Software Partners Band Together

The result? More solution providers are partnering with each other to help close customer deals. With such a strategy, solution providers can combine strengths such as technical expertise or geographical reach, said Robert Deshaies, vice president of Microsoft's U.S. partner group. Establishing alliances can also reduce costs while mitigating risks, he said.

Customers today don't want a solution provider that can do everything, said Per Werngren, CEO of IDE Natverkskonsulterna AB, a Microsoft channel partner in Stockholm, Sweden. Werngren, who also serves as president of the International Association of Microsoft Certified Partners (IAMCP), said businesses want to work with solution providers that specialize in certain technical or business skills or have expertise in specific vertical industries.

Rose Business Solutions Inc., a San Diego-based Microsoft channel partner and application service provider that focuses on the vendor's Dynamics GP and SL applications, sometimes partners with other solution providers with expertise in other technologies, said CEO Linda Rose. Those partnerships include working with solution providers that install Microsoft Dynamics Retail Management System (RMS), a point-of-sale application, and Microsoft Project Server.

A first step to successful partnering for a solution provider is "really knowing where your boundaries are as an organization," Rose said. Understanding what a company is and isn't good at, and what the complementary solutions would be, are critical.

Werngren says executives from solution providers exploring a possible alliance need to meet face-to-face. "Doing it by e-mail doesn't work," he said. "You need to spend time with people building that trust needed to do business together." While he also recommends writing up a formal agreement spelling out the terms of the partnership, he said solution providers can't get so bogged down in the details of each company's responsibilities that they waste time and leave deals on the table.

"Sometimes trust can't be wrapped up in a document," Rose said. "Really strong communications are key. There's a level of trust and communication that's needed to make these work." She cited a case where her company's Microsoft RMS partner was handling the negotiations with a client in Hawaii that was having a problem. Rose worked with the partner to handle the issue, and the trust between the two helped them work through the problem.

Rose also suggested managing partner-to-partner relationships at the operational management level rather than the business development level. And partnerships are often best limited to a specific geography, not the entire world, Werngren said.

Some of the largest vendors, including IBM Corp., Microsoft Corp., and SAP America Inc., have figured out that there's a lot to be gained by managing their solution provider partnerships as a networked system rather a set of discrete relationships, according to a report from International Data Corp. Microsoft helps foster partner-to-partner relationships through its Partner Channel Builder initiative, a P2P resource on the vendor's partner portal. IBM does likewise through its Value Nets program, as does SAP with its PartnerEdge P2P Network.

As of May 30, some 3,000 partner-to-partner connections have been made through Microsoft's Channel Builder program this fiscal year (which ends June 30), according to Microsoft.

Rose said she identified her partners with help from her Microsoft partner account manager rather than through the vendor's formal P2P program. The IAMCP also plays matchmaker between Microsoft solution providers through its P2P services and in 2007 the organization handled some 8,000 requests from solution providers to help identify potential partnerships.

Nearly 11 percent of solution provider revenue is generated by ventures with other partners initiated through Microsoft's channel program, according to a survey of the 30,000 solution providers that make up the Microsoft Partner Panel. Thirty-eight percent use the vendor's partner portal as a peer-to-peer network resource to increase business opportunities. And more than half (58 percent) of Microsoft solution providers access the vendor's partner portal to learn from other partners.

Vendors are also expected to make increasing use of social networking tools to foster partner-to-partner relationships.