Ecosystems. It’s the new buzz word in the B2B SaaS world, and for good reason. As business needs grow more complex, customers need integrated solutions, not siloed offerings and direct sales models. According to Jared Fuller, CEO of PartnerHacker and ecosystems expert, we’re entering the “era of partner ecosystems.” The era of easy direct sales in the B2B SaaS world facilitated by readily available data is over. Consumers are tired of being ushered into funnels based on algorithms, so they’re consolidating their networks and looking for trusted voices to help solve their problems.
Enter ecosystems and the channel partnerships that make them possible. Tech channel partnerships have existed for decades, but they’ve long been considered the domain of enterprises like Microsoft, which makes 95% of its commercial revenue from partners.
It’s time for B2B SaaS companies to mix old world channel sales with new world data-driven customer relationship management to create an exceptionally better world: an ecosystems-driven world filled with win-win channel partnerships.
But how exactly are SaaS companies supposed to do this? There can be limited resources for SaaS companies, making it difficult for them to figure out where to start. If you’re planning on launching an ecosystem in winter 2022 — or you’re just getting started developing your channel partnerships — this guide will help you get sorted.
Let’s get into it: here’s what to expect if you launch a B2B partner ecosystem in winter 2022.
Get your bearings: Understanding what a technology ecosystem is
First, it’s important to understand what an ecosystem is. In the traditional sense, an ecosystem is a collection of organisms that interact with and benefit from each other. When you think of a tech ecosystem, just swap out the word “organisms” for “companies” and you have the right idea.
In a simple sense, a technology ecosystem is a network of companies that work together for mutual benefit.
Just like in the natural world, there are all kinds of different organisms (companies) and all kinds of different interactions (partnerships) and pathways (channels). Tech ecosystems can span across industries and be composed of many, many companies — the key is that each is interconnected and each partner in the ecosystem can benefit from the relationships created with others.
What is a channel partner strategy?
A channel partner strategy is how you use third parties or indirect sales channels (people outside of your organization) to help you do more business. Your strategy could focus on using channel partnerships and channel partner programs to accomplish any number of business goals including:
- Finding new customers
- Growing market share
- Expanding into new geographies
- Expanding into new verticals or market segments
- Creating entirely new markets
- Increasing demand for your products
- Delivering outsized value by solving complex customer problems through integrations
What are examples of channel partners?
Original equipment manufacturers (OEM)
These are companies that build products, like laptops, CPUs, or keyboards. Over time, this term has expanded and can now refer to both:
- Companies that build a product that is then sold under another company’s name
- Companies that build a product that is used in the creation of a more complex product (e.g., the CPU that is used in a laptop computer)
Original equipment manufacturers can play a big role in the channel partnerships world. In some cases software can be considered “original equipment.” When a manufacturer like HP or Dell builds a computer and bundles it with the Windows operating system, Microsoft can be considered the original equipment manufacturer. Windows has become synonymous with personal computing, but it’s important to remember that computers don’t have to use the Windows operating system. This dominance is the result of having hardware manufacturers as channel partners.
Independent software vendors (ISV)
An independent software vendor makes software applications that cater to a specific need or business use case. Before the PC revolution, a piece of traditional software could retail for tens of thousands of dollars. Once ISVs turned PC sellers into channel partners, it was possible to sell a piece of software for under $100. It’s easy to take for granted the applications that are available on our end user devices, but in the early days of personal computing, this availability was often the result of clever partnerships that extended the reach of software through indirect sales channels. Examples of independent software vendors include Oracle Corporation, SAP, and Nutanix.
Value-added resellers (VAR)
Value-added resellers are another important sales channel. A value-added reseller takes a product offered by a vendor, like an independent software vendor, and by bundling additional features, can sell that “amped up” version of the computer hardware or software components to its network at retail prices. Examples of value-added resellers are CDW, Insight Enterprises, and SHI International Corporation.
System integrators (SI)
Another entity in channel partner programs is system integrators. System integrators are solution providers that are similar to value-added resellers, but they tend to deal with more complex customer needs that bring a number of solutions together. These projects can span different use cases and geographies and take years to implement just one customized solution. Turning service integrators into channel partners can make a big difference to a vendor’s business. If the service integrator understands your technology and encourages its employees and IT consultants to train in your technologies, the number of end users (think: massive enterprises) whose solutions include your tech will only grow. Examples include Accenture, Cognizant, and Capgemini.
Managed service providers (MSP)
A managed service provider handles the ongoing, day-to-day work needed to manage a company’s IT environment. This includes activities like data security or monitoring a client’s network infrastructure. Partnering with managed service providers extends the number of enterprises that rely on your tech. There is a significant amount of overlap between systems integrators and managed service providers, since an enterprise may hire the systems integrator that built their solution to manage it for them as well. Examples of managed service providers include Infosys and Cognizant.
This isn’t an exhaustive list, but it should give you an idea of the types of organizations that can be part of channel partner programs. Smaller-scale IT consultants and established distribution channels can be part of the mix, too. Also keep in mind that there can be overlap between the services offered by different partners.
What are the different types of channel partner relationships in an ecosystem?
Now that you know the different categories of players, let’s take a look at the types of channel partner relationships that can form in an ecosystem.
Transactional partner relationships
In these partnerships, the focus is on the transaction. Two companies work together to get a customer to buy a specific solution. These can be facilitated through:
- Referral programs: Existing customers recommend your product or service to a potential customer and get a percentage of the revenue when someone purchases technology products.
- Affiliate program: An entity that isn’t necessarily a customer recommends your technology products and shares a personalized link that their audience can use to make a purchase. When they make a purchase, the affiliate gets a cut of the proceeds.
- Reseller program: An organization uses their own sales force and network to find new buyers for your product. They purchase your product at a wholesale price and then sell it at a higher retail price. This is evolving, since the shift from licenses to subscriptions has made this sales effort more complicated.
Transactional partner programs require platforms that make it easy to track referral and affiliate revenue as well as share product information with partners. It’s the easiest way to dip your toes into the ecosystem business model.
Co-marketing and co-selling partner relationships
These partner relationships take things a step further. In this case, an affinity brand (someone who offers products that complement yours but don’t necessarily compete with yours) markets and sells your products to their customers as well. These are big in the financial services industry where co-branded credit cards are popular and benefit from another company’s brand reputation. A credit card company will partner with a hotel chain or airline, because they want to target a specific customer profile. In the tech world, a co-marketing relationship might take several forms:
- Sharing case studies where customers solved a business problem using products or services from Company A and Company B
- Including a description of Company A’s products and services on Company B’s partners page and vice versa
- Including a landing page of Company A’s products and services on Company’s B’s website and vice versa
- Co-sponsoring industry events or research reports
- Training sales teams to become channel sales teams by selling Company A’s products and services in conjunction with Company B’s complementary products and services, and vice versa
This next type of partnership takes things even further. Whereas the first type of partnership is more transactional and the second marketing-driven, technology partnerships require one or both partners to get nitty gritty and invest significant time and resources.
A technology partnership involves linking your solution to another company’s solution so that end users get a seamless experience. Consider the Slack and Google Workspace partnership which offers:
- Native access and notifications: Users get Google Drive notifications about access requests, newly shared files, and more directly within the Slack interface where they’re spending most of their time
- Instant permission granting: Slack instantly alerts you if you share a file to a channel where participants don’t have the ability to view it
- Rich previews at a glance: Get a quick glimpse of Google Drive files without having to leave the Slack interface
In some cases, companies are platform companies meaning they offer a common foundation that others can build upon. In other cases, companies are platform extenders, meaning they don’t have a platform, but they can enrich other platforms through a mutually beneficial relationship. In this case, Google is the platform and Slack is the platform extender.
This is the ruler of partnership arrangements and offers participants an epic competitive advantage. The term “strategic partnerships” can be amorphous and cover all kinds of partner arrangements, but the hallmark of a strategic partnership is co-innovation and co-creation. This is when two (or more) companies put skin in the game to work together and solve a real customer problem.
This is becoming more and more important as companies embark on complex digital transformations. Customers no longer have the patience for silos and competition that prevent them from getting work done. Tech companies are aware of this and they’re moving from fierce competition to “co-opetition” where they work on more strategic technology initiatives that generate value greater than anything they could do on their own.
You can see these kinds of partnerships happening with the major technology providers. At first glance, you’d think that legacy IT providers wouldn’t want to work together with the big hyperscalers. In reality, there’s more value in joint efforts. Large enterprises don’t want to throw away the enterprise-grade systems and expert teams they’ve built using specific solutions. At the same time, they want to benefit from the agility of cloud computing solutions. The result has been strategic partnerships and joint investments to make enterprise-grade technology available within cloud environments. Examples of these kinds of partnerships include:
- VMware (legacy virtualization company) and AWS (hyperscaler)
- SAP (legacy enterprise resource planning software company) and Google Cloud (hyperscaler
- Oracle (legacy database management software company) and Microsoft Azure (hyperscaler)
- NetApp (legacy data management company) and Microsoft Azure (hyperscaler)
Strategic partnerships go beyond marketing and channel sales teams coordinating to meet at a trade show in Vegas or Miami. It requires C-suite investment in resources so engineering teams from both companies can co-innovate and create joint solutions that make customers’ lives easier. A partner doesn’t just access a vendor’s customers, they access the vendor’s resources as well.
Yes, it’s a lot of information, but it’s information worth knowing. Why? Because launching an ecosystem can be incredibly complex. You need multiple entities to buy into your ecosystem in order for it to function. Results can feel choppy and non-linear, especially in the beginning since it can take anywhere from 9 to 12 months for a partnership to start delivering value. And as Allan Adler explains, the ROI won’t be as easy to calculate as it is for your sales, marketing, or product teams.
Understanding who the players are and the different types of channels available can help you focus your efforts.
Choosing your ecosystem’s initial focus and long-term vision
Okay, so where do you stand in this mix? Consider the advice offered by Shopify partnerships pro Brian G. Peters. The first thing he recommends doing is identifying whether you are (or plan to be) a platform company or a platform extender.
If you’re a future platform, you’re building something that could potentially be used as a “source of truth”, like Salesforce. Salesforce is the base of customer data and then others build on top of it. The company has a marketplace for apps called AppExchange for everything from apps to plug-ins. They’ve also got a massive network of 124,000 experts and over 350 resellers. Moreover, analysts predict the Salesforce ecosystem will be six times larger than Salesforce itself by 2026. Other examples of platforms are Google’s Android operating system, Apple’s iOS operating system, and Atlassian.
If you’re a platform extender, you’re someone who offers a capability that can be helpful to other platforms. Examples of platform extenders are Zoom or Slack, which are meeting and messaging functionalities that can be added to other platforms.
The type of product you’re creating helps determine how to pursue a partner or channel strategy. That said, all the different types of partnerships are available to you. The difference is that platform extenders will have to spend more energy demonstrating why they are better than another platform extender when they are trying to:
- Pursue technology partnerships (e.g., using APIs to integrate with other platforms)
- Pursue sales partnerships (e.g., encouraging other platforms to become channel sales partners and sell your application to their community of users in exchange for a cut)
- Pursue strategic partnerships (e.g., investing in long-term co-innovation projects together)
Peters explains that if you’re trying to form enough partnerships to eventually form an ecosystem, you’ll likely face the chicken-egg dilemma, depending on what stage your company is at when you launch your program.
To have an ecosystem that is meaningful, you need multiple different partners using your product. Those partners need to be convinced that your solution is worth their time investment. So in the beginning, your goal should be building a rock-solid product that delivers value to customers. If you haven’t accomplished this yet, it’ll be hard to build an ecosystem since no one will want to be dependent on your your company.
One way that Peters recommends overcoming this dilemma is to build your integrations in house. Talk to your frequent customers and find out what problems they are solving and what tools they are using. If there is a natural integration between your product and those products, find a way to integrate that tool. You’ll demonstrate the value of your product not just to those users, but to the other companies who can give their customers a better user experience without having to spend any extra money. If you don’t have the in-house resources to make this happen, consider hiring an agency.
Only once you’ve acquired a considerable number of users and begun to demonstrate your product’s value through several integrations should you start targeting high value technology partners.
For the purposes of this article, we’ll assume you’re a beginner with the following profile:
- You have a solid product that your users love, and that your potential reach is bigger than your current salesforce.
- You have buy-in from your leadership team, a dedicated partnerships person, and investment for your partner ecosystem.
- You have invested in the right technology to manage your ecosystem, such as a partner relationship management (PRM) tool or partner portal for information sharing.
What to expect in the first quarter after your ecosystem launch
Your partners might not care as much as you think
Getting this partnership off the ground was a big lift. There was sweat, and maybe you even drew a little blood. Stay buckled down, because there’s more to be done before you can start realizing the value of your ecosystem.
Signing a partnership deal is not the same as signing a service contract where there are specific service-level agreements an entity has to meet, so it’s important not to assume the following:
- That your affiliate partners will put serious thought and energy into promoting your business just because you’ve given them a personalized link and the promise of incentives.
- That your reseller partners will give your products preferential treatment over other vendors.
- That your partner company’s salesforce will invest time into learning about your products’ unique value proposition and mention our products in conversation with your customers.
- That your partner company’s customer success and technical support teams will know how to coach users and provide technical assistance on how to integrate with your products and services.
Don’t assume that a partnership that matters to your company matters to the people on the ground. If you want your partnership to be meaningful, you’ll have to align it to what your partner organization and its people care about. You’ll also need to make it easy for your partner to get the information they need. It’s about constantly asking, “What can I do for you?” not “What can you do for me?”
Ongoing marketing and messaging work for your dedicated affiliate or partnerships marketing manager
Once you add people and organizations to your partner program and give them access to a partner portal, they’ll still need ongoing technical support and training. Your dedicated partner marketing team member will need to help with:
- Best practices for sharing affiliate links such as creating dedicated landing pages that request contact information or share a special offer
- Tips on what kind of content is best for sharing affiliate links such as demo videos, review blogs, or resources pages
Your affiliate and partnerships manager will also spend time:
- Sourcing new affiliate partners and crafting criteria to refine the candidates who apply to the affiliate program
- Developing educational marketing materials and email campaigns to keep affiliates and partners engaged and informed
- Updating the affiliate portal with product information, new messaging, and brand guidelines
- Monitoring affiliate activity to ensure they are representing your brand and products correctly
- Answering questions from partners and handling overall project management
The need for ongoing training for channel sales teams at partner organizations
Don’t assume that your partners’ in-house sales team will automatically become your channel sales team and start selling what your company’s offering.
As Sunir Shah explains, these sales partners will sell their core product because it’s what they know, and they will only deviate from this and talk about another product when it solves a customer’s problem or helps the customer move closer towards buying the core product.
This is why making sure your partner program launches in close conjunction with your partner’s sales, marketing, and customer support teams is essential. It helps ensure there’s enough messaging and support for your channel sales partners around why this partnership is valuable.
It’s also why having the right technology, like a partner relationship management tool, is so important. For instance, with AI-driven tools, channel sales associates can be served the exact information they need about a specific partner-enabled product when they need it.
As Jesse Shipman explains, a whopping 90% of B2B channel sellers don’t use partner or ecosystem enablement materials because they’re hard to find or just plain unhelpful. So it’s vital that companies go beyond what Shipman calls “static content” and create dynamic content that empowers channel sales teams to become problem solvers and understand how specific partnerships work so they can adjust the message based on a customer’s need or based on the participation of other partners in the ecosystem.
Difficulty identifying which metrics matter
As we mentioned earlier, metrics won’t be as straightforward as they are in other departments like sales (e.g., more revenue) or customer success (e.g., more retention/renewals). But Sunir Shah offers three ecosystem KPIs to consider:
- Demand: How much demand are your partnerships driving towards the top of your funnel?
- Retention: It’s not just about customer acquisition. Are your partnerships making your product adoption stickier? Are ongoing engagements and services from your partners making your solutions more valuable to end customers?
- Higher average revenue per account: Are your partners upping the value of each customer through cross-selling and upselling?
If you can start to track these metrics, you can demonstrate the value of your ecosystem to both your senior leadership and your partner’s senior leadership. And these results can:
- Create excitement for even deeper partnership like strategic co-innovation projects
- Encourage your partners to spend more time promoting your partnership within their organization
- Lead to case studies that bring in additional partners and expand your ecosystem
As your program evolves into strategic partnerships, you can focus on KPIs that address:
- Development of innovative products build on top of your technology
- The number of employees and IT consultants within your partner organizations that get training in how to sell or use your technology
You’ll need to evolve your ecosystem as it grows
If your ecosystem is successful, you’ll need to help it evolve. This means expanding on your existing framework. In the beginning, your partner program may only consist of affiliates or referral partners. Over time, you might need to expand your program to include different partnership levels (e.g., bronze, silver, gold), certifications in your technology depending on how much interest there is for training, and even awards.
To evolve your program, you’ll need the right technology. Having the right technology in place helps you deal with the important, yet granular elements of ecosystem management, so your team can focus on the human interactions required to make partnerships successful. PartnerStack offers either a partner management system to use to run your ecosystem, or you can take the opposite approach and join our own partner ecosystem and connect with complementary B2B SaaS companies.
The future of B2B SaaS sales sits in the ecosystem. It’s time to create your own.