Today in IT services world there is a web of partnerships between various product vendors, value added resellers, IT consulting companies and IT services providers. To illustrate, Wipro has partnership with SAP, Oracle, HP, IBM, Seebeyond, Cramer, Infovista, Metasolv, Oblicore, Openet, Subex & several others. eSilicon has alliances with Cadence, TSMC, Agilent, TSMC, ASE, Amkor etc.
Companies enter into multiple alliances because it is one of the cheapest, fastest and easiest ways to grow your business and test new market opportunities. For example, Wipro can now sell IT services to an European Telecom operator because the telecom operator is using Subex software - and wipro know how to integrate Subex's billing software with SAP & Oracle. Product vendors on the other hand win by getting IT service providers to do marketing for them. Since Wipro supports Subex, Wipro will recommend for additional software licenses of Subex to the telecom operator if necessary. This prevents a competing product from Convergys being sold.
Another good example is the relationship between Cell phone operators and cell phone manufacturers: See how Nokia markets its handsets through Cingular. http://news.yahoo.com/s/ap/20060912/ap_on_hi_te/cingular_nokia_smartphone_1
Today the joint marketing efforts are seen everywhere. However, managing marketing partnerships is not easy. There are several challenges to make it successful. To build a successful marketing relationships, I follow the following rules:
- Define what you want
- Define who you want as a partner
- Develop a fair business sharing model
- Be creative
- Keep it simple
Rule 1: Define what you want
If you want access to a particular market, partner with a company who will help you to sell into that market. For example, Wipro can partner with Convergys - wherein Convergys will train Wipro engineers on it's "Geneva" software and together Wipro & Convergys can pitch for Telecom billing solution at British Telecom. Similarly, eSilicon can have an alliance with ARM and jointly market their silicon solution for HP.
Before you begin talking to partners, know why you are seeking partnerships, and how you will measure success. Start with a small test first, to see if the results meet both parties' expectations, then roll out the partnership in a larger way. The small test should be a business opportunity - wherein you can test: Working relations, sharing the gains, work cultures etc.
Ask yourself:
- What are you testing?
- How big is the opportunity?
- What economic terms will work?
- What are your showstoppers? Areas where you can't be flexible?
- What metrics will you be using to evaluate success?
You also might ask, "How will we know if this partnership is successful?" You can't expect the other side to know what is important to you - make sure that you know!
Rule 2: Know who you want to partner with
Once you have decided on what you want, the next question is to decide on who you should partner with? Today most IT services companies get dozens of calls each day from suitors wanting to "partner." These callers might include the following:
Technology partners: They have a product that can make the company more efficient.
Resellers and agencies: They will work on commission to sell the company's product.
Providers of complementary products and services: They want to bundle their products/services with yours
It is up to you to know what it is you want. Look at your corporate objectives and the metrics you are using to assess success, and talk only with potential partners who can help you achieve your goals.
I'm currently developing vendor partnerships with a leading Silicon Valley company. My objective is to offer value added services on top of my partner's products to a telecom service provider. My objective is clear - to provide IT services. My partner's objective is also clear - to sell more software licenses & have a secured future revenue through annual license fees. My customer's objective is to ensure that they get the best quality of service and network reliability for their money.
This situation has a potential to create problems between partners. My company which is providing the IT services has to ensure that the customer is getting the value for money - so in order to do that, we recommend a certain number of software licenses from my partner - say 8 copies of that network management software is needed. But my partner thinks that the customer will need 10 copies. Extra copies means more money for the software vendor - and that comes out of the existing budget - which in turn means less revenue for my company. This problem may get out of hand - and result in an acrimonious dispute between partners.
To overcome this problem, my recommendation is: Don't partners with those who are driven to sign a deal that they don't think through the issues; but do partner with the one who is motivated to work together.
Also, when thinking about who to work with; make sure you like them. If you find them difficult, unreliable or rude during the courtship phase, you probably don't want to work with them! After all, companies are just groups of people, so it's important that the relationships be strong.
Conversely, keep a list of people you've turned down, especially those you liked; after all, objectives can change, and people can switch companies. Maybe, down the road, that person could be a great partner. Keep track of people you like and trust.
Rule 3: Be fair
Being a "tough negotiator" works great in bazaars or used car lots. But not when you are going to be working with the other party long after the ink is dry. I like to start my negotiations with a good, fair offer for a few reasons.
First, it saves time. If it's good for you, and fair to them, there's a good chance they will accept the deal and you will have a fast close and be able to quickly start growing your business together.
Second, let's say you are able to "trick" the other side into a lopsided deal. Once they figure out that they aren't getting a fair shake, they will feel resentful of you (never good to have an angry partner) or will be no longer your partner in the next engagement try to maximize the value of working together.
Don't get me wrong, there is a big intersection between "fair for me" and "fair for you," and
within that range I'd like to maximize my side. But even if I can get a partner to sign a deal that I know is not going to make economic sense for the other side, I don't do it.
The most lucrative partnerships are always the ones that are profitable on both sides.
Rule 4: Be creative
Negotiation is not a zero-sum game. If you want new customers, and they want a great brand image, they may let you market to their customer base as a way of creating excitement through your brand. There are dozens of ways to measure success, and you and your partner may have complementary objectives.
Here are some very public examples of symbiotic marketing partnerships:
- Lay's BBQ Chips made with Masterpiece BBQ Sauce (Lay's added to its reputation for quality, Masterpiece got some branding and a big customer)
- Toys "R" Us using Amazon as its online channel. Amazon moved beyond books, and Toys'R'Us got traffic and someone to manage its online operations.
- Bayside Design partners with Open-Silicon Inc. Open-Silicon has a wider reach of customers and Bayside design has a niche package design technology - Open-Silicon can win high end semiconductor designs with Bayside's package technology. Bayside in turn allows Open-Silicon to market its customers.
- EDA tool vendor Synopsys has a tie-up with manufacturing fabs - TSMC, UMC etc. so that TSMC's customers will use Synopsys's tools for timing closure.
Spend at least a few minutes with prospective partners to build rapport, understand their objectives and explain yours. The broader the understanding, the more likely you are to find a way to let both sides win.
Rule 5: Keep it simple
This rule I learnt at Silicon Valley - Keep it Simple (stupid) a.k.a.. - KISS. Companies in Silicon Valley are rife with business partnerships - new partnerships are formed, old partnerships are dissolved on the fly - based on business needs.
Just as you want to start the discussions with a workable deal and quickly get to the final details, you also want to keep the implementation simple. Resist the temptation to include all kinds of protections, extra reporting and paperwork, as well as lavish integration plans to streamline data and communications.
Adding clauses for exclusivity and "most-favored nation" status seem like strong additions to a contract, but they can often slow things down, or even stop the deal. I avoid both of these types of clauses in the contract, because they can prevent you from making the best decisions down the road, and because they are just difficult to enforce, especially as the number of partnerships you have grows.
Put up with manual data entry and hand-cut checks for the trial periods. Try not to bring in the rest of the company (legal/finance departments) until you know you've got a winning deal.
Closing Thoughts
Making successful marketing partnerships are tough. Especially for a new company - or for a new business venture. The odds are that out of every 10 partnerships created, only one will be work. And for the joint market opportunities, the odds are even worse. Therefore one must have patience, persistence, vision, strategy and above all have an opportunity to succeed. Yet, marketing partnerships are worth the effort and in a complex world of IT services - partnerships are the way to grow the business and be successful.
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