Technology partnerships between technology vendors and professional services are essential. Without external service providers to deploy and build projects on your software or platform, the ability for your clients to fully utilize your product is marginalized. All too often, however, I see vendors and service providers in conflict, chasing the same services revenue dollars.
Having spent twenty-plus-years working on both sides of the consultancy – vendor divide, this bugs me because working harmoniously leads to the best customer (and revenue) outcomes. In this paper, I’ll share my secrets to ensuring a healthy relationship between vendors and their partners.
Identifying the sticking points in vendor/partner relationships
Vendors get greedy
Yes, they do. Vendors sometimes see large projects that have much of the budget taken up by professional services who design, build and deploy an outcome for their mutual clients. The vendor can’t understand why they only get a small chunk of that hard-to-come-by client budget. So what do they do? They figure that as they have the skillset to install and configure their product, and they’ve been doing it for years, they should be the natural first choice for any client seeking advice on how they then use it in their business. The vendor often tries to convince the client that only their people can work on their software – we all know the scenario.
To avoid this, agree on both sides as to who will do what for a sale to be successful. If there’s a vehicle to shore this up, such as a binding agreement, then use it. Better still, agree up front on the outcome of all sales within an ongoing partnership arrangement (may be specific by type of product or service). When agreed beforehand, there are no surprises at the end and each party can accurately forecast potential revenue.
Margin dilution and professional services
Vendors are prepared to accept margin dilution in providing a team of professional services. As a vendor, they figure that so long as they sell their product, they’ll always have enough business to feed that team and besides, revenue is king right? The reality is that when times get tough, it’s the professional services team that get’s hit the hardest and first.
I generally believe that vendors need to be careful about investing in professional services.
It’s important that vendors accurately assess what they need to ensure the success of a core offering and how much dilution in overall margin they’re prepared to accept. The assessment of risk from maintaining a larger work force, that could at times be a cost, not a profit centre, cannot be ignored.
Waging war with IP
‘I’m the vendor and I know my product best’ vs I’m ‘external advisory and I know the industry/subject matter best’. Sometimes both statements are true. Often a client wants advice on how to deliver a solution – the vendor product is a part of the overall picture, not all of it.
Contests for revenue lead to a both parties losing out in the long run, broken trust breeds resentment and before you know it the partnership is over. Instead, get together and map out the ideal solution for each opportunity, not two sides of a greedy solution. Give the customer the very best possible outcome from both the product and partner/vendor services to support it. Work together to ensure a win for both – don’t debate each other’s share and risk winning 100% of nothing.
Two secrets to successful partnerships
1. Vendors should leverage external relationships and dependencies
Vendors should seek to get their partners so skilled on their product that partners can make a living off it, or at least a strong revenue stream. Vendors should help their partners become experts, invest in them, train them, reward them well, share leads and promote their partners.
Why?
Because a partner that builds a service line on your product will consistently look for ways to grow and feed their accounts once established. Those Partners will look at opportunities to keep those people utilized and billable – which then promotes vendor product retention, product usage and identification of new leads for the vendor. The vendor may give up revenue but increase margin while lowering the risk of an underutilization professional services team.
The partners are better geared to manage utilization fluctuation: most consultants are multi-skilled and can redeploy their skillset to other projects or products. Can you really see analytics vendor ‘Company A’ selling their services to deploy Open Source ‘Software B’? No, that would be ludicrous, but consulting Firm C can happily work on both products, keeping their teams billable.
When it comes to talking about IP and who’s best, let’s be honest, who cares about a ‘we’re better than them’ conversation when a vendor can proactively work with their partners and give their clients the best of both worlds? Yes, the vendor usually knows their products inner working better than most and yes the partner has more industry experience. So capitalize on this collective IP, get together and promote yourselves as a combined entity. Everybody wins.
2. Joint account planning and processes are key
Vendors and partners should get to know each other, work out who does what, what skillset each has. Know each other’s boundaries, limits and capabilities – more importantly, once agreed they should each stick to those boundaries. Get it in writing where you can.
When a partner knows where vendor services end (e.g. vendor installs, the partner does the rest) they can determine what’s in it for them and the size of each opportunity. We’re all coin-operated right? To that end, you have less conflict with the very channel that, when structured effectively, can be a positive lead generation channel for both. You can share opportunities, talk openly about prospects and pursuits – in the knowledge that you aren’t cutting each other’s lunch. The partner gets to sell the IP, skill set and capability of their teams, the vendor sells their software or platform.
Wrapping it up
Hopefully, the above tips can help you to build your own successful partner – vendor relationships. We’re all better together, after all.
As Head of the Partner Ecosystem at Data Republic, I’m personally committed to applying these principles to our diverse partner network. Together, Data Republic works with our partners to offer the most innovative data exchange projects in the market and to make them famous for their unique specializations.
Get in touch with me to learn more about how you can get involved in our Partner Ecosystem.