This week I pick up where last week’s conversation with Ellen Daley left off. As I mentioned last week, Ellen was the CEO of Acorio, a ServiceNow consultancy that became ServiceNow’s largest boutique partner.
This week’s episode discusses the ins and outs of building a partner-centric professional services business. These partner-centric models revolve around a product company that uses services providers to provide consultative help to their mutual clients and perform implementation or integration work to make clients successful.
Picking a Partner
Look for large addressable markets with a low barrier to entry. Acorio thought ServiceNow was attractive because it had a large addressable market with no significant barrier to entry in the partner ecosystem.
Consider how much follow-on opportunity may come from a typical services engagement using the partner’s product. Acorio viewed ServiceNow as a “good bet” because it presented an entry point to a client organization through IT but with cross-selling opportunities to other departments (e.g., HR).
The maturity of the partner ecosystem is an essential factor. When Acorio started, most of ServiceNow’s partner’s ecosystem wasn’t yet at scale. It presented a significant opportunity to grow a large business quickly. If a partner ecosystem already has many “at scale” players, waiting for them to exit and creating an opportunity for more boutique, high-growth partners can be better.
How Partner-Centric Services Businesses Are Different
Partner-centric services businesses have an additional audience. They have to think about interacting with, marketing and selling to, and managing relationships with their clients and the product company partner.
The need to market to the partner. The partner (who makes the product/technology) needs to understand what services companies in their ecosystem can provide, how they are differentiated, and when they fit their mutual customers well.
The need to “sell” to the partner’s sales reps. These are the sales reps in the field who are selling product licenses/subscriptions. It’s not enough for a “partnership” team at the partner to know about services businesses in the ecosystem; the sellers are the ones face-to-face with prospects and influence how services engagements are satisfied.
Simultaneously maintaining direct access to prospects and customers. Despite being partner-centric, having a direct marketing and sales relationship with prospects and customers is essential. Without this relationship, a services business is vulnerable to a partner “turning off the spigot” to opportunities.
Starting & Nurturing Partner Relationships
The starting point is usually a public-facing partner portal. Even if you have deep relationships with the product company, virtually all roads to partnership begin with filling out some online application.
Established, mature ecosystems may be very automated. The larger and more mature the partner ecosystem, the more automated the process can be.
Make sure there are interactions through the partner’s organization. Ideally, a services company is interacting with people in the partner company across their:
sales organization, which is often geographically or industry-aligned, so it can include numerous people
marketing organization
product organization, which rarely helps with commercial opportunities but builds brand value for the services company
professional services or customer outcomes business, even though it may be competitive with the services company at times
executive team
Map out who you need to interact with within each of those organizations. If a services company is relatively small or young, it can be beneficial to only focus on specific individuals in the same geography as the service provider.
Understand what motivates individuals within the partner organization. Generally, most partner teams care about selling more licenses/subscriptions. A services company’s ability to articulate how its capabilities support that outcome can be a point of differentiation compared to other providers in the ecosystem.
Why Product Companies Need A Services Ecosystem
Services companies have a more “intimate” relationship with the client. The services provider can offer a more trusted, third-party perspective that is more helpful to the client.
Represent the partner’s products and benefits organically. Because the services provider can better understand the client’s needs, they can put the product in the best possible light.
Easier co-marketing opportunities in the field. Partner programs often include market development funding (MDF). The product company helps fund these marketing opportunities through local in-person events or online webinars. The events typically combine someone from the product company, someone from the services company, and sometimes a customer to talk about the product.
Product companies expect services firms in their ecosystem to help these activities. While the services company has a lot of latitude in shaping the event, it is usually an expectation that the services providers take they occur.
Size & Stage For Services Businesses Getting Into Partner Ecosystems
Get started early if your vision is to be partner-centric.
Case studies matter. Have 2-3 good case studies before approaching the partner to demonstrate value and capabilities. This makes partnership much more compelling.
Hire people who can work collaboratively with product companies as a partner. Sometimes the product company’s staff, particularly partner reps and salespeople can have strong personalities. They often believe they are “calling the shots” - and they usually are. Having sales and marketing folks who can work effectively in that environment is vital.
Embrace sharing talent between the services business and the product company. Staff that comes from or goes to a partner can be an excellent way to strengthen the partnership and build organic alliances internally within both companies.
Challenges & Downsides of Partnerships
Partner teams can ask their services companies to do a lot of work. Sometimes this work may not find its way to the sales organization. The services company needs to have some finesse in managing expectations and knowing what work is necessary and adds value.
Individual sales reps can sometimes break the rules. Partner organizations often lack the power to control or stop “bad behavior” by sales reps responsible for license/subscription revenue. Services companies should be cautious about complaining too much and instead focus on reps with whom they have a better relationship.
Product companies may use their own professional services teams competitively. This is particularly common when they expect a bad quarter and need increased revenue. When this kind of thing happens as a temporary ebb & flow, services providers shouldn’t get too worked up about it. Expect that it will happen occasionally, and ensure you have a direct channel for selling work.
There will sometimes be tension between the client and the partner sales rep. Sales reps may pressure a services provider to generate license/subscription revenue when the client says, “I’m not buying any more products.” Again, finesse is required to maintain a good relationship with both parties.
Exclusivity with one partner has a lot of risks. Suppose a services business is aligned with only one product partner. In that case, it is very vulnerable to the volatility that can come from the product company having a bad quarter or two, having leadership changes, etc. Two strategic partners are a good number; more is hard to manage.
Three Things Ellen Wish She’d Known When She Started
Know what motivates your partner. Aligning the services company’s offerings and differentiation to the product partner’s incentives is powerful for growth.
Don’t freak out if partners act destructively in the short term. Take a long-term view. There are more deals out there!
Partnerships are relationships. They will have peaks and valleys. Don’t make it feel transactional!
✌🏼 That’s it for this week! I’ve planned more conversations with experienced leaders in the product partnership space. Send me the questions or topics you want to see covered:
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Building Partner-Centric Services Companies with Ellen Daley