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Partnerships 101: ISVs, VARs, SIs, MSPs, and the Glue that Holds them Together

Are you new to business development or are you a tech executive working on your go-to-market strategy? Still swimming your way through the alphabet soup of terms like SI, ISV, MSP, VAR, and OEM? You're not alone.

We hope this post helps demystify the most common types of partnerships that surround your industry. Having a better grasp on this universe of players should help you and your organization better build, market, and sell your product through partners.

Partnership Ecosystems

A partner ecosystem (or partner community) can be broadly defined as a network of entities that help a company market, sell, service, support, complement, enhance, or adapt its products or services to either mutual or distinct customers. These ecosystems first emerged around legacy technology giants that had the muscle to significantly influence their partners and define the relationships powering the network.

Today, the rise of the cloud and software-as-a-service (SaaS), as well as the consumerization of enterprise technology, have created new ecosystems that are more horizontal in nature. Twitter and Salesforce are examples of companies that successfully cultivated and leveraged their ecosystems to achieve widespread adoption, reinforcing the importance of ecosystem development as a critical growth strategy.

 

Why are partner ecosystems important?

The logic behind the partner ecosystem is that (1) no one company can expect to control a customer’s entire technology stack; and (2) no one company can realistically reach all its potential customers.

The commoditization of information, connectivity, and computing power had the effect of extending companies’ access to customers, but also brought about the creation of thousands of enterprise applications. In such a fragmented landscape, partner ecosystem development has become a critical way to leverage competitive advantage and drive growth by:

  • Increasing market power and penetration
  • Accessing and expanding into new markets and businesses
  • Innovation via new skills acquisition and technology transfer
  • Gaining scale and improving supply chain and market defensibility

 

Companies vary in terms of how they categorize their partners, but these are some of the most common categories.

 

Partners-Diagram-101

 

Tech Partners (ISVs)

Broadly speaking, if the partnership involves your tech product integrating with a partner's tech product, you have a technology partnership on your hands. We typically see tech partners referred to as Independent Software Vendors (ISVs) in partnership speak.

While tech platforms develop software for a living, they simply can't address every possible customer need. Partnerships with ISVs result in features or functionality that round out the platform providers’ core software offerings. Generally, a platform becomes more valuable to the end user or customer with the more applications it supports.

A good example of this is the partnership between Spotify and Amazon Alexa. When you say "Alexa, play Spotify," a tech partnership between Amazon's home automation technology and Spotify's music streaming service brings delight to your ears. It also makes both of their products more valuable.

A great place to find ISVs is in the "App Store" or "Integration Marketplace" of large tech platforms. The Salesforce AppExchange, Shopify App Store, and Zapier Integration List are treasure troves of tech partnerships.

ISVs often receive developer support, training, and enablement resources, as well as marketing, distribution, and sometimes monetization benefits. They can be critical to a company’s growth because they enable the company to capture and enter new adjacent markets without having to invest heavily in new product developments.

 

Go-to-Market Partners

Go-To-Market Partners include Consulting Partners (also called Service Partners) and Channel Partners that provide sales and marketing services. The lines between these distinctions can be a bit blurry, but most are professional services firms that help customers design, architect, build, migrate, integrate, and manage their workloads and applications. 

Most of the acronyms you encounter when researching partnership types fall into this category of go-to-market partners, and the most common are broken down below.

 

Value-Added Resellers (VARs)

VARs sell third-party software, hardware, and applications directly to the end-user at a markup, along with some combination of procurement consulting, configuration, and customization services.

VARs purchase technology products from distributors or original equipment manufacturers (OEMs), add features or services to the original product(s) and then resell the bundled solution to their customers. They are most commonly found in the IT and electronics industries, which sell products and services manufactured by third parties, as well as their own.

The value proposition of a VAR is the provision of turnkey solutions designed for a customer’s needs that are ready to use. VARs aim to be one-stop shops for all of a customer’s needs, sparing them the inconvenience of dealing with multiple solutions providers.

The most well-known VARs are large technology consulting firms, such as Accenture, Deloitte, IBM, and PwC, or smaller upstarts like Slalom. In 2014, for example, Deloitte announced a global value-added reseller agreement with SAP, which permits participating Deloitte member firms to resell SAP products and product maintenance support services under a single global framework. The participating Deloitte member firms can license SAP software directly to clients, which allows clients to obtain SAP solutions through a single supplier.

Other players are companies like CDW, World Wide Technology, Cognizant, and Insight, which can be considered “purer” plays compared to the professional services firms. VARs also include smaller consultancies focused on specific domains (the cloud, mobile, digital marketing, data analytics, etc).

 

Resellers

Resellers mainly sell technology products without any modifications to specific markets. For example, Best Buy is an authorized reseller of Apple.

 

System Integrators (SIs)

The distinction between VARs and SIs is often blurred as both parties increasingly perform each other’s functions. SIs combine hardware and/or software components sourced from different third-party vendors to build a new, custom system per a customer’s requirements. In the era of cloud computing, cloud integrators also qualify as SIs. Centric and Atos are two large, well-known system integrators.

Most large tech companies have global SI ecosystems made up of such firms. These can range from small shops to large international consulting firms. Magento's Solution Partner Network is a good example of a global SI ecosystem. 

 

Managed Service Providers (MSPs)

MSPs offer technology or services for a recurring fee. These partners may provide the infrastructure and implementation but their core value proposition is helping customers use and manage their technology on an ongoing basis.

MSP offerings typically include network maintenance, hardware repair, help-desk support, email management, and any other function that requires a day-to-day administrator to keep running. They tend to be marketed to smaller businesses as completely outsourced IT department solutions. And compared to VARs, which often operate on a transactional basis, MSPs operate on longer-term contracts.

 

Original Equipment Manufacturers (OEM)

OEMs incorporate a vendor’s product and/or solutions into their own proprietary offering with either the original branding or their own branding. Dell is an example of an OEM partner to McAfee—many Dell PCs and laptops come pre-installed with McAfee security software.

 

Strategic Partners (or Strategic Alliances)

Strategic partners are commercial enterprises that share resources and/or collaborate on a new endeavor to leverage each other’s expertise, relationships, distribution channels, and/or market reach for mutual benefit.

There are a couple of strategic partnerships from 2018 worth mentioning. Microsoft and Walmart announced a five year cloud services partnership in July 2018 to build out the retailer’s e-commerce capabilities. Walmart reportedly requested its vendors to leave AWS in 2017 and this partnership is seen as a strategic play to contain Walmart and Microsoft’s mutual competitor, Amazon.

Apple and Salesforce launched a strategic partnership in September 2018 that aims to deliver a redesigned, native Salesforce app for iOS with Apple features such as Face ID, Siri Shortcuts, and Business Chat. Apple could be using the partnership to further its ambitions in voice—an interview with Tim Cook suggested Apple seeks to establish voice (Siri) as an enterprise tool.

 

Everything Else

Some companies classify their partners by solution area or domain. For example, Twitter breaks down its partners into Ad Partners and Data Partners, while Samsung allows website visitors to filter partners across industry and solution categories.

Different companies benefit from different kind of partnerships, and the categories that matter most to your business are for you to discover and cultivate. We hope you find great success in building your own partner ecosystem, and we're eager to help. 

Crossbeam is a collaborative data platform that helps companies build more valuable partnerships. We act as an escrow service for data, allowing companies to find overlapping customers and prospects with their partners, while keeping the rest of their data private and secure. If you want to see how it could help create partner success for your company, you can sign up here