I recently attended the Google ISV Forum in NYC (May 8, 2023) which contained a lot of fantastic sessions. One in particular described how the “Triple play” of Google + Independant Software Vendors (ISVs) + System Integrator (SIs) could yield big outcomes for all parties involved.
For the last 3 months, in my role as Chief Product and Strategy Officer at ActivTrak, I’ve been focus on engaging with ISVs and SIs to build out partnerships that will extend the reach of our valuable #workforceanalytics data and platform to create win-win opportunities with partners alike.
With that session still fresh in my mind combined with my 30+ years of having executed large OEM agreements with other ISVs, and partnered with the largest SIs in the world such as Accenture, Cognizant, Wipro, Deloitte and more, I thought I’d create a mini guide to help anyone interested through the process of partnering with ISVs and SIs to build a successful ecosystem. For many experienced partner and alliances professionals, the info below may seem rather basic.
But for any Product Managers (PMs) out there looking to expand their skills and exploring the different partnership options, I outline the potential benefits and pain points, and offering tips for effective collaboration.
Wait, not so fast! How do you determine which companies are ideal to partner with? Well that’s a whole other article but briefly:
- Know your Buyer personas – You should already know which tools are likely to be shared by your target persona. However it maybe just as beneficial to think about adjacent personas. For example, if you sell to the CIO, and you have software that can reduce costs, the CFO might be an influential party. So an ISV that targets CFOs may provide synergies
- Ask your friendly neighborhood Analyst – Gartner and Forrester have the most comprehensive research which lists named vendors in specific categories. Gartner’s Hype Cycle in particular is an interesting resource since it lists the various market technology categories, and often provides insights into buyer inquiries that they receive on which tools could be best combined to solve a business challenge
- The competitor of your prospective partner is your other partner possibility – If there’s a Forrester Wave or Gartner Market Guide or better still an MQ of vendors in a potential target partner category, work your way through the list! Don’t discriminate. Smaller less established companies may be more apt to partner than the larger established vendors with formal partner gates you have to qualify through. But put your expensive analyst license to good use by arranging inquiry calls, which you can pick their brains around which companies are likely to partner. You might even get a warm intro or two, but at the very least the next time they speak with the potential ISV partner in question, they may mention you and your company.
- Just speak to your customers – Use your product council or Customer Advisory Board, and QBRs with your sales and customer success teams to find out which tools they use, and what they would like to see in terms of integration and synergy. You do this anyway through your normal feedback and roadmap planning process. The data might just be right under your nose.
Understanding ISV Partnership Options:
There are three primary partnership options to consider, each with its own variations. Note that the first two (GTM and Referral) do NOT require any product integration. Even the fourth (Reseller or OEM) may also not require any engineering effort. This is a crucial aspect of partnering that maybe counter intuitive to you as a PM. Look to the value from a channel and market perspective, and find joint customers who will dictate what level of deeper integration would make sense later.
a. GTM Partner:
- This is an initial exploratory partnership to determine compatibility
- Focus on securing a couple of mutual customer wins and creating marketing content together. But keep it simple since marketing has lots of higher priorities and unless you have a dedicated partner marketing manager or team, use simple blog posts, or presentations to your friendly mutual customer advocates to gauge interest and market opportunity
- No contractual obligations; it’s an opportunity to evaluate shared values and market fit
b. Referral Partnership:
- Involves one-directional or bi-directional lead sharing
- Maintain existing go-to-market (GTM) motions; establish a lead registration process
- Typically, referral fees range from 10-15% of revenue for deals closed within a specific timeframe.
- Prepare a referral agreement for each partner to ensure clarity and minimize legal complexities
- Leverage Partner Ecosystem tools – Utilize partnering tools to identify overlapping opportunities with SI partners. Platforms like Crossbeam and Reveal can help identify joint customers and target prospects for potential partnerships and drive partner-sourced deals
d. Reseller Partnership:
- Involves one-directional sales, allowing the partner to sell your app and provide tier 1 support.
- The ISV/OEM (Original Equipment Manufacturer) offers tier 2/3 support to the reseller, not the end customer.
- Requires significant planning, enablement sessions, sales materials, and support training.
- Market rates usually involve sharing 30% of revenue annually with the reseller.
By following these partnership options in order to gauge success gradually and avoid excessive legal, administrative work, and critically precious PM and Engineering time and resources, without early signs of shared value.
Understanding How to Partner with System Integrators (SIs):
Partnering with SIs can provide several benefits to your company.
a. Gateway to Target Businesses:
- SIs can help you target businesses in a growth stage, enabling access to larger opportunities.
- SIs lead transformation initiatives in specific departments or entire organizations.
- Your software can play a crucial role in their clients’ growth, increasing revenue and retention.
b. Focus on Product Growth:
- SIs handle consulting and implementation work, allowing ISVs to prioritize product development.
- Reduce the need for one-to-one client services, enabling more product-focused efforts.
c. Accelerated Deal Closures:
- SIs often introduce your product to clients as a recommended solution.
- Their existing relationship with clients builds trust and accelerates the sales cycle.
- SIs can influence client decisions, driving deals faster than direct sales efforts alone.
d. Discount Offering:
- Collaborating with SIs can lead to higher deal volumes, allowing ISVs to offer lower rates.
- More closed deals translate to increased Annual Recurring Revenue (ARR).
Potential Challenges with System Integrators:
While partnering with SIs brings significant benefits, it is essential to consider potential challenges:
a. Enabling Large SIs:
- Navigating and finding the right partners and practices in large SIs can be a challenge.
- SIs need proof of business opportunity for them to invest, so initial relationships with SIs typically only form with a few successful implementations for shared customers
- Larger SIs may have extensive employee numbers, making it challenging to maintain expertise and certifications for every employee working with your software
- That could lead to SI resources being under skilled in your software, this is when you need to pay special attention to provide “expert services” to help ensure the success of the implementation and to train, sometimes on the fly, the new SI resources assigned to a project (see risks below)
- Ensure consistent improvement and expansion of your software despite the complexities of managing multiple ISV partnerships.
b. Managing Risks:
- If SIs take risks with your software, errors can occur, negatively impacting the partnership
- Encourage SIs to consult your professional services team for guidance before implementing new strategies outside their comfort zone
c. Establishing Partnerships with GSIs:
- Getting the attention of a Global System Integrator (GSI) as a small ISV can be difficult.
- Research GSIs thoroughly to ensure your value proposition, product features, and success stories align with their interests.
- Consider starting with boutique SIs for experimentation before approaching larger GSIs.
d. Continuous Software Usage:
- SIs generate revenue primarily through services, emphasizing the importance of ongoing software usage by clients.
- Maintain open communication with SI partners to enable them in maximizing the value of your software, ensuring its continuous use within the client’s tech stack.
e. Fragmented Org Structure:
- Larger SIs often have fragmented organizational structures, making it challenging to expand across different projects.
- A successful integration within one project does not guarantee consideration for other projects.
- Understand the SI’s structure and identify opportunities to advocate for your software in new projects.
f. Tailored Sales Content:
- Your direct sales content may not resonate with SI partners and their specialized projects.
- Invest time and resources in creating customized sales collateral that aligns with SI partners’ requirements and addresses their clients’ needs.
A few more Tips for Partnering with System Integrators:
To ensure successful partnerships with SIs, consider the following best practices:
a. Enablement Resources and Certification:
- Keep SI partners informed about relevant enablement resources and certification courses.
- Help them stay up to date without overwhelming them with irrelevant information.
b. Establish Ecosystem Ops:
- Create scalable practices for your sales team to communicate and co-sell with SI partner teams.
- Understand the SI’s preferred approach and maintain regular communication throughout the sales cycle.
c. Transparent Communication:
- Be open about the involvement of your professional services team in ongoing client use cases.
- Prevent SI partners from leading clients astray by catching any potential mistakes early.
d. Attribution Tracking:
- Implement attribution tracking to measure the impact SI partners have on revenue.
- Allocate more time and resources to partners and tactics that yield the most success.
- Utilize Salesforce or similar tools to track partner influence throughout the sales cycle.
e. Establish Strong Relationships:
- Facilitate early connections between your CEO and the SI partner’s CEO.
- Strengthen relationships across teams to foster long-term success.
By following these tips and strategies, ISVs can foster effective partnerships with SIs, leading to increased sales, improved customer success, and the growth of a robust ecosystem. Successful partnerships require ongoing collaboration, effective communication, and shared value for both parties involved.
If you’re a PM in charge of your company’s platform, or charged with building out your API strategy, you no doubt already have spent time thinking about these partnerships. You may already be working with your partner/alliances team to identify key targets.
But here’s a word of warning, finding partners and building relationships is not easy work. There will be lots of times when an initial introductory conversation goes well, but then everyone “goes back to their day job” and momentum fizzles. It takes persistence, thick skin, and passion to open up the doors and to pitch mutually beneficial opportunities. You will have to create your own slides, perhaps getting help from PMM if they have availability, showing the art of the possible. But the good thing is that as you have more conversations, the pitch and slides can be refined to continuously get better. Think of it as an agile process, where the scrum takes place between partners. But expect to be ghosted, and don’t take it personally. It just takes a few like-partner-minded companies and a solid joint value proposition for sparks to fly.
Hopefully this guide has helped sharpen your understanding of the process, pitfalls and approaches to such partnerships will sharpen your all round skills as you continue to build a platform, and bring it to market for the mutual benefit of ISV and SI partners alike.