Partner ecosystems are growing in popularity, with almost a third of total global sales predicted to come from ecosystems by 2025, according to McKinsey. In previous articles on channel partner management, we’ve covered the partner ecosystem phenomenon and how programs can develop a partnership ecosystem framework. But how do partner programs make their burgeoning partner ecosystems successful?

To answer this question, we spoke with six industry experts. Our panelists include:

What is a Partner Ecosystem?

A partner ecosystem is a community of companies that play a role in delivering business outcomes to their customers. The ecosystem encompasses a range of pre-sale, sale and post-sale activities that extend far beyond the transaction between a provider, sales partner and end customer.

Kestin Impact Consulting’s Schildkraut defines it succinctly: “A successful [partner] ecosystem includes an interconnected or interdependent network of participating companies that work together to deliver technology solutions that address customer needs.”

Jay McBain, Chief Analyst – Channels, Partnerships & Ecosystems at Canalys, identifies six primary types of partnerships within a partner ecosystem, including:

  • Technology Alliances – Also known as an integration partnership, a technology alliance partnership is the partnering company’s products integrated to deliver additional value to the customer. Companies pursue technology partnerships if their platforms benefit from the additional capabilities and features of the partners’ solutions.
  • Strategic Alliances – Sometimes referred to as strategic partnerships, strategic alliances align the long-term goals of two or more companies. These are commitments with clearly articulated goals and investments for all parties. Companies may enter these partnerships because they have the same end customers or plan to enter a new target vertical with complementary solutions.
  • Business Channel Alliances – A channel alliance is an arrangement where a vendor engages a partner to resell, manage, and deliver the vendor’s product to market. The partner makes money through vendor referral fees, margins or commissions and by selling complementary services. The vendor benefits from the partners’ existing customer relationships and a faster go-to-market timeline. There are a few different types of business alliance partnerships in the IT channel, including:
    • Resellers
    • Value-added resellers (VARs)
    • Systems integrators (SIs)
    • Agency partners
    • Business process outsourcers (BPOs)
    • Managed service providers (MSPs)
  • Transaction & Transaction-Assist Channels – These partnerships facilitate vendor and end-customer transactions. Unlike business alliances, these partners only facilitate the purchase in exchange for compensation.
  • Influencers – Influencers refer to entities that “influence” the decision-making of an end customer to purchase a vendor solution but are not directly involved in the transaction. These partnerships typically involve companies such as:
    • Alliance partners
    • Consultants
    • Ambassadors
    • Advocates
    • Affiliates
  • Retention Channels – Retention channels refer to partner companies involved in helping to retain the use of a tech vendor solution by proxy through the delivery of the partner company’s services. Examples of companies that may be part of retention channels include:
    • Digital agencies
    • Healthcare companies
    • Construction companies
    • Legal or compliance companies
    • Transport companies
    • Accounting and CPA companies
    • Management consultants and other professional services

What Are the Benefits of a Partner Ecosystem?

We surveyed our panel to understand how both suppliers and partners benefit from the partner ecosystem go-to-market model.

What Are the Benefits of a Partner Ecosystem for Providers?

According to our panelists, the primary benefit for providers in adopting an ecosystem model is expanded market reach and delivery.

“Companies (providers, vendors) that have truly committed to the partner ecosystem model [have] learned that the growth potential and results increase exponentially by having the expanded reach and delivery to the market,” says Kestin Impact Consulting’s Schildkraut. “Companies can only reach so far with their sales teams and marketing resources. Partnering with others creates opportunities to expand business beyond existing customer bases. When these partner ecosystems [are] aligned and enabled, they serve as an effective extended salesforce.”

PartnerReady’s Plum shares a similar opinion. “Since a partner ecosystem is a multi-directional matrix of purchase influencers, SaaS providers benefit from a ripple effect,” says Plum. “By aligning with the right partners, providers gain exposure to their partners’ sphere of influence.”

Additional benefits for providers outlined by our panel include:

  • Higher close rates
  • Shorter sales cycles
  • More successful direct sales teams through co-selling with partners
  • Greater customer retention rates
  • Better customer experience (CX) due to dedicated customer focus by select partners

What Are the Benefits of a Partner Ecosystem for Partners?

Our panelists say the primary benefit to partners in joining an ecosystem is increased revenue through additional cross-sell and upsell opportunities offered by working with other partners in the ecosystem.

“This means that partners need to be open to partnering with other partners,” explains Schildkraut. “When everyone brings their expertise together, unified delivery is stronger than each of the parts. The outcomes yield more opportunities for growing customers and, therefore, revenue and growth.”

Ridge Innovative’s Ridge views the ecosystem as “the magic multiplier” — a gateway to not only increase margins but multiply partner revenue by layering on services, whether intellectual property, managed services or related products.

Partners can also work with ecosystem partners to add value to customer relationships, helping to solidify their role as expert advisers and more effectively retain accounts. “Partners who understand their place in the ecosystem are in a better position to leverage other players in the ecosystem, which includes peers, complementary service offerings, marketplaces and even competitors,” says Partner Ready’s Plum.

Plum explains: “An MSP who aligns with another ‘trusted advisor’ in their customer’s sphere of influence is in a much stronger position than a partner who is approaching them as a ‘single-threaded’ solution. Natural complementary fits include consultants supporting a customer’s cloud platform (i.e., Salesforce, ServiceNow, SAP, etc.).”

For more information on ecosystem benefits, check out our blog on why partner programs need partner ecosystems.

7 Tips For a Successful Partner Ecosystem Strategy

How can your company build and grow a high-performing partner ecosystem? Our panel recommends the following seven tips for success:

1. Develop Your Partner Ecosystem With Your Ideal Customer Profile (ICP) in Mind

Start developing your partner ecosystem by establishing your ideal customer profile (ICP) and work backward to determine which partners best serve that ICP. Without this vital first step, our panel agrees that your partner ecosystem may falter.

“[Providers] need to understand the influencers within the customer’s ecosystem, more so than our own,” says PartnerReady’s Plum. “Aligning with partners in our own ecosystem doesn’t help us if they have little influence over our target customer. Once we identify our customer’s influencers, we can seek alignment with those partners, resulting in a resilient, multifaceted, ecosystem strategy laser-focused on the proper target — our mutual customer.”

Ridge Innovative’s Ridge agrees that understanding joint value propositions between organizations is vital to having a clear “why” for the ecosystem relationships and recruiting influential partners.

To determine your ICP, answer the following questions:

  • What would a customer buy from you?
  • What problems do your products or services solve?
  • What business advantages do your solutions provide?
  • What is the age of your typical customer?
  • What is the gender of your typical customer?
  • Where do your typical customers live geographically?
  • How do your customers make money?
  • In what industries or verticals do your customers typically operate?
  • What are your customers’ pain points, and does your product or service address them?
  • Why would they buy your services over those of a competitor?
  • What are the most common or popular services you offer that your clients purchase?
  • What factors are your customers likely to consider before the purchase?
  • What do customers tell you they value about your services?
  • How do your customers typically discover your product or service?
  • How does the cost of your product or service influence your customers’ decision to buy?
  • What is your typical customers’ preferred method of communication?

Based on the answers to these questions, you’ll have a clear idea of your target customers and how best to reach them. From here, determine what other companies serve these customers and whether there’s an opportunity to partner with them to deliver your services.

AchieveUnite’s Caragol points out that providers must document partner selection criteria for channel managers who are front-line recruiters. “Establish criteria for selecting partners that align with your organization’s goals, values and target market,” says Caragol. “Ensure partners bring complementary expertise and resources to the ecosystem.”

2.   Build Partner Ecosystems on Long-Term Relationships, Not Only Quick Wins

Our panel notes that building long-term relationships is paramount for the ecosystem’s success, especially for providers accustomed to the short-term relationships common in the transactional partner channel environment. “[Partner ecosystems] involve fostering collaboration, trust and mutual success,” elaborates Caragol. “On the other hand, a transactional partner channel typically focuses on individual transactions and short-term sales.”

“From a practical perspective, the ‘long-term’ approach means potentially delaying your return on investment in the ecosystem,” says BuzzTheory’s Henderson. “Cultivating relationships with influencer and retention channels take time and may not pay off for months or possibly years, depending on the solutions you sell.”

Henderson cites the example of a conversational AI software provider that integrates with hosted phone systems or contact centers. “Partnerships with UCaaS or CCaaS providers for bundled offerings targeting enterprises have a high potential for a conversational AI vendor. However, the customer contracts can take months or years to close and deploy. Or, you might be one option available in the provider’s online marketplace. Either way, your return might not arrive in the current quarter or even the current fiscal year. Your leadership team needs to take the long view; otherwise, stick with the short-term transaction channel.”

PartnerTap’s Muller echoes these sentiments: “[Common challenges ecosystems face are] the investment it takes and the timeline [leadership] thinks it will bring revenue,” says Muller. “I have built channel programs for two large companies and first-hand experience learning from building [those] two different programs. It’s not an overnight sensation, nor is it a one-year timeframe.”

Muller cautions ecosystem leaders to think long-term. “Everyone thinks short term and wants the ROI yesterday,” says Muller. “This is where, as a channel chief, your experience and insight guides [leadership] in the right direction and reality sinks in.”

3. Expand Incentives Beyond Sales to Drive Results Across the Partner Ecosystem

Partner programs leveraging a transactional channel logically offer incentives tied to sales performance. Incentive programs for non-transactional ecosystem partners must be approached differently.

“Incentives in a partner ecosystem often promote collaboration among partners,” says AchieveUnite’s Caragol. “This can include rewards for cross-selling or joint solution development, as well as incentives for sharing knowledge, resources or leads within the ecosystem.”

Kestin Impact Consulting’s Schildkraut agrees that channel leaders should include incentives in ecosystem business plans.  “If partners help yield success, it’s important to acknowledge that in a meaningful way,” she says, noting that companies need to determine if partners are incentivized by margins or bonuses, for example. “Incentives are an investment, so clear goals and desired outcomes should be established, tracked and assessed.”

4. Simplify the Partner Experience (PX) Within the Partner Ecosystem

Our panel advocates that partner ecosystems be easy to do business with; otherwise, partners will take their business elsewhere. “You can have the best partners come join the program, but if the program itself [doesn’t simplify the] partner experience, your ecosystem will not succeed, no matter how much of an investment you put in,” warns Muller. “That’s why communication with your partner community is vital.”

Muller recommends involving your key partners in ecosystem building from the beginning by inviting them to provide insight and feedback on your strategy. “What better way to build a world-class partner program than [with input] from your world-class partner ecosystem?” says Muller.

5. Leverage Technology Platforms to Solve Ecosystem Revenue-Attribution Challenges

Attributing a closed deal or upsell to the right partner(s) becomes increasingly complex in an ecosystem environment. That’s because more than one partner may influence the sale.

Technology platforms such as partner relationship management (PRM) systems and customer relationship management (CRM) systems will help you track all parties involved in the deal.

“Proper tracking is critical to the growth and success of a partner ecosystem model,” says PartnerReady’s Plum. “Fortunately, there is a new generation of partner management systems designed with this complexity in mind.”

6. Measure Ecosystem Partner Performance & Conduct Quarterly Business Reviews (QBRs)

Program leaders should establish key performance indicators (KPIs) to measure the success of their partner ecosystem. Define clear metrics and incentive programs that motivate and reward partners for achieving mutually agreed-upon goals.

Our panel also advocates for holding quarterly business reviews with partners to evaluate performance, address any issues or concerns and identify opportunities for growth and improvement. “Use these reviews as a platform for collaborative planning and goal setting,” advises AchieveUnite’s Caragol.

7. Get Executive Buy-In to Manage Channel Conflict

Program leaders must secure executive buy-in to ensure a consistent ecosystem partner strategy. Without it, the risk of underfunding and channel conflict with direct teams can be high.

“Establishing guardrails or rules of engagement are key to ensure that partner engagements are complementary and non-conflicting with company go-to-market strategy,” says Kestin Impact Consulting’s Schildkraut. “Furthermore, it will be critical also to maintain support and resources that ensure a successful partner ecosystem.”

Competition and business conflict can be muddy waters to navigate. Yet, successful partnering can occur when mutual objectives and roles are defined.

“Years ago, we never thought we’d see corporate giants like IBM and Microsoft partnering together, or even IBM and some of the main hyperscalers who were considered competitors to IBM Services divisions,” explains Schildkraut. “Yet, today, we see major corporations successfully finding ways to jointly leverage strengths to deliver strong value propositions to the market.”

High-performing partner ecosystems are the future of partner sales motions in 2024 and beyond. Channel organizations serious about expanding beyond transactional channels should consider these tips when building and growing their partner ecosystems.