What is Happening in Enterprise ICT Alliances and Channel in Italy – Early Results   4 comments

Italian translation available – disponibile la traduzione italiana. Text revised on 30 Jan 2012.

I am gathering insight on enterprise Information and Communication Technology (ICT) alliances and channel evolution in Italy. Information comes from selected local and global market analysts, large and small systems integrators, resellers and distributors, Independent Software Vendors (ISVs) and software platform vendors (the category including global players such as HP, IBM, Microsoft, Oracle, SAP, and a few others).

More evidence will be required for meaningful conclusions, still I am finding early results interesting and useful for our daily work, both individually and as part of my organization, evolving to develop our alliance teaming capability as well as very high value added resale capability.

My personal understanding so far: ICT partner management, including both asymmetric, one-to-many channel relations and symmetric, one-to-one, essentially peer-to-peer alliance relations, is going through intense and disruptive evolution. I believe this evolution is stronger than standard sales discipline and even response to a challenging economic environment can explain. New categories of enterprise ICT partners are emerging to compete with existing ones, while incumbents are developing new behaviors to answer this competition.
In Italy, this is providing ICT market players with new opportunities to overcome historical fragmentation. Over time, it might even become possible to define new partner business models that leverage local specifics in original ways, somehow like networks of small enterprises in regional districts had innovated manufacturing around the 1980s.  

Let me start by setting some local context. I see two distinguishing features in the Italian ICT partner ecosystem:

  • it is highly fragmented, just as our enterprise ICT customer market (analysts monitor and report on more than a dozen thousand suppliers and intermediaries, and on a number of enterprise end customers that is in the same order of magnitude).
  • credit access is relatively complex for enterprises large and small, so resellers and distributors put significant resources to bridge  customer and supplier requirements on payment terms.

This combination impacts channel operators as well as enterprise platform vendors at the supplying end of the channel.
Resellers and distributors must focus on breadth and transactional efficiency, which reduces resources available for offering innovation, differentiation from competitors, and development of true alliances.
Platform vendors, on the other side, struggle to distinguish among so many partners so alike, to recognize, reward and drive the most effective behaviors, and with them innovation and efficiency in their channel.

In this context, I see two major global trends causing disruptive change, that can have special results in our country.

The first is cloud-enabled globalization: cloud architectures and business models for both enterprise and consumer ICT are helping fulfill the long due promise of global, fully location-independent service delivery for advanced small and medium market players. An independent software vendor from any country can combine their own innovative solutions with relevant innovations from others elsewhere, then deliver the result to customers of both, and to new customers in new locations. This has allowed success of Software as a Service vendors, and much greater market reach for more traditional on-premise software vendors.

The second is really the partner management side of consumerization: new ICT platform vendors coming from the consumer market, with their specific business and partner models, have entered the enterprise market with a vengeance. After few years, we see they have significantly adapted their partner models to this new environment. Established global platform vendors and their channel and alliance partners have been adapting, sometimes scrambling to adapt, applying their partner models more rigorously and innovating them in the process.

Working mostly with large enterprise platform vendors and their channel and alliance partners, I have seen some incremental results of these two trends, and some more innovative, truly disruptive.

Among incremental developments, enterprise platform vendors have increased their investment in partner management discipline, to identify and grow partners that provide the most value. They have introduced, or significantly strengthened, such standard partner management tools as competency certification; they have increased certification requirements, and made competencies more specific and differentiated. They have improved lead registration and reward programs, and the few who could afford to ignore them are adopting them. Those that had long privileged asymmetric channel relations with smaller, more complying partners have now opened up to managing selected relations as more symmetric alliances, each with its specific set of values, objectives, and management practices, tuned to the business model of both partners. Some platform vendors are now segmenting their partner portfolio just as carefully as they do their customer portfolio, and matching partner segments to customer segments more carefully. Many are now much more deliberate in how their direct sales and indirect sales separate, or cooperate.

Most of this is the result of global best practices. Applying it to Italy’s special environment has been complex, with a significant change management effort, if medium term results may well be better than in other countries. Some vendors for instance are still working to obtain from their greater partner management investment and discipline the ability to find and develop those special partners who “pull the most weight”, in terms of vendor business they embed and drive in their own.

Other results of the same trends appear to me more disruptive and innovative.

An important one has been making repeatable, formally defined solutions an essential part of how platform vendors and their partners deliver value to their customers. In addition to improving delivery efficiency, this is helping partners differentiate from each other, and platform vendors perceive this differentiation. Solutions make a more tangible, understandable and rewarding object to team around, sell together and measure success of, than prescriptive behavior models. This value of solutions applies both to asymmetric channel relations with small partners, and with more symmetric alliances among near-peers.
For smaller partners, solutions are really vendor-supplied solution blueprints; each platform vendor challenges and encourages all partners to take up these blueprints, add value to them, and sell the result.
For partners with more complex business models, it’s the partner that proposes solutions to team around to the platform vendor.
In alliances, the approach is closer to joint solution development by both partners, who then cooperate in selling and delivering it, together and in parallel.
For all kinds of partners, solutions become the catalyst of teaming: solutions are what teaming is really about, what makes a given partnership stand out from other similar relations.

Perhaps the most interesting development from innovation trends in enterprise ICT partner management I am seeing in Italy involves Independent Software Vendors. ISVs often benefit from these trends in many ways, for instance:

  • platform vendors, seeking to understand partner value and distinguish among partners, find ISVs and their solutions easier to assess, compare and manage. This helps them choose among ISV solutions, and most importantly makes it easier to measure and reward success.
    In ISV solutions as well as in those of platform vendors, much of the value is embedded in the features of a software product. Measuring and rewarding mutual contribution to success becomes much easier for both partners than when either works with a traditional partner.
  • Small, niche ISVs are in a great position to leverage the opportunity for location-independent value delivery that cloud platforms and internet channels are providing. Truly innovative, valuable ISV solutions can reach global markets with very limited effort.

In my experience, this has happened mostly with international – single-country or global – ISVs working or entering the Italian market. Personally, I have yet to see significant examples of Italy-based ISVs taking similar approaches in working with platform vendors.

What is the result for enterprise ICT partner management overall?
It seems to me that this greater mutual clarity, and better ISV access to market, are allowing more and more, smaller and higher value ISVs to compete with distributors and resellers for platform vendor support and for customer access. In some cases this better access to platform vendor rewards is encouraging ISVs to take sides and focus their product strategy on a single platform among competing ones, as a way to forge more direct connections with that platform’s vendor.
Conversely, I see platform vendors who used to be skeptical about ISVs and propose implementations of their own solutions instead of ISV solutions, now gradually opening to the value that an ISV solution can provide on top of the platform it leverages, as it reaches more easily market niches where the traditional channels would require more complex integrations. These vendors start to team more and more with ISVs for sales.

This evolution challenges more traditional channel and alliance partners, such as distributors, resellers, and general-purpose systems integrators. It happens in at least two ways. 
On the one hand ISV solutions, often configured and enriched by more specialized, solution-focuses systems integrators, add to competition for general-purpose integrators. On the other hand, ISV and systems integrators find great value in teaming with each other. In pursuing this, ISVs can provide a further stimulus for systems integrators to focus their offering in solutions, built more and more around selected ISV solutions.

Early discussions suggest this requires significant investment by platform vendors, ISV and traditional partners. Specifically, the change is about offerings and how to define, manage and even communicate partner relations to partners themselves and the market. In our fragmented Italian market, I am seeing evidence that some platform vendors, ISVs, and systems integrators are strongly interested in this.

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4 responses to “What is Happening in Enterprise ICT Alliances and Channel in Italy – Early Results

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  1. I share almost all the content and have similar feelings. As I am more used to operate in the enterprise software segment I should like only to underline how ISVs should look for a vertical matching with VARs, System Integrators and, even more, if more sophisticated kinds of Partnership are implemented.
    The main parameters are:
    1. vertical domain matching
    2. reciprocal committment
    3. clear definition of a rump-up period, whose target is to take Partner to be autonomous in steady-state operations
    4. build a both-parties attractive business case, based on:
    (a) value of the average sale
    (b) average duration of the selling cycle
    through a detaild design of the value chain
    Overall should be remembered any Partnership, below the large enterprises global alliances, is a relationship between two enterpreneurs, each of them looking to the Partnership from his own point of view and looking in it for his own medium/long term profit.

    I am less used to examine Partnerships based on volume software product distribution.

    About the software platforms channels I think there is a dominant party, the platform provider, who should have, and clearly communicate, a channel strategy, objectives and plans. And should not modify them too often. The dominant party might be leaded to adapt, overtime, the Partnership content and rules, measurements and awards, to its own specific short-term targets. This might, in my opinion, take to a de-fidelization of Partners and to an opportunistic behavior by Partners, which, in the long range, might be a concern.

    Like

  2. Great analysis and article. Among the disruptive and innovative trends affecting the ICT partner ecosystem I would like to add business ethics and consumer protection. The recent global credit crisis has caused a profound transformation in the way consumers weigh risk and value ethics, and the effects of such transformation are extending beyond the finance industry to touch other business sectors. Globalisation has made an unprecedented, vast universe of products available on the marketplace, from financial derivatives to software applications the options are endless and making the right investment has never been more difficult. As a result customers are now looking for guidance, protection, and trustworthy advice which no player – in my opinion – has translated into a convincing market proposition yet.

    In some extreme cases, institutions and agencies that were expected to protect and assist the market community, instead totally misrepresented the real value and risk of certain investments, producing devastating consequences for millions of customers. Not much has changed since. The demand for ethics and protection is still there, unfilled, from finance to ICT, customers are crying for help. The reason I believe organisations for profit are not structured to address such a need, lies in the business model they have adopted across industries. A large chunk of their profits in fact, comes directly from the very entities and players they are supposed to objectively and reliably evaluate and rate. The paradigm does not work: the controlling entity cannot be financed by the controlled ones. The implications are obvious.

    Having worked on the ISV side for many years, I am witnessing many of the trends Gianluca has identified and illustrated in his article. A growing number of ISVs and platform vendors have indeed adopted competency certification as a practice to score and rate the system integrators they partner with. Certifications and ratings do a great deal in helping end customers in the decision making process but – in my opinion – the market is asking for more and those who will succeed in filling this gap will emerge in the market in a clear leading position. The element which may soon represent the answer is an accountability model for risk assessment. ISVs, platform vendors and rating agencies are seldomely held accountable when customers fail to achieve the benefits they were looking for. System integrators more often than not, instead are. They and they alone are the ones who in the eyes of the consumers employ the most ethical and consumer protective business model of all.

    Who can we trust in this market, if not the business partner who accept to pay for his mis-judgement and mistakes? Who does it now a days?

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  3. Pingback: Cosa sta succedendo nelle alleanze e nel canale ICT italiano – primi risultati « Gianluca Marcellino – Business Notes

  4. Pingback: Cosa sta succedendo nelle alleanze e nel canale ICT italiano – primi risultati « Gianluca Marcellino – Business Notes

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