Are partner relationship management (PRM) systems dead? How will the shift towards partnerships ecosystems change the way we manage partnerships programs in the future? Change is here — this is how the industry is adapting to the world of ecosystems in 2023.
Indirect sales and channel marketing have been a pervasive presence in the technology sector since the PC revolution. They were a smart way to scale your salesforce by tapping into the sales teams (and connections) of other companies. But over the past couple of decades, the partnerships paradigm failed to capture the hearts and minds of SaaS companies who preferred to use data as the primary way to secure customers. Today, these two worlds, the indirect sales world and the data world, are coming together to create a new world defined by ecosystems.
What did partner programs look like in the past?
The story of a partner program has been fairly simple in the past: vendor meets partner. Partner tries to convince vendor they’re worth the vendor’s time. Partner sells vendor’s technology. Partner makes money, either by receiving a percentage of the sale or re-selling the vendor’s product or service at a mark up and offering value-added services.
Today, things are a little more complicated. The partner landscape has changed in three main ways:
- Previously, vendors held all the power. Now, partners are spoiled for options and can pick and choose which vendor’s products and services they prioritize.
- Customers expect more from vendors and partners. They don’t want to cobble together a solution from multiple companies. They want companies to collaborate on joint products, solutions, and implementations that solve their problems.
- The speed of digital transformation and heightened customer expectations make it impossible for vendors to be and do everything for customers. They have no choice but to embrace “co-opetition” and work with their competitors.
In short, companies are shifting away from one way partnerships and moving towards an interconnected network of partnerships: an ecosystem.
So in the past, a partner may have had access to a gated website where they could find sales enablement materials, learning resources, product info, and more. Over time, that developed into partner relationship management tools that allowed companies to track pricing, inventory, sales, discounts, and more. The problem with these traditional PRM tools is that while they facilitate a bi-directional relationship, the power is often one-directional. The vendor updates the portal, but it’s difficult for the partner to share their own information.
This works well enough for reseller arrangements wherein a partner is just waiting for a vendor to pass down the information they need for sales, but it doesn’t work for the kinds of partnerships that will define future ecosystems, which rely on co-selling, co-marketing, technical integrations, and co-innovation. What’s needed is a digital environment that can facilitate these co-operative initiatives.
Ecosystem-led partnership programs are a must for SMBs in 2023
Eighty trillion dollars. That’s how much annual revenue ecosystems will generate by 2030, which is a staggering third of total global revenue. It’s no surprise that this is the way things are going, since ecosystems are nirvana for customers. As Miklós Dietz explains in his report for McKinsey:
The result? Customers receive seamless service during their entire journey instead of having to stop and shop with different vendors. Put differently, it’s no longer just about market share, it’s about customer ownership as well. This phenomenon’s potential doesn’t only apply to enterprise-sized companies. It also applies to small and medium-sized businesses (SMB). If you’re selling a software as a service (SaaS) solution, the days of easily winning new customers through digital marketing and algorithmically-created funnels are over. Instead, SMB SaaS companies are going to have to shift their thinking from “go-to-market strategies” to “build-in-market” strategies.
What does that look like? Consider the fact that Slack had 15 million daily active users when it was topped by Microsoft Teams, which acquired over 125 million — all because Microsoft had an existing ecosystem of channel partners selling Microsoft products and companies that were already using Microsoft products. Getting these companies to use Teams was a simple add-on to their existing suite of Microsoft products. While Slack had a great go-to-market strategy, Microsoft had an unbeatable build-in-market strategy.
Other B2B SaaS companies must do something similar. Even if they don’t have the existing behemoth ecosystem that Microsoft boasts, there are still opportunities to create integrations with other SaaS companies, so that consumers get one seamless experience. Examples include being able to get Google Drive notifications in Slack. Or Zoom users being able to sign business documents directly within a meeting by using DocuSign. Or Chrome users being able to automatically check their grammar and spelling when typing an email thanks to a Grammarly plug-in.
SMBs will need more than traditional PRM solutions to turbocharge their emerging ecosystems
The trouble is this: traditional partner relationship management (PRM) systems don’t tend to have the breadth and depth of functionality that an ecosystem requires, and the companies of the future will need something more akin to a partner ecosystem platform to help them succeed. But before we dive into why this is the case, it’s important to understand what traditional partner management systems do offer.
Traditional partner management systems help vendors manage their relationships with partners. Typically, these partner management systems provide individual portals that a partner can log into in order to find information about products, messaging, marketing development funds, deals, and more. They also allow vendors to track deals and referrals for each partner.
The partner ecosystem platform (PEP) of the future
Many of these portals are limited in their abilities. They don’t offer companies and their indirect sales teams the opportunities to engage with their partners as frequently and as richly as they desire. Instead, vendors need partner ecosystem management (PEP) platforms that offer:
- On-the-go access: Cloud based tools give sales representatives the ability to tap into their partner ecosystem on the go, whether it’s from their smartphone, tablet, or laptop.
- Interactive experiences: Vendors can give their partners live demos or interactive tours directly through the platform.
- Deep and meaningful metrics: Traditional partner platforms focus on very bottom of funnel, transactional metrics. Newer platforms will need to provide richer metrics on other areas of the vendor-partner relationship such as level of partner engagement, how much engagement a partner’s employees have had with the vendor’s educational materials, co-selling metrics, strategic alliance KPIs, and more.
- Sophisticated access controls: Different people within a vendor’s organization (and a partner’s organization) will need access to different materials.
- Learning management system (LMS) component: Your partners’ employees will need to stay up-to-date on your product messaging, your latest products, and more. Providing a learning management system that makes self-directed and contextual learning possible for a partners’ employees is key.
- Multi-directional data sharing: Traditional partner relationship management systems have a one-directional approach. The vendor shares information with each vendor through their individual portals. Today’s emerging ecosystems require data sharing between vendors and partners as well as between partners and partners. This makes extensive account mapping, opportunity development, and pipeline building possible without constant manual manipulation of spreadsheets or requests for access into a partners’ customer relationship management tool.
Perhaps the most distinctive feature is that a partner ecosystem platform makes it possible to have one-to-one, one-to-many, and many-to-many relationships. It also provides an environment in which vendors and partners engage with each other as equals. Your partners become organizations you sell with rather than organizations you sell through.
Previous partner relationship management tools were also very transactional and very linear. A partner would log into a portal mainly to register a deal so they could attribute the revenue. And often, this deal registration would happen at the last possible second to avoid any competition with the vendor’s sales team! Modern ecosystem strategies focus on cooperation and information sharing as early on in the opportunity as possible.
Does this mean that partner relationship management tools are no longer relevant? Despite the provocative title of this guide, the answer is no. Rather, they are part of the partner and ecosystem management tech stack rather than the only piece. As Jay McBain wrote for Forrester, today’s ecosystem tech stacks have to develop, design, and execute plans to:
These activities must also be adapted to what McBain calls the “trifurcation of partners into influencer, transactional, and retention categories.” With this in mind, he splits partner management technologies into seven categories:
- Partner relationship management (PRM)
- Through channel marketing automation (TCMA)
- Channel learning and readiness (CLR)
- Channel incentives management (CIM)
- Channel data management (CDM)
- Channel marketplaces, financials, pricing, and inventory
- Channel ecosystem management
The ecosystems of the future will need their technology stack to account for all of these categories.
What does the future of partner ecosystem platforms look like?
In 2022, partner relationship management solutions are still available, but these vendors are focused on expanding their current offering to incorporate the new world of ecosystems.
A textual analysis of the 26 companies McBain places under “partner relationship management” in his report on channel software tech stacks shows that 81% of them mention “ecosystem” or “ecosystem platform”, 4% mention “co-innovate”, 62% mention “co-selling”, and 77% mention “co-marketing.” While they may be identified as partner relationship management vendors, they are expanding their offerings to play a wider role in the tech stack McBain outlines. 62% of the vendors on his partner relationship management list are in at least one other tech stack category.
In 2023, we can expect that:
- Channel management roles within organizations (large and small) will evolve to include “ecosystem” in their title or job description
- Traditional partner relationship management programs will continue to evolve into partner ecosystem platforms, with small- to medium-sized SaaS businesses in mind
- Partner relationship management and partner ecosystem platform vendors will continue to expand the number of possible integrations with their platform
- The focus will increasingly be on facilitating many-to-many relationships in addition to one-to-one and one-to-many ecosystem relationships
- What McBain calls Minimum Viable Channel Programs will become more prevalent for companies, particularly small to medium-sized businesses who think that they are not ready for a channel partner program
- Platform companies will start to move away from reseller programs and towards co-selling, co-marketing, and co-innovating
- More companies will start to publish their total cost of ownership (a number that has traditionally been hidden) and then offer the complementary services that create that TCO from within their own ecosystems, because they can win 200-300% of the deal at 75% margin
- The partner experience will become more automated and offer more self-service options, so that vendors’ partners will more easily be able to get onboarded, be engaged, educate themselves, etc., without requiring as much manual work — this will free up face time for creative activities, problem-solving, and innovation.
As traditional companies shift towards consumption-based business models and SaaS companies crop up to support them, ecosystems will be more important than ever.
Once upon a time, partner programs and channel resellers were largely the domain of big tech companies or telecommunications providers. Today, a SaaS company with a handful of employees can trigger exceptional growth by embracing an ecosystem-based business model. For this to be possible, however, the traditional partner relationship model has to reinvent itself. The linear, one-directional portals that once dominated partner relationship management must now make way for partner ecosystem platforms that facilitate one-to-one, one-to-many, and many-to-many relationships through data sharing, automation, flexibility, and self-service.
The ecosystem-based future is here. It’s up to your organization to embrace it.