The growth conundrum
From the smallest start-up doing 18 hour days in a garage, to the largest behemoths in the software industry, the need to scale is critical. Growth is the quintessential elixir of any business. Growth drives everything else. And yet time and again, the smaller product companies seem to spend a lot of time running after angels and VCs. Since their size is small it consumes a lot of their bandwidth and very soon they are caught up in the vicious cycle of low scale-low customer traction-low investor attractiveness-low scale. Software vendors now have to consider their strategic role in the software ecosystem to survive. The companies that can best leverage the ecosystem are the ones that will survive and grow. This approach must essentially be embedded in their go-to-market plan.
Why do you need an ecosystem approach?
“Real long-term business success comes not solely from competing successfully within your current industry, but also from being an active participant in shaping the industry’s future. That way, everyone can create opportunities for future success the way you want them to be, rather than simply making do with the way things currently are. Coopetition combines the advantages of both competition and cooperation into a new dynamic which can be used to not only generate more profits but also to change the nature of the business environment in your own favor” – Coopetition : Adam Brandenburger and Barry Nalebuff.
The landscape of software products has undergone dramatic changes – from fierce turf wars to one of partnering for bigger mind share and purse share. The players that influence solution sales are many. Therefore it is only incumbent upon the players to discover that unfair share of the value they can take to their customers – together. Today, they include several players.
The Software Ecosystem
Although companies have different reasons for adopting a software ecosystem approach, one can identify a number of convincing arguments explaining the current trend:
1. Scale the reach by partnering with ecosystem players who have C-Level relationships and can influence deals
2. Together players can significantly increase value and attractiveness of the offering to buyers
3. When players complement one another, they increase the “coverage” of the solutions in addressing the prioritized issues that buyers identify with
4. By collaborating with partners and leveraging their unique strengths, players can achieve faster time-to-market
5. Players can bundle the total set of functionalities offered by own and partners and offer it as a “platform” that addresses end-to-end needs of customers
6. Players can achieve economies of scale by shared go-to-market initiatives as well as product innovation and integration efforts
The anatomy of a software ecosystem
Let’s spend a little time understanding the role of each one of the players and their motivation:
Customers: They have the need for and buy software and infrastructure solutions. Understand their criteria for their solution(s) of choice.
Consultants: They do the Strategy stuff, write RFPs, and are in a position of influence. Example: Accenture, PWC, KPMG, Ernst & Young. Your attractiveness to them would be driven by your domain expertise, your solution attractiveness viz-a-viz the customer requirements. Engage them meaningfully and you could well be on your way to some mega deals.
Large ISV (Independent Software Vendors): They cover generic application software like ERP, Portals, Content Management Suites, Analytics software, Middleware and more. They have large account relationships. Examples are IBM, Microsoft, Oracle and SAP etc. Many of them have excellent partnering (and certification) programs like IBM’s Global Entrepreneurship and Microsoft’s BizSpark program for smaller software companies. Can your solution raise the attractiveness of their proposal?
System Integrators: Service providers who drive the implementation of total solutions including enterprise application software, system software, niche applications, infrastructure and support. They have large account relationships and may have partner ecosystem of their own. Examples are Infosys, Wipro, Cap Gemini, and Atos Origin. How can your solution make them more competitive?
Open Communities: Open developer communities provide a rich array of resources in technology and marketing. Leveraging them is a great idea for scaling without adding fixed costs and managing the demand-supply discontinuities. They need to see sustained commitment from you both in revenue and relationship terms.
Local software companies: Many times overlooked, they often have the local reach and influence to help you engage with customers your bandwidth does not allow you to. Does your solution help them penetrate their existing accounts and create new ones?
Getting a share of the ecosystem for growth
Application-centric software ecosystem is perhaps the most viable option for most companies employing a software product line. Since there is a range of products derived from the product line of a large ISV, there is a customer base that is potentially attractive. By joining forces with them, you can drive significant value for your common, targeted customers. In addition, both large ISVs and local software companies can extend their offerings much beyond their current capability. Remember to socialize your offerings to Consultants to demonstrate the value they can provide. Last but not the least, by combining forces with System Integrators you can start addressing larger deal sizes, than you could have done on your own.
Does all of this take time? Sure it does and it’s a better investment of your time than running after funding partners. At the end of the day, the people who fund you are “paying customers”. In my mind, the ecosystem is the right place to seed your efforts – the harvest will follow