Once considered an inconsequential extension of the reseller operation, “sell-with” alliances have now taken center stage at companies large and small. Many high-technology executives now aspire to make alliance partnering a core competency of their company, and alliance activities have increased steadily over the past two years. Everywhere you go, people are talking about influenced revenue, alliance programs, strategic partnerships, and “sales linkage.” Search firms increasingly are being asked to find executive candidates with a track record of successful alliance management. In many ways, successful alliance managers are the new “superstars” in vendor ecosystems.

To better understand how vendors are using alliances in this period of economic challenges, Technology Channels Group, Inc. investigated the “sell-with” partnering activities of leading vendors to see what lessons have been learned - and what problems persist. The results, now available in the TC-Group’s “Converting Alliances into Revenue Engines,” were surprising. Despite the emphasis on alliances – and the highly publicized success stories – most vendors are doing a poor job of aligning their alliance activities with their corporate goals and market objectives. In other words, most alliance programs are failing!

The root problem could be that virtually all high-tech alliance programs are based upon the same models, a kind of “one size fits all” mindset, that was much more appropriate to a market of 20 years ago. Today, small companies try to copy the alliance programs of large companies, but without the resources or market position to be successful. Large companies, on the other hand, try to model their alliances after successful partnerships in other markets or industries where the business opportunities are completely different. Everyone is emulating everyone else - in the same way that middle-school students all want to be wearing the same “cool” clothes. Few vendors are willing to risk the support of their peers (or superiors) by suggesting something fresh and pragmatic. As a result, we concluded from our research that there are very few high-tech vendors with successful alliances.

Not all high-tech companies are created equal, so why should their alliance programs be the same?

Big companies, particularly market leaders, require their own breed of alliance programs because they have unique problems and opportunities. Their primary alliance-related concerns are improving their market position and expanding their customer base. To accomplish these goals, big high-tech companies leverage partners for expansion - to add customers and increase presence. They have the ability to create and manage programs to address a wide range and number of partner types (e.g., Systems Integrators, Technology Partners, Independent Software Vendors, and so on). They often have a substantial number of partners, and aspire to form alliances with even more.

How do large companies deal with the conflicting bids for attention from multiple players? Even the organizations of market leaders have limits and reach the point of diminishing returns. Eventually, most of these firms establish tiers of programs to better manage their resources. The first tier – let’s say, Platinum – receives a dedicated partner manager and access to all programs. The bottom tier – Silver – gets access only to a partner portal with technical documentation, marketing literature, sales guides, marketing programs, sales promotions, and other offerings. One industry giant said that they had created “the mother of all alliance marketing templates” to manage their multitudes.

Large companies can organize programs and events to leverage partners on a massive scale, such as a vendor’s “partner pavilion” within a larger trade show where each partner has their own separate booth. Big companies get first choice of most strategic partners for one-on-one programs, joint planning, and often investment, thus ensuring that the partner is engaged, committed, and well supported. They develop sales pipelines with their partners and work many opportunities in multiple countries. Their programs – when managed correctly – create formidable barriers to competitors, especially the companies that come late to the market.

During the research, vendors were asked which companies had the best alliance programs – who were they most eager to emulate. Two big companies were named again and again: IBM and Siebel Systems. Siebel has an elaborate alliance offering, focused on pre-packaged, Go-To-Market programs. IBM has a manpower-intensive, joint planning process that is coupled with numerous Go-To-Market programs. Both of these companies offer consummate alliance programs. However, few companies can successfully match them, although many are trying – and failing.

Small companies, on the other hand, are all about limited resources. Even though many small companies model their alliance programs after the programs of market leaders, a small company cannot effectively develop more than a few alliances at a time. This simple logic is often overlooked amid the pressure for revenue growth – or even survival. Deals can be dependent upon technical relationships or integrator alliances. The result is that many alliances are formed for the purpose of closing single deals – not for ongoing business. Soon after the deal is won (or lost), smaller vendors must confront their limitations. They usually haven’t got the resources, people, funding, or bandwidth to develop the relationship further, and sometimes the initial deal is lost as well.

To accomplish their goals, a small vendor has to do less with less. Small companies with successful alliance programs set clear objectives and focus on a small number of alliance types and partners. (The alliance goals of small companies are typically to grow revenue and gain presence – with an emphasis on increasing credibility among analysts, other partners, and especially end users.) In the best case, small company alliances can increase presence in one or two markets, secure reference customers, and boost revenue over the short term. Small companies have a desperate need to leverage a partner’s resources to accomplish more than they could through their own budget and headcount – yet in trying to do too much with too many, they often fail. Small vendors need to clearly identify their top partners because there are usually only enough resources for one or two major relationships. They must try and set expectations as early and clearly as possible, particularly if the alliance is with a larger market leader.

This was the conclusion of a small, niche software vendor in our study. They had a large number of alliance partners, and little results to show for it. They faced serious, overwhelming competition from a market leader because they competed directly against the market leader with a systems software solution. However, the leader offered similar software and other programs together to provide a “whole product” or complete solution that often shut out the smaller software firm. The leader also offered a robust suite of alliance programs that the niche software company could not match.

So what did they do? First, the software company reduced the number of alliance types to just two: systems integrators and platform partners. They reduced their alliance portfolio down to 13 partners. In addition, they formed an alliance with Microsoft, who lacked the small software firm’s application and was enthusiastic about teaming to beat their competitor. To ensure focus and follow-through, the software company set up a separate budget for the Microsoft alliance and hired a dedicated manager for this partner only (all the other managers handled multiple accounts). Today, they compete and win!

Are your alliance programs ready?