The partnership landscape is changing, with co-innovation picking up steam, partner category lines blurring, and brand new roles being created. What changes should you expect to see this year?
Last year, partnerships started attracting more attention when notable enterprises committed to bringing in significant revenue through indirect channels. At Pronto, we’re optimistic 2022 will be a year of growth for partner relationships. Read on for our predictions of what’s to come in the new year.
1. Robust, well-managed partner ecosystems will generate significant revenue for platform companies.
Organizations that are actively building and nurturing strong partnerships will reap the rewards of their efforts, generating more indirect revenue than those taking a more passive or reactive approach. IDC has found that organizations that share data, applications, and operations within their industry ecosystem are realizing 3% more revenue than nonparticipants.
2. System integrators will contribute a significant portion of indirect revenue that is counted towards companies’ top line revenue.
Of all partner types, system integrators (SIs) and consulting partners in particular will bring in a large percent of partner influenced revenue in 2022. Why? For one, partnerships teams can more easily manage and attribute results to specific partners with today's Partner Ecosystem Management platforms like Pronto. In the past, it was harder to measure the impact that SIs had on revenue. Secondly, innovative joint solutions are being developed in close collaboration with SIs at a rapid pace, giving SIs and other partner constituents more to offer their client base.
3. Co-innovation is becoming essential to keep up with customer needs.
Vendors are finding it impossible to meet the growing demand for complete, multi-technology solutions alone, and IDC predicts that by 2026, 25% of organizations’ new application portfolio will be consortia-developed within their ecosystem. Collaborating with partners to develop mutually beneficial, complementary solutions is exploding in popularity.
One of the top recommendations from the 2021 Gartner IT Symposium was to “nurture connections everywhere by fostering three types of partner relationships: one-to-one, one-to-many and many-to-many.” Additionally, an entire section of Gartner’s Emerging Technologies and Trends Impact Radar: 2022 report is dedicated to “collaborative ecosystem product development” (CEPD), defined as partnering with several, sometimes competing, vendors to develop innovative, new solutions in a timely, cost-effective way. This in turn improves business outcomes. Gartner estimates that “the early majority will use CEPD within a 3- to 6-year period because of the widespread support by application software vendors.”
Forrester shares a similar outlook. “Digital transformation will shift to creativity-fueled transformation. In 2022, future fit firms will think beyond digital transformation to implement initiatives that tightly fuse CX and EX. Additionally, 10% of tech leaders will prioritize investments in strategic partnerships and innovation practices at 3x the rate of competitors,” according to their North America Predictions 2022.
4. Large channel partners and resellers will either develop or acquire SI capabilities, resulting in channel vendors transforming into SIs or MSPs.
Channel or resell companies that partner with vendors now realize that they can uplevel their partnerships by offering more value-added services to end customers. A natural progression for such companies is to transform into managed service providers (MSPs) or SIs by offering strategic guidance and implementing, customizing, and managing solutions deployed on the vendor’s product.
As an example, Microsoft, with over 300,000 partners, has already seen their resellers evolve to capture significant revenue growth. Microsoft CEO Satya Nadella wants partners to transform from pure resellers focused on a single product to trusted advisors delivering managed services and creating innovative solutions atop multiple offerings from Microsoft’s increasingly intertwined portfolio, claims CRN. So far that seems to be working, with partners involved in 95% of the company’s commercial revenue.
The forthcoming overlap between reseller and SI capabilities is part of a larger trend in which the lines of traditional partner categories are blurring. In the coming years, ecosystem orchestrators will need to adapt to this shift by managing partners based on their capabilities rather than their categories.
5. New incentive compensation models will emerge, linked to partner related KPIs.
Unlike their peers in direct sales, those in business development (BD) and partnerships have lacked a straightforward commission structure. Measuring the impact of partnerships has historically been difficult, but purpose-built platforms have recently made it simple. KPIs like total partner-influenced revenue and partner-attached conversion rates will start being incorporated into partnership professionals’ compensation.
A stronger correlation between performance and incentives helps motivate, reward, and retain employees. Retention is a widespread concern within the industry. Even before The Great Resignation, the average tenure of a Business Development Representative (BDR) was 14 months. Holding onto talent also saves employers money: it costs about 6 to 9 months of an employee’s salary to replace him or her.
Importantly, basing incentive compensation off partner KPIs underscores the fact that partners play an important role in enterprise profitability. High-performing partners and employees are a win-win for all.
6. A new position – Chief Ecosystem Officer – will join the C-Suite.
Look out for job postings for Chief Ecosystem Officers (or CECOs) in 2022. This new head of partner relationships will play a pivotal role in strategic planning, forging lasting relationships, and collaborating externally to fill internal gaps (i.e. revenue, product, services, security, or sustainability). Why now? Partner ecosystems are more complex than ever, but when managed correctly, have the potential to contribute exponentially to top line growth. As part of the executive team, the Chief Ecosystem Officer will incorporate key partner initiatives into the overarching corporate strategy, making projections, setting the budget, garnering C-Suite support, and hitting revenue goals with support from their partner ecosystem. They will also be accountable for their team’s quantifiable success.
7. Business development professionals will rise in the ranks.
Promotions will be in order for Business Development and Partnerships professionals this year. An exodus of senior leaders plus high turnover leave gaps to fill in mid-level and senior-level positions. Simultaneously, companies are eager to keep their existing employees, and there is a growing recognition of the importance of this function within the organization.
Although the Partnerships career path is relatively new, online communities and resources are popping up to help those navigating this journey. Those who have made it to the top cite empathy, work ethic, diplomacy, and the ability to connect the dots as the most important traits to embody as a leader.
8. Companies will create Indirect Field Sales teams to involve partners in more deals.
A new team under the Partnerships umbrella will emerge: the Indirect Field Sales team. As the COVID-19 pandemic slowly subsides and in-person meetings pick up, expect those with expertise in partner solutions to join in, working closely with their own Field Sales teams and partners’ Field Sales teams. Indirect Field Sales teams will be ready to add partner solutions to conversations to help close deals, possessing in-depth knowledge of the optimal solution for a particular prospect. As a result, more deals will have one or more partners embedded within them, which in turn will help demonstrate the value of partnerships.
Field sales on its own is powerful – research shows that field sales representatives are 2x more likely to close a sale than inside sales counterparts, and the deals they close are 130% larger. With the addition of innovative, joint solutions that might otherwise be overlooked, this team is positioned for success.
9. The PRM tool market will constrict as new age, collaborative partner tools mature.
Partner Relationship Management (PRM) tools rose to popularity during the heyday of channel partnerships.The expected decline of reselling and channel sales coupled with PRM tools’ limitations within modern partner ecosystems mean that PRMs will play a smaller role in the year ahead. In a recent podcast, Forrester’s Jay McBain predicted that resell will make up a smaller proportion of the technology industry’s revenue, dropping from 66% (or $2.2 trillion today) to 33%. The growing popularity of marketplaces and the rise of non-resell indirect revenue streams are likely to generate new revenue that makes resell less gargantuan in the grand scheme.
Another reason is self-service tools like partner marketplaces allow individuals to discover solutions and partners without the assistance of a sales representative. Finally, product-led growth (PLG) – an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion – has truly caught on. There are currently 21 large public companies with a PLG model – including all of the top IPOs in 2019. Instead of relying on channel sales teams to win over customers with the promise of what a product can deliver, many organizations are encouraging users to try out the product for themselves.
Meanwhile, Partner Ecosystem Management platforms are maturing, and companies are embracing the ability to manage their entire partner ecosystem (GTM and non-GTM partnerships included) rather than only a piece of it. Forrester reported that these platforms nearly doubled in year-over-year sales last year. It’s possible that some PRM tools will evolve into Ecosystem Management tools as the need for equal collaboration across many parties and partner types is increasingly desired. If not, they PRMs continue to be used for the specific purposes they were built for.
If the past two years have taught us one thing, it’s that coming together holds significant power and promise. As we look ahead, we expect that 2022 will be considered a year of positive growth in the Partnerships world – from a career, revenue, and innovation perspective alike.