The intention of this post is to guide the SAAS executive or investor regarding the implementation of a partner ecosystem, its evolution and its role in the SAAS go-to-market. An effective go-to-market is heavily dependent on target market size, monthly/yearly average price, the complexity and customizability of the SAAS service, and the overall size of the SAAS company.
I decided to break the guide into several parts.
Through this and future posts, I will provide an answer to the following questions:
What is a partner ecosystem? Why might it be needed? How does a partner ecosystem look for a SAAS company? What are the key metrics? When and where to deploy one? Where to start?
What is a partner ecosystem?
I will define a partner ecosystem or partner community as all the businesses that have established a relationship with the SAAS company with the goal to market, sell, service, support, complement, enhance, increase or adapt the solution to mutual customers.
The key points of this definition are that partners are independent companies with their goals and objectives, which in some way leverage the SAAS company offers to enhance or complement their own. They have established a relationship with the SAAS vendor, meaning that there is a clear value exchange, usually expressed through the “Partner Program.” Their way to leverage the relationship could be, for example, by providing referrals (in return for money) to a more complex multi-tier market, sell, service, support relationship.
The potential roles are numerous, and we have mentioned a few already. They can provide referrals, as stated above. They can provide services associated with the solution. Partners can integrate their solution through APIs and connectors. Consultants can create awareness, through their consulting activities, or they can help penetrate a market, vertical or geographical area in which the SAAS company does not have a presence or capabilities or both.
Typically, a SAAS company moves through at least five stages: Pre-Startup (Problem-Solution Fit), Startup (Product-Market fit), Growth Model (Search for repeatable, scalable, profitable model), Rapid Scale, Maturity.
During the Growth Model stage, the business will evaluate and define the first go-to-market, and based on several criteria that we will discuss later the first elements of the partner ecosystem can be introduced.
The partner ecosystem will evolve and develop, adding more and different players through the Rapid Scale and Maturity stages, as the business and the offer grows in size, complexity, and customizability.
There are two relevant questions for a SAAS company:
A) How profitable will the business be at the Maturity stage?
B) How much capital will it require reaching the Maturity stage?
We need to look to those questions to think about the introduction of partners. Will the addition of a partner reduce CAC (Customer Acquisition Cost)? Will it decrease revenue churn? Will it increase MRR (Monthly Recurring Revenue)? Is the time to recover the investment compatible with the capital efficiency goals? From a partner perspective, the parameters likely to attract them will be associated with profitability, investments, and complexity (more about this later).
Type of partners and roles
Let’s bring in the sales funnel concept to discuss types of partner and purpose.
For simplicity, let's divide the sales funnel in two: Top and Bottom of the funnel.
The primary activity at the TOFU (Top of the funnel) is to drive interest and awareness. At this stage, we are interested in creating leads, to be qualified by marketing and move further down the funnel to sales.
The main motion in the lower part of the funnel (BOFU) is to drive conversion and ultimately sales. Typically, the SAAS vendor will do demos, provide white papers, case studies, trials to reach commitment and sales.
Some partners can help the SAAS company at the TOFU, some at the BOFU while others can complement the offer and enhance the common customer business outcomes.
We classify partners in the ecosystem as Top of the funnel partners, Bottom of the funnel partners and Outcomes partners.
Top of the funnel partners are Marketing Affiliate Partner, Influencers, and Referral Partners.
Bottom of the funnel partners are Resellers, Managed Service Providers, Marketplaces, OEMs, and Distributors.
Outcomes partners are System Integrators, Technology Partners, Solution Partners, Alliance Partners, and Training Partners.
The role of the top of the funnel partners is to drive awareness, generate leads, and provide referrals. They leverage their relationship, access and ability to influence the customer. They supply information and create interest that, hopefully, will translate into leads.
Examples of Top of the funnel partners:
Marketing Affiliate Partner: They typically send traffic to the SAAS website. The SAAS company will reward affiliate partners for each visitor or customer (sale) brought by the affiliate's marketing efforts.
Influencer Partner: Typically a consultant or trusted advisor, his objective is to provide advice and guidance to the customer, to be effective he needs updated information of the available solutions. The SAAS vendor will support the partner through training, product access, sandbox, demos, or white-papers. Usually, there are no monetary rewards associated with such referrals.
Referral Partner: The purpose for the referral partner is to generate leads to the SAAS sales team in exchange for a fee per lead closed. There are some differences with the Marketing Affiliate Partner; Referral Partners leverage the relationship and trust with the customer. It provides a lead, so it is never anonymous.
Examples of Bottom of the funnel partners:
Reseller: The goal for the reseller is “just” to sell the service, capturing a profit margin. Resellers can provide additional services like renewals, billing, or contract management.
Managed Services Provider: The purpose for the MSP is to take the SAAS offer and deliver it as a full, outsourced solution to the customer, based on their platforms and its relationship with the client.
Marketplace Partner: This is a specialized platform that offers multiple SAAS vendors. It can act as a Reseller or as a Referral Partner. It can be stand-alone or part of an IAAS, PAAS or SAAS company.
OEM Partner: The OEM Partner will use the SAAS solution as a part of his product. The OEM Partner will define the go-to-market for its product.
Distributor: The distributors in the SAAS environment include a marketplace capability. They can provide a platform to support any resellers managing the SAAS solution, such as billing, provisioning and vendor contracts.
Examples of Outcomes partners:
System Integrator: The role of the System Integrator is to provide customization, deployment, and integration in the enterprise. They can have vertical or horizontal specialization. They usually have relationships with the IT department and with the business leaders. A successful deployment, customization, and integration with existing systems will increase the possibility of a successful business outcome.
Technology Partner: Technology Partners develop and market SAAS solutions that complement and enhance the SAAS vendor’s own.
Solution Partner: In the same way that Technology Partners do, they supplement and enhance the SAAS solution, but in this case through a product or service.
Alliance Partner: An Alliance Partner is defined as one having a broader and deeper relationship, with strong organizational commitment and significant business impact. The range of this partnership could go beyond the goals already described, into areas such as product development, joint branding or finance.
Training Partner: The aim of the Training Partner is to educate the customer and other partners regarding the SAAS service.
A combination could exist, in which a partner performs several roles, for example, a System Integrator that resells the product and delivers training, or, a referral partner that can provide some customization after the sale.
The descriptions above do not comprise an exhaustive list, as new partnership types and combinations are being constantly introduced
This concludes part I, where we have introduced the concept of the partner ecosystem. In Part II we will discuss situations in which it may be needed and the associated metrics to decide its introduction and to measure performance.
Thanks to Mike Allen for input and suggestions.
References and further reading:
Bech, Hans Peter. Building Successful Partner Channels: in the Software Industry, TBK Publishing®. Kindle Edition.
Strategic Alliances. Three Ways to make it work. Steve Steinhilber, Harvard Business Press
This article was written by Osvaldo Bianchi, a business leader and strategist helping small, mid-sized, and large companies grow quickly and efficiently leveraging expertise in SAAS, indirect sales, digital go-to-market. Osvaldo co-founded Latamkey, based on innovative sales outsourcing business model.