Your Partner Model Was Built for a Different Era with Alex Smith

Speaker A: Welcome to Investable Partnerships where we talk to industry leaders about growing revenue generating partnerships. I'm your host Des Russell and co founder of Partner Elevate. And the daily battle for partner success is forcing channel leaders to rethink how to maximize their relevance and value so they can be a driver of partner impact. So let's jump in and find out how. Today's marketplaces are led by a uh, marketplace strategy that dominates how technology organizations go to market and bring an economic return for their shareholders. Fundamentally within these go to market strategies is there's a huge effort, there's a lot of uneven outcomes and um, there's also a lot of participation by both sides of the equation. In today's episode we're going to look at why partner led growth is um, something that is dominating the way technology organizations go to market and what are the challenges that uh, these technology uh, organizations have around a go to market strategy that is there to deliver a good economic return. Today I'm joined by Alex Smith from Futurum Group. Alex, welcome to the Investable Partnerships uh, podcast show.

Speaker B: Oh, thank you. And uh, actually I should say welcome to you to uh, flying all the way out to uh, Portland just to speak with me. It's quite the honor.

Speaker A: No, I appreciate it. Uh, it's been a bit of a bit uh, of a holiday in the US 10 days prior and now we're here to work. But uh, really appreciate uh, the time that you are taking to spend with us and our audience on the Investable Partnerships podcast.

Speaker B: Yeah, absolutely. Always happy to talk partnerships uh, and especially with you.

Speaker A: Description excellent. So let's start there. You head the channels and ecosystems research at Futurum Group. Give our audience a little bit of an understanding about your background, how you got to where you are today and then we'll talk a bit about the perspectives around partnerships and ecosystems that you see from over 20 years in this particular space as well.

Speaker B: Yeah, I'm about two decades in the tech industry but um, really that entire time landed in the industry ah, as an analyst. And so my job was to cover different technology sectors, write about the trends, um, constantly speaking with tech executives and understanding their strategies and just keep following how the industry is evolving and mostly been in enterprise tech. So looking at areas such as cybersecurity, networking infrastructure, um, software and probably about 10 to 15 years ago really shifted to focus on channels and go to market strategies. And I did that for my last firm and then joined Futurum um, about just over a year ago to help um, lead um, RF it's here, um, looking into the ecosystem and partnership space. And I think what I love about that side of research is you get to be technology agnostic. Right. If you are a tech company that wants to land in um, enterprise and commercial and government, like you need a partner ecosystem in some capacity. And so I like being able to kind of dance around the tech industry and understand how different companies are working with the partner sphere to get to land uh, in their customer base.

Speaker A: Yeah. And I suppose, you know, 20 years is a long time. You know, it's like 20, uh, years is uh, a lifetime, uh, in a lot of industries. And there's been so much change in the technology space in how organizations drive value for shareholders, how we partner for a way in which we can build, extend our reach, extend our customer acquisition, reduce our costs internally. Early on in your career, what surprised you about how partners actually create value, uh, within the ecosystem?

Speaker B: So when I landed in the industry, um, again nearly 20 years ago, if we cast our minds back then really tech was heavily dominated by. It, uh, was a hardware centric market. Right. We were still like that was in the midst of client server and PCs being still one of the big drivers of the industry. And even when it came to software it was largely on premise. Right. The, the selling model behind software was some form of licensing which is a, you know, in effect a tangible thing that can be sold to extent. So when you look at the, the value of partners, a lot of it was built around reselling. Right. We talk about channel and channel implies a very linear one direction model from vendor through partner to um, customer. And it was all about reselling. It was about kind of the value add and attach around that. But reselling was fundamentally the kind of core value proposition that a lot of partners um, brought to the table. And in some respects it was a very well understood industry, very clear KPIs, you know, clear programs for engaging with uh, such partners. And a very good business model for a lot of partners and actually still is. But you know, certainly when we cast back 20 years ago, that was very much the kind of the ethos and the kind of core of how I would say, you know, the partner community was looked at.

Speaker A: Yeah. And how they created value. So where do you see the misconception is in from looking back from there to now in actually how partners actually create value? Like what did you see is, is there a misconception in how we think from an inside, inside vendor, inside, uh, distributor, uh, looking out to partners, how they create value?

Speaker B: I just think the world has gotten a lot more complex and the technology landscape has gotten a lot more complex. I don't think we can ignore the fundamental shift of moving from kind of on premise environments and the role that cloud has played in just of changing the economics and the distribution models of technology and the consumption models of technology. And in that period, you know there was uh, and there still is, but certainly in kind of the midst of the 2010s, you're seeing lots more product led growth, motions arise, you're seeing just the explosion of SaaS companies in the landscape. And I think it's fair to say that the, the role of partners during kind of a period there was potentially being questioned obviously still is I think. But um, certainly you know, you saw a lot of that. But then just as I come back to it, the technology landscape just got more and more complex. And so the ability to integrate technology to understand how to get the most value out of your deployments, you know, how to manage a technology environment that was both on premise but also running in the cloud, then of course you inject kind of remote and workers everywhere. And so if I kind of compare to yeah nearly 20 years ago where I'm just going to say the world was a lot simpler from a technology side of things, the partnering discipline was a bit more simpler. Now it's highly complex and the role that different partners play in is a whole myriad of things. And trying to make sense of that is um, difficult for partner leaders.

Speaker A: Yeah, I would say that shift in the technology space, client, server, ah, web, cloud and AI, ah, not as in a different thing but cloud as sort of at the end of cloud there we've seen a massive shift in the go to market models and if we look at those God end market models there's still a lot of assumptions that partner leaders have actually made about where they should be placing their bets, which partners that they should be working with. So what are some of those uh, assumptions that have changed for you over the time from those early days to now around the go to market shift?

Speaker B: I think the assumptions are interesting because they vary depending on who you're talking with inside the organization. Right. Uh, one of the interesting pain points that I've seen is when you kind of talking with partner leaders they kind of have two challenges. They have the internal um, stakeholder challenge and many respect managing up right. Um, how they manage up to their C suite, um, their sales or even right up to the CEO. And then of course they have you know, their external stakeholders, the actual partners, you know, how Are they vying for, for, for Mindshare, et cetera. Going back to the assumptions question, there are definitely companies out there who, or so I should say leaders out there whose assumptions are that partners play fulfillment role. Right. They're, they're not bringing anything additional to the equation aside from fulfilling business that that company is um, driving or you know, the demand that that company is driving themselves. And in many respects I think that's a fair assumption that is happening for a lot of partners and a lot of activity out there. I would just go as far to say is fulfillment is a, um, is a value add.

Speaker A: Right.

Speaker B: Fulfillment. It, you know, it requires lots of resources both in terms of just you know, managing the actual sale. You're fielding questions some of that support and if you can parse some of that activity off to a, to a partner that has value. Now it might not be the value that a, uh, you know, a C level, C level exec wants who's striving for growth. Um, but it is value and it should be, you know, paid for accordingly. But I think one that should be recognized. I think the assumption that on the flip side of that there are always questions of is this partner actually doing enough to drive incremental growth?

Speaker A: For me. Yeah.

Speaker B: And I think that is a fair question that should be had in the industry. But also you know, fundamentally need to understand like um, the dynamics of a specific partner and what their own objectives are and what their own goals are. They are their own business. Right. They might have goals that slightly misalign with yours. And I always say if you are an early stage company that is thinking I need to engage with partners to help drive net new demand. I think oftentimes the experience is not going to live up there. It's still incumbent upon a, in my belief a company to prove their own value in the market to demonstrate to customers that they have a strong value proposition and partners will kind of come on that journey. Yeah. But if you, if you can't do it yourself, then you know, how do you expect a partner to, to do that for you?

Speaker A: Yeah. How do you expect. And do you see there are vendors that actually struggle to do that today?

Speaker B: Yeah, I mean I think there are vendors who will, who think that, you know, the key to uh, kind of winning in the channel just signing up tons of partners. Right. And the business will come. I mean whatever kind of go to market you're looking at, like that's never the answer. It's never a spray and pray approach. It's not about signing lots of partners. It's not about just, I don't know, listing on marketplaces. It's not about just hiring a bunch of sellers. Right. You have to meet capacity with kind of a clear target objective and the right amount of enablement and support to, to kind of execute your goals. So it's never as easy as just kind of scaling up, right?

Speaker A: Yeah, exactly. And I'm interested to get your point of view on, on these, particularly from a go to market. Where do you see marketplaces and ecosystems create more pressure than clarity?

Speaker B: Yeah, I mean marketplaces is a fascinating kind of um, injection ah. Into the world of go to market. Um, definitely spent a lot of my recent kind of time like studying and looking at marketplaces and I think there we've also seen an interesting kind of evolution. I remember when Marketplaces um, were first kind of coming on the scene and I had, I'll tell you actually a specific debate I had with uh, an exec at Red Hat. Must have been about six, seven years ago. And you know this individual was saying no, marketplaces are just going to become an increasingly more efficient way for um, enterprises to identify, procure and deploy software. I was a bit more, well no, I think software is still going to be very much like a people driven, you know, engagement and selling motion. Kind of turns out we were both right. Right. And you know like in anything life you kind of meet somewhere in the middle where again going back six years ago a lot of the talk around marketplaces was an alternate route to partners. What we ended up seeing was, was marketplaces being an end play to partners.

Speaker A: Yeah.

Speaker B: And as the economics of uh, you know, the fee, the listing fees of a lot of the major hyperscaler marketpl to come down, down and down, they're now operating at a margin level that's similar to what you might see from traditional distribution. And so it makes it a more cost effective route to market and it means there's more room in the margin stack for a partner to also be involved in that deal as well.

Speaker A: Yeah.

Speaker B: And what that then allows for is a more digital oriented backend for, for kind of managing, deploying and you know, sourcing and you know, um, billing the technology but at the front end having a partner to provide that, you know, additional services and support and you know just the people.

Speaker A: Right.

Speaker B: To be at the front end of, of that deal. So I certainly think over the past three, four years we've seen partners and marketplaces become an end play. But we're still very early in this cycle and they're um, constantly working with ISVs who are still trying to figure out how to best activate a marketplace and a marketplace and partner strategy.

Speaker A: Strategy at the exact same time. Yeah, very complex environment to work within, particularly when you've got billions of dollars now being represented by pure marketplace transactions, uh, from some of the largest vendors uh, in the AWS ecosystem, uh, as well. I'm m interested to see from your research vantage point is what do you see partners are being asked of today that wasn't really expected of them before?

Speaker B: I think the easy answer to kind of land on is it's always, if I kind of put it in a generic bucket, it's value add services. Uh, in some respects that's unfair because partners have always been asked to do value add services. But I just think though the, what is the value add services has changed as like as the um, you know, the just um, the landscape has evolved. Right. And so increasingly the expectation of what is encapsulated in value add services is more around things like are they bringing their own IP and software to the table, are they bringing their own vertical or industry expertise to the table? Um, are they bringing their own again advisory services where they are beyond just kind of coming to the table with billable hours for break fix uh, and support but actually are they able to help design and architect a technology strategy and implement it? So that expectation I think is continually expected and asked for. And I think there is this kind of meeting in the middle of you know, I think at one end of the spectrum if you have the just the very box shift resell model of you know, we're on, on margin of you know, selling from product from point A to point B. And at the other end of the spectrum you have the gsis who are, you know, have lived and breathed professional advisory services since their entire history. In the middle is where it gets mushy and in the middle it's where that kind of blend of technology and services is kind of still finding its um, like what does that definition, what does that partner look like? And it's a whole myriad of companies in there.

Speaker A: It's less about I suppose the struggle is less about intent and more about actually how are you measuring success mhm of the partner there. And when you look at it from a ecosystem point of view, there's a lot of talk about this. I know other research firms have been talking a lot about how partners are measured, how partners are incentivized, um, how partners are actually identified within that mushy muddle. There's no clear at the top there's no clear, at the bottom there's this mushy muddle. So why do you think partner ecosystems still really heavily rely on activity based signals like certifications, participation in events and tiers? Mhm. Why do you think they still rely heavily on that to try and predict capability or try and predict where success will come from? Ah, because they really seem like such weak economic signals of success.

Speaker B: Maybe. But I might, uh, almost argue that with the advent of AI and the ability to kind of capture more and more data points and make sense out of them, um, in kind of more of an intelligent way, I actually think the trick is can you capture more data points and build a more holistic story from all these signals? Right. I kind of agree that individually attending a training event that's individually, it's not much of a signal and sometimes and oftentimes it's just a very perfunctory thing that, you know, partners are expected to do. But I think if you blended that with, oh, okay, this partner has attended a lot of these types of training events. They have done a lot of deal registrations in this particular area. They have downloaded a lot of marketing materials in this sector. If you kind of have that holistic view of all these activities and can kind of formulate a more accurate picture of oh, this partner based on all these signals is really strong in this area. I don't know, I think we could be at the cusp of unlocking way more intelligence and way more kind of ability to, to kind of really profile partners based on, you know, where their real strengths are. And so yes, individually these signals are kind of weak. But you know, combined together I think they, they could be strong. And, and one other thing I would also say I also think there's been kind of maybe a bit of um, a fallacy or misconception. Uh, when I speak to program leaders, there's definitely been a, uh, wondering of oh, how do we evolve our partner program to not be revenue based. Right. A lot of traditional channel programs are you sell X amount and you move up a tier and so on and so forth. And while I agree that there are more, as we kind of just said, there's more signals I think that are worth tracking and monitoring. You can't divorce it from the actual impact to top line, especially if you want to continue to justify investments internally

Speaker A: in there as well.

Speaker B: Yeah. And so, uh, some of the best program initiatives that I've seen of late is where they are able to connect some of these more pre sales advisory kind of customer interaction activities through um, to close one. Right. And even if it, you know, close one is a different partner or happening at a different cycle, etc. Being able to connect activities that are happening in January, February, March to a deal that closes in, you know, November, October, December and being able to connect that to, in some capacity to, to these partners, I think that's, I think that's essential for a, a uh, um, program leader. And if they don't have that, they're, they're going to forever have that, you know, internal upwards battle. What are my partners doing for us?

Speaker A: Yeah, yeah, almost, almost here that you know, take, you know, I wonder if every leader step back and instead of looking, if they step back and instead of looking at the activity that generated that, that sale, they looked at the partners through a investment or portfolio lens. I wonder what the, what the outcome might be. I wonder why that or uh, wonder how that outcome might be different. To be more consistent about looking at this. These activities that are leading indicators, they're not, they lead in indicators to this partner fits this type of investment or this type of portfolio that we want to go to market with versus it's the activity of they downloaded the uh, um, uh, event in a box and they ran an event. So therefore capability wise marketing, they must be great at marketing and we should be investing money in them.

Speaker B: Yeah, maybe. I mean I think that but, but whatever kind of theories might be had at the end of the day you have to be able to, to kind of track, track it ah and, and monitor it and you can have all kinds of theories. But you know, if you're not able to kind of pull out the data to try to showcase, you know, the answers to those theories, then they're still just you know, kind of going to remain theories.

Speaker A: And yeah, I love the way you've got, brought that together around bringing different data sources that, bringing them together and trying to understand what decisions can be made around the collection of those activities and not just looking at them, uh, individually. I think that's what a high performing ecosystem should be doing differently. Should be doing differently today.

Speaker B: Yeah.

Speaker A: So if I'm a partnership and ecosystem leader and I'm listening to this uh, this podcast, um, and our session, I want to ask you a few things here. So what are three actions leaders? 1, 2, 3 actions leaders can do to reduce the noise of the signal that they're getting from what their partner program's telling them versus actually what's happening?

Speaker B: I think we have to accept that a partner leader sits somewhere in the middle of their organization hierarchy and step one is to understand what is their top down objectives from like C Suite. Right. You can't build a partner program. That is, that is. Hey, looks like my favorite program out that I've seen out in the industry. If it doesn't kind of match the internal realities and objectives of what your own kind of SUI seat is kind of um, dictating to the table. So that's the first thing I would say is you know, mapping your own program and strategy to your internal objectives. Not best in class program.

Speaker A: Yeah. Uh, yeah, don't take the copy and paste and go. Well this is, this is best in class.

Speaker B: Yeah. Yeah. You know, thinking of um, you know, from an infrastructure side of things. What data do you have and what gaps do you also have? Um, and you know trying to work in around that. I don't think it's about kind of collecting data for data sake. Um, that can be um, you can kind of get um, just lost in the weeds there. But um, certainly understanding what your kind of inputs are and how you can leverage that um, to kind of, you know again evangelize and internally one mindset

Speaker A: shift that you think a partner leader needs to make today.

Speaker B: Mindset shift. I uh, would say a lot of my messages are going to be about internal management actually.

Speaker A: Yeah.

Speaker B: Um, I think a lot of partners, you know, if they come to the table thinking partners, partners, partners, you know, I think that's in, in on paper the right thing to do. But if you don't have the internal, if you don't have internal alignment then you're going to have far more problems.

Speaker A: Yeah. It's almost the always on button of selling and promoting partner value.

Speaker B: Yeah.

Speaker A: It's that you know, just because you've got partners and you've got a partner program, don't just don't assume that internally that everyone understands partner value.

Speaker B: Yeah.

Speaker A: So shift from that. Being more proactive around. Where are you finding? You've got to be finding multiple intersection points every uh, across leaders, across the organization. Sales, marketing, uh, product leadership. To make sure that partner value is being intrinsically top um, of mind.

Speaker B: If you don't have internal buy in, you are, you're alone out there in the water.

Speaker A: Early on we spoke about, you know, this volume, this volume mode of partners, partners, partners. So what is a common mistake that keeps ecosystem leaders stuck in that volume mode? What would you say is one mistake?

Speaker B: I think one mistake might be you know, thinking the grass is always greener. Right.

Speaker A: You know, you know there's Always someone

Speaker B: better seeing, seeing a bigger partner, A big um, you know, I need to get into anytime you ask, like, oh, who are your strategic partners? And you know, you're going to get a lot of the same names sometimes. And the reality is a lot of these, you know, a lot of these companies can, there's only so much mind share that they have. So I think it is always a tough conundrum between like, you know, trying to break into, you know, net new partner that might unlock, you know, net new versus how much more can I extract out of my existing partner. Um, so that's, that's a tough one to kind of, you know, have a generic kind of answer to. But I think that's always a key decision point that um, the partner leaders face.

Speaker A: Yeah, it's uh, you know, all these points really just point to there's a bigger shift happening than we actually realize in terms of what needs to be done, uh, to make partners. Partnerships and ecosystems really sit front and center of a core lever for the CEO to uh, get behind, uh, as well.

Speaker B: Yeah, I mean it's like, you know, customers is like, you know, you're, you know, how much are you looking for net new versus how much are you looking to expand within your kind of existing customer base? And what is that kind of, what are the um, what does the opportunity look like? And it's the same kind of equation with partners. And yeah, many times over the years there's always just been this kind of insatiable kind of search for oh, who is the, who is the partner out there that is just absolutely crushing it and I'm not doing business with them and how do I find them? And that partner may exist, but they may not. And uh, there's plenty of um, I'm sure every partner leader can look within their current ecosystem and say there's more that we can do within here.

Speaker A: Yeah. So if we recorded this uh, podcast in two years time again, and hopefully we don't do it only in two years time again, um, what would be different about how successful ecosystems operate?

Speaker B: Well, hopefully in two years, uh, in two years time we will, I mean we're going to go through another round of um, I mean we've touched a little bit on AI, but um, obviously we're still the early cycles there and just how that is transforming, you know, really everything, business models and partner models. And I think in two years time, you know, we will see the proliferation of marketplaces really kind of expand more into more kind of agentic commerce work, work streams where There is going to be more, um, digital buying that is happening, you know, between um, buyer and seller, which again will re challenge the role that kind of reselling has in a lot of parts of the, of the partner economy. But I think the more optimistic side of that is that we will see a evolving breed of partner that is just very, um, agentic first in the way in which they operate, the way in which they're kind of deploying technology and tools. And I think in the same way that we saw a new breed of born in the cloud partner, as cloud came onto the scene, I expect we will see a new breed of what actually we're calling frontier partners, who will land in the industry, um, with these very agentic workflows and agentic, um, mindsets. And that's going to be a whole new breed of company that vendors, um, are going to have to think, how do I engage with this kind of partner? How do I, um, leverage them in my ecosystem, go to market model?

Speaker A: Love it, Love it. Okay, we're uh, near the end and the end is the fun part in we call this the partnerships fast five. Okay, so, um, there's five quick statements that I'm going to give you and I'm looking for one to two words, uh, answers, just what comes to mind. There's no right or wrong answer. You won't be judged. But there is a gong that does go out at the end of the year for, uh, the best ones. Just kidding, just kidding. Okay, so, um, let's go. One belief about partnerships you've changed your mind on in the last six months.

Speaker B: I believe that there will be a new, um, breeder partner.

Speaker A: New breeder partner, which is this frontier partner that you're talking about? Yeah. So there is a new breed or there will be a new breed.

Speaker B: There will be a new breed.

Speaker A: There will be a new breed. Okay. Um, one capability partners must build next to be successful in an ecosystem.

Speaker B: M agentic operating models.

Speaker A: 1 metric Partner leaders must care about more.

Speaker B: Today I'm going to say customer activity generically.

Speaker A: One mistake you see reported way too often about how partner leaders go to

Speaker B: market changing programs constantly.

Speaker A: That's why this industry is so crazy, isn't it? Um, and last one, one piece of advice for new ecosystem leaders that are joining this crazy world of, uh, technology, partnerships and ecosystem.

Speaker B: Give me a call.

Speaker A: Give your trip a call. I love that. I love that.

Speaker B: I got to get one plug in, right?

Speaker A: Yeah, you've got it. Absolutely. Um, Alex, uh, thanks very much for joining me and our listeners and putting some language around these challenges that partner leaders and ecosystem leaders really do struggle to, uh, articulate, uh, today. So it's been so good to have you here, and thank you very much for welcoming me to Portland as well.

Speaker B: Yeah, my pleasure. And, uh, thanks for having me on.

Speaker A: Right. If this episode resonated with you, share it today with a partner leader. People, uh, in sales, marketing, operations. Doesn't matter. If you're helping partners grow, this episode should be worthwhile for you. Thank you very much. Thank you for listening to Investable Partnerships. Subscribe wherever you listen, and visit investablepartnerships.com for the transcripts of today's show.