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Channel partner ecosystems evolve to support digital disruption

Over the past several months, TBR has seen increased activity and interest around the topic of channel and alliance strategy across our 12 ICT industry coverage domains. While channel and alliance strategy is a pervasive topic, the intensity and tenor of the questions posed recently signal an increased focus around deploying industry-leading partnering strategies to pursue long-term growth.

Some of the common recent questions we’ve fielded from our clients include:

  • We’ve been partnering with global systems integrators (GSIs) for years, but our relationship in this emerging technology or service area is new. What is the right engagement model for this new area? What revenues can we expect? How do we establish a stronger relationship than our peers?
  • Our competition in this new portfolio area has stronger relationships than we do. How do we develop programs, incentives and recruitment strategies to secure partner engagement?
  • What are the right partners to engage with to achieve our objectives in this area? What type of programs, engagement models, incentives, benefits and management structure will resonate with those partners?

While these questions themselves aren’t entirely new territory, the systemic market forces that underpin them are certainly disruptive to partnering models for many ICT providers. The quote below, from TBR’s 1H18 Cloud Applications Customer Research, speaks to how the economics of cloud and digital IT consumption impacts the role of the services partner in applications deployment:

“Partners are still an integral part of almost every deal we do, but most deployments are no longer $10 million to $20 million to get it installed — now [it’s] just about $1 million. Many companies have shrunk their IT departments over time because of cloud, leading to skills gaps, so partners are so important.”

Senior Director of Procurement, Telecommunications

Partners will continue to fill a critical role for enterprise customers and, by proxy, leading technology companies, but digital disruption will continue to shift how vendors think about partner roles. A few ways we are seeing technology disruption impact vendors’ partner programs and strategies include:

  • Self-developing Partner Ecosystems: Firms are creating formal programs and incentives to encourage partner-to-partner relationship development and joint go-to-market activity (i.e., a marketplace ISV engaging with a reseller to jointly support a customer).
  • Partner Stickiness and Specialization: Leaders use partners as a conduit to specialize by industry, use case or region, and are encouraging partners to expand portfolios and enhance industry and/or solution specialization (i.e., cross-training ISV partners as implementers in an industry).
  • Partner Journeys: Vendors are reconsidering traditional partner tier structures and aligning program tier requirements and benefits to reclassify partners around long-term value opportunity versus purely revenue generation.

I’ll be conducting a webinar on Wednesday, April 17 at 1 p.m. EDT that will dive into these trends and others in greater detail. Click here to register for the webinar. For questions on this or anything else, you can contact me at [email protected].

Channel partner ecosystems will evolve to support digital adoption

An exclusive review of TBR’s ongoing analysis of ICT vendors’ go-to-market strategies and Tailored Services capabilities

Shifts in customer consumption preferences and efforts to accelerate revenue expansion in high-growth business segments continue to transform the go-to-market motions of leading technology and professional services vendors. Vendors are increasingly relying on their channel ecosystems to create self-sustaining economies that support their financial and strategic objectives in cloud, Internet of Things, artificial intelligence, digital, and other disruptive technology and services segments. As part of this effort to pursue channel-led growth, vendors are investing in new and revised channel partner programs, structures and strategies, and new partner types and ecosystems are emerging around major technology domains.

Join TBR’s Bryan Belanger and Colin Naples April 17 for a review of:

  • Major recent channel and alliance strategy trends and developments observed across TBR’s technology market coverage domains
  • Expectations for channel and alliance strategy trends and developments across TBR’s technology market coverage domains in 2019
  • TBR’s perspective on the importance of competitive channel strategy benchmarking, as well as recommended best practices for vendors to use in benchmarking competitive channel programs, structures and strategies

 

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

The Big Six, the 150, and the future of Accenture’s alliances

Like nearly every IT services vendor TBR covers, Accenture professes to follow a technology-vendor-agnostic approach to making client recommendations, but we have noticed how the company — in addition to managing over 150 tech vendor partnerships — forms strategic business groups with core partners, such as SAP, Oracle, Amazon Web Services (AWS), Cisco, Pivotal and Google, not to mention the joint venture with Microsoft (Avanade). Given the initial structure of the Accenture-Apple partnership, we expect this may formalize as a Business Solutions Group as well. Augmenting its large partner ecosystem capabilities often requires Accenture to team up with regional firms (e.g., Sompo Japan Nipponkoa Insurance and Daiichi Kotsu Sangyo) to demonstrate how Accenture partners at the local level to gather insights and test technologies in specific industries. The alliance strategy makes sense for such a large firm with a diverse set of offerings and capabilities, but in today’s market, which is flooded with emerging technologies, we have to ask what market and competitor changes will alter Accenture’s strategy.

What’s changing?

As the market evolves, Accenture’s do digital, be digital approach has impacted the way the company forges and manages its alliance relationships. The influx of startups presents a great opportunity for Accenture to expand its reach into new areas such as artificial intelligence (AI), blockchain and the rest of the alphabet of new technologies. Part of the Accenture Innovation Architecture, Accenture Ventures has played a critical role in this evolution as it has taken Accenture’s alliance strategy to the next level, creating a bridge between acquisitions and strategic partnerships mainly through minority investments in vendors such as Ripjar. The additional commitment and risk sharing demonstrated through minority investments is a step in the right direction as new buyers can be skeptical when nontraditional vendors pitch new capabilities. But Accenture is an almost $40 billion organization with a predominant focus on Global 2000 clients, leading the company to heavily rely on its Big Six partners — SAP, Oracle, Microsoft, AWS, Salesforce, Google, plus the emergence of Workday on Accenture’s radar. TBR notes that recently Accenture’s leadership has recognized the importance of these partners, as platform-based services enabled by the soon-to-be Big Seven by these Big Seven are now generating over 25% of Accenture’s sales. So, is anything really changing? At the macro level, maybe not, but the “as a Service” economy has enabled Accenture to pursue opportunities within the midsegment market, which in our view is an even bigger strategic shift than bringing in Accenture Ventures. This move into the midsegment market creates opportunities for the small technology players to play in the same sandbox as the 800-pound gorilla.

With Accenture augmenting its strategy, how do the small guys get Accenture’s attention? TBR asks this $100 million question of the startups, but more importantly of Accenture too. Many rival IT service vendors have ramped up similar strategies and will now drop prices to meet clients’ demands for nimble, off-the-shelf solutions that may not require premium consulting expertise as much as strong back-end support (hello, India-centric vendors). So is Accenture ready for the next chapter of its alliance strategy? Possibly. Will data interoperability reduce the need for multiple large platforms and be the panacea for the small tech guys to fill in the blanks? Can Agile methodologies infect Accenture’s alliance strategy? Maybe. With Accenture, let’s recall that it’s all about process. To paraphrase the late Johnnie Cochran, if it doesn’t fit, you must quit. And if you’re one of 150, you’d better be better rather than good.

Hybrid, multicloud, reunited partners featured in TBR’s upcoming cloud & software research

Going into the second half of 2018, TBR’s Cloud and Software Practice anticipates providing additional research around a few issues that have been top of mind among TBR’s clients and our analysts. The common theme across the three issues highlighted in this report is the growing focus on how cloud and software are jointly being used to deliver real solutions for customers. Highlights of the research center on how establishing hybrid capabilities is a primary challenge for enterprises and a growth driver for vendors, from the initial design and integration through to the ongoing management and optimization of the increasingly complex environments. Additionally, offering multicloud is the first priority for customers and creates opportunities for vendors other than category leaders such as Amazon Web Services (AWS) and Salesforce. Lastly, partnerships that were previously threatened by cloud are now realigning for new opportunities created by on-premises hybrid delivery and solution bundling. Look for more insight into these topics in our upcoming research.

Hybrid enablement is an increasingly critical predictor of vendor success
There is no question that cloud and software solutions are being increasingly deployed into hybrid environments and have been for some time now. The real customer pain point in regard to a truly hybrid environment — one or more cloud assets integrated with one or more on-premises assets for the seamless flow and sharing of data — is around enabling each of the solutions to fit into the environment and integrate with the others for optimal utilization.

Cloud and software vendors alike are investing to capitalize on this growing opportunity around empowering enterprise IT departments to integrate sprawling environments on their own, with the help of automated tools and platforms. Salesforce’s acquisition of MuleSoft is one of the more noteworthy examples as it has vast implications for both Salesforce and the market. This is because MuleSoft offers licenses alongside its subscription offerings despite Salesforce’s “No software” mantra, and because many organizations utilize one or more of Salesforce’s cloud offerings, which will soon feature and/or be integrated with Salesforce Integration Cloud, a solution that will be based on MuleSoft’s well-known Integration Platform as a Service (iPaaS).

Software vendors are making similar investments, such as Red Hat announcing its own iPaaS — Fuse Online — and VMware’s continued updates to the vRealize cloud management suite. Additionally, many continue to expand their partnerships with cloud vendors and systems integrators to improve their hybrid technology and hybrid enablement portfolios, increasingly going to market with a software-led services approach.
Cloud brokerage and hybrid integration pure plays continue to generate buzz as well, providing attractive solutions for enterprise IT departments struggling to keep pace with integrations, orchestration and skill sets. We expect some of these vendors to be acquired over the next couple of years as cloud and software vendors look to quickly build out their hybrid integration and enablement tool sets.

Consolidation around leading PaaS & IaaS vendors does not reduce competition
The public cloud IaaS market, substantially made up of businesses that complement scalable infrastructure with general purpose PaaS, has consolidated around the four leading U.S.-based cloud vendors — AWS, Microsoft, IBM and Google — and one international vendor, Alibaba, which has been successful in the highly exclusive Chinese market and is diligently focused on effectively competing with these U.S.-based vendors on an international stage.

Among the insights gleaned from TBR’s upcoming Cloud Infrastructure & Platforms Customer Research, it is becoming evident that even in discrete use cases and niche industries, the general-purpose nature of these vendors has enabled them to be considered across needs. Many customers agree that there is a delicate equilibrium yet to be found in first balancing on-premises and cloud deployments, and then balancing vendor lock-in concerns, usage volume discounts, vendor specializations and multivendor environment complexity. TBR will closely watch and assess how each vendor overcomes its perceived downfalls and positions itself to help customers best weigh the benefits and drawbacks of increasing cloud adoption.

In particular, customers almost universally recognize Google Cloud as the third option behind AWS and Microsoft Azure, citing TensorFlow as a key technology that will drive Google’s growth into a more prominent cloud vendor, but in the same breath identify that Google’s enterprise vision has not matured from “talk the talk,” particularly outside of the executive office of Google Cloud CEO Diane Greene. Meanwhile, Azure has become a viable alternative to AWS for many customers that note general ubiquity in each vendor’s ability to support various enterprise needs. TBR expects the closeness in AWS and Azure functionality, strained by the maturation of Google’s enterprise vision and Alibaba’s increasingly competitive entry into Western markets, will cause the converging market to grow quickly around this competition.

Partnerships are being both stressed and created as the cloud market evolves
The increased focus on cloud delivery methods has certainly stressed many long-held partnerships between traditional hardware, software and service vendors. The model of solution creation, distribution, installation and support was one that had multiple participants in the traditional model but became more focused on the cloud provider in the transition to cloud. Cloud is also an opportunity for new or nascent vendors to take share in markets such as business applications, where SAP and Oracle have been dominant. SaaS vendors fill portfolio gaps and augment vendor offerings for verticalized use cases, enabling legacy players such as Microsoft and SAP to adapt and compete with born-on-the-cloud providers. An example of this shift in vendor landscapes comes with the release of Dynamics 365 Business Central, which will help Microsoft gain footing over SAP in the SMB space for business applications and provide new opportunity for Microsoft’s SaaS partners. However, as each vendor expands its cloud portfolio, its respective ecosystem will be required to adapt. SAP’s acquisition of CallidusCloud will improve the vendor’s position in the cloud front-office space, but it also places SAP in direct competition with its ecosystem of Configure, Price, Quote (CPQ) providers. Now more than ever, the market will see vendor shares susceptible to ongoing changes as the market for core business applications remains relatively immature for cloud.

Hardware and services partners were previously hard hit in the transition to cloud but will have more opportunities with a growing mix of public and private cloud options becoming available. Microsoft will continue to leverage hardware and services partners to deliver and implement its hosted private cloud, Azure Stack, which has already doubled its geographical reach in recent months. This new opportunity for longstanding hardware partners such as Dell EMC and Hewlett Packard Enterprise to collaborate in delivering Microsoft’s Azure Stack offering does little to offset the erosion those vendors have seen as Microsoft built out its own Azure public cloud offerings, reducing customer demand for hardware.

Note: TBR provides extensive, sustained coverage of the strategies and select performance metrics of all the vendors mentioned above, as well as their competitors and key technology partners. Contact the authors for additional details.

By Allan Krans, Practice Manager and Principal Analyst; Cassandra Mooshian, Senior Analyst; Meaghan McGrath, Senior Analyst; and Jack McElwee, Research Analyst