Technical Alliances, the good, the bad and the ugly

I’ve been wrapping up our renewals of two of our key technical alliances at HMS Software this week and it has me take pause to think about the different aspects of how these partnership works.  alliance.jpgI’ve been most recently working on our Microsoft and Oracle relationships.  We’ve had a technical partnership with Microsoft since 1995 so we’re at 21 years on that relationship.  With Oracle we’ve done 19 years as we started our formal relationship with them in 1997.  That in itself is remarkable.  That we would have formal ties with any other company for over two decades speaks to the longevity of the three companies involved and their mutual interests.

Each of these two alliances and the others we’re involved with have different elements but as you look at them, there are a few truisms that are worth sharing.

What are you in this alliance for?

If you’re tying your organization to another for your hoped-for benefits, it’s good to look beyond the partner brochures and be clear what you’re hoping to get out of it.  I don’t have any illusion that anyone at Microsoft wakes up in the morning and says “I have to make HMS successful today!”  Don’t get me wrong, it can be prestigious to have a 20 year link with a company like Microsoft but I’ve met with many entrepreneurs like myself who spend some money and a lot of time and effort to become a Microsoft partner and then complain that Microsoft isn’t giving them the 20 leads a day they expected.  “Did you ask anyone at Microsoft if they intended to get you those leads?” I’ll ask.  I’m quite certain that no one would make such a promise.  If you’re joining an alliance to get inside technical information or the partner logo for marketing purposes or for inside opportunities to work together, then make sure the other partner is aligned with that.

What are they in this alliance for?

It’s worthwhile asking yourself, “What do they get out of it?”  This can save you a lot of sleepless nights later when you’re wondering why you’re so involved and not getting what you want.  Some large technical alliance partners are looking for organizations on whom they can off-load resource challenges that they can’t handle themselves.  Others are interested in extending their reach through all of your contacts.  Still others are looking for you to be the “local” presence they lack as they focus on national or global marketing initiatives.  I remember asking someone at one of our alliance partners once why my partner listing was only for the Montreal area.  “That’s where your headquarters is,” they replied.  “But we sell software all over the planet,” I replied, “Over 90 percent of my sales are in other markets.”

“Oh.  We’re not really set up well for that,” was the answer.  Clearly that partner was looking for local presence to do installations or local support of their product, not collaborate on us both going to market together with both our products and theirs.

What is the real cost.  What is the real benefit?

All technical alliances have a cost.  Sometimes there is a direct cost to join a program.  The prices for different programs and what you get for them can vary greatly.  It can run from a few hundreds of dollars to tens of thousands of dollars to get on the “partner list”. But that is just direct subscription costs.  There is also often the cost of reaching certifications to comply with partner requirements, to attend mandatory and there is always a cost of the time to maintain the relationship.  It’s important before you start to think about what you’re really going to put in and what you expect to get out.  In our case, we invest in alliances where we are committed to put effort into the partnership and where we are reasonably clear about what we can expect to get out.

Am I constrained?

Some partnerships come with the caveat that you can only offer that partner’s technology or that you can’t offer certain kinds of solutions that might be considered competitive or which are not aligned with the partner’s own.  Recently there has been a push with some technical organization to “not invest if it’s not in the cloud”.  One of the potential pitfalls with some of these relationships is that if you do allow yourself to become constrained, you may find yourself highly dependent on the whims of your alliance partner.  It’s important to look at what constraints you might be agreeing to before you get started in the relationship.

Is this a fair trade?

One way of looking at new technical alliances is to see if it seems fair to both parties.  I remember a few years ago having invested an inordinate amount of time doing volunteer work for one of our alliance partners.  It was great for awhile as it afforded me remarkable inside connections with a partner that would be otherwise hard to reach into but the amount of time and money that had to be put into the arrangement eventually seemed unfair to me.  We changed the status of that relationship and everyone kept on much better terms.

Don’t promise what you don’t have

One pitfall I’ve seen often with people in our industry is that someone feels so strongly about getting the alliance established that they over-promise.  This can result in people actually changing their business in order to satisfy what the alliance partner’s expectations are.  I’ve seen organizations start a new sales group to try to sell an alliance partner’s products and services even though such sales weren’t a core part of their business in the past.  I’ve seen organizations change their product to adapt to only what aligns with the alliance partner’s products.  I’ve seen organizations stop lines of business because they perceived a conflict with their alliance partner.  It’s important I think to come to an alliance clear about what your business is and what you’re prepared to invest.  If that doesn’t work for your alliance partner, you should perhaps think about how important that alliance is to you.

Who expects what?

Finding out the expectations is key before you make a strategic decision to align your business with someone else’s.  Are they expecting you to do the marketing or are you expecting them to?  Are you expecting they will co-invest in development activities?  Are you expecting they will provide you technical expertise?  Are they expecting you will become their local representative?  Take the time to figure out the rules of the game before the game gets underway.

Is this the only path to what I’m looking for?

I have seen numerous people start on some technical alliance track only to find out it was the most complicated method of getting what they wanted.  A few years ago an entrepreneur approached me for advice on how to enter one of the alliance programs HMS is a part of.  That seemed like a disconnect for me between the effort required to join the program and the size of the entrepreneur’s company so I asked what they were hoping to get out of the relationship.  “The free software,” he replied.

So, I pointed out that if he had to spend all the money on the partnership just for that it wasn’t exactly free and, moreover that the alliance partner in question had numerous small-business programs designed for his size of firm that were primarily for getting access to their software at 10% of the alliance partner price.  Using one of those programs was what they decided to do.

Things change

It’s the software business.  Things change.  Sometimes they change very quickly.  You have to keep up with the direction your alliance partner is heading and while you may be disappointed, don’t get too frustrated if one day the long term alliance goes its separate ways.  Perhaps the alliance partner finds you competitive or perhaps you find the alliance partner is headed to technology that you don’t embrace.  Or, maybe you’ve become so darned successful out of your alliance that you need to renegotiate it to keep it equitable.

Alliance Partner programs carry enormous value to both parties when they work well.  We’re delighted about the alliances we maintain 1plus1equals3_300x165.jpgand we’re very proud of some of the long term relationships with other organizations that serve to benefit our joint clients.  In the end, isn’t that what these alliances should be about? Making 1+1=3.