths, develop synergy in goals and create new benefits for customers that neither partner can deliver alone. The value of partnering comes from combining capabilities that can create new growth, new markets, and expand each partner’s revenue base. “It’s really not effective just to have lots of partner icons on your Web site. You need to understand the capacity of your organization, and select only those partners that complement your strengths,” says John Pettit, president of Adaptik Corp. in Bethlehem, Pa., which specializes in software for the insurance industry.

3. Successful partnerships have formal business agreements which establish goals, financial targets and strategies for dealing with conflict. These are measures that both partners use to evaluate the relationship’s progress. Only with careful negotiations can partners reach agreement on overall priorities, set rigorous requirements for resource commitments, such as training, technical and marketing support, and determine how the alliance will be managed day-to-day. Adaptik has a 20-page agreement with its partner, Docucorp, detailing their mutual commitment of resources, and their rules of engagement for new market opportunities. To Rich Hall, vice president, sales and marketing for the California-based application development firm, Touchtone Corp., formal agreements are important as guidelines, but he emphasizes the importance of “respect, trust and honesty” in the working relationship.

Building healthy partnerships

Building healthy partnerships

4. Healthy, profitable partnerships require an investment of time and a supporting infrastructure to help make them work. In successful partnerships, individual senior executives are responsible for the relationship, and for getting results. They set clear revenue targets, hold regular meetings to monitor progress, and establish tools for measuring the results and the health of the relationship. There are processes to deal with conflict, so issues are handled as they arise They aren’t allowed to smolder and damage the working relationships. “Mutual goals are essential,” says Sam Varghese, director of sales at ASU Solutions Inc., an ISV specializing in supply chain solutions. “If you don’t know where you want to go, you’ll never reach your destination. It’s just common sense,” he says. Touchtone Corp. for example, issues a quarterly newsletter to partners to keep them up-to-date on new customers, applications, product enhancements, and deals.

5. Only when each partner is successful can the partnership itself claim success. An alliance isn’t simply a way for one partner to get sales leads. It is a joint effort to drive new opportunities in which both partners share the risks and the rewards. “Looking at a partner as a hired gun doesn’t work. When the approach is too parochial then both parties look out for their own interests and that doesn’t create joint success,” Pettit of Adaptik says.

6. Partnerships must be flexible enough to evolve with market conditions, and be capable of being transformed, if necessary. “We have quarterly reviews to make certain we’re reaching our targets. It’s important that the relationship is flexible enough to make adjustments,” Saunders of Interchange Solutions said. Interchange and one of its partners recently decided, when revenue targets weren’t reached, to limit the scope of their relationship. As a result, the partnership is now proving profitable for both parties. It also makes business sense when both sides do decide to exit the partnership, to have a well-executed plan in place to save time, capital and human resources.

Partnerships are genuinely win-win. As your partner becomes more successful so do you. Ultimately, IT companies, who master the art of strategic partnering, are able to deliver greater value to their customers — which is always a recipe for market success and long-term profitability.

Buell Duncan is general manager of IBM ISV and Developer Relations, Software Group. He is responsible for IBM’s worldwide relationship with independent software vendors (ISVs) and corporate developers, a strategic growth initiative in which IBM partners rather than competes with developers of business application software.