Frogs in a Pot - IT Ecosystem Services Partners

For many years now we’ve been working with large technology vendors to help transition their services partner ecosystems from a focus on time and materials to packaged IP. This work started with the need for services ecosystems to transform from an on-prem business to a Cloud-based recurring revenue business, but it’s evolved since then for a host of reasons.

We can’t remember how many times we’ve shared the following image:

The challenge: A donut in the hand

Why aren’t partners taking up the baton? The donut analogy offers a perfect explanation.  Offered one donut today versus two tomorrow, most partners chose the donut today: keep on keeping on with a time and materials model, selling people for margin. And yes, there’s no arguing it continues to work, albeit at a constrained growth rate, because cloud and recurring revenue software haven’t completely eliminated the need for ecosystem services.

But soon a very large donut-eating AI is going to rip that tasty, glazed beauty right out of the service partner’s hand and leave them with next to nothing.

We’re already seeing this in our clients. Today, marketing and customer support roles are being displaced, mostly in the content creation, business development, and support arenas.  But soon the rest of the customer journey will experience the rise of AI-supported delivery, which will displace selling people for money:  

This presents services companies with both a challenge and an opportunity:

• The challenge:  “I’m going to lose headcount and if I keep driving my business on a cost-plus basis, my margins, which are already under pressure, will go down precipitously.”

• The opportunity:  Package AI as part of a broader packaged IP offering and sell to your customers. 

But you can’t take advantage of this opportunity until you learn how to create, package, and sell IP. And this requires a different mindset from the same old same old, people for money model that’s cradled so many services company leaders into comfortable retirements.

It requires a whole range of new organizational capabilities including product development chops, positioning, value prop development, pricing, new commercial and contracting models, and new selling motions.  

It’s a transformation that depends on certain table stakes:

How to change behavior? Give your ecosystem access to a donut machine

What do we mean by a donut machine? Ask yourself how the tech industry has handled IP innovation and packaging for years now. The answer: by leveraging a robust VC and Incubator model.  

We believe, after years of banging our heads against the wall conducting training sessions for services partner ecosystems and creating do-it-yourself IP development playbooks, that teaching them to fish only works for the willing.

Most need more “support”—both a kick in the pants and a big fat easy-to-use donut machine.

The time has come for large IT vendors to take a new tack. And apropos of the platform business model so popular in today’s tech world, deliver incubation platform services to their ecosystem to help drive change for them.  

Explicitly this means supporting partners with scalable low-cost shared resources built into existing tiered partner programs. Frequently partners will have some marketing and sales capabilities, but lack the product management, product governance, and ops expertise. 

In addition, one of the biggest barriers to partners building IP is that it’s hard to find enough customers to make the economics work—facilitating a P2P motion between partners that create IP and partners that sell IP helps overcome this challenge.  An incubator can deliver these types of resources while also acting as an IP marketplace facilitator, including:

Use the carrot and the stick. Tell partners if they want to work with you, that they need to make this transition. Otherwise, you’ll both lose the IP resident in the ecosystem, either to machines run by competitors, or to the slow death of the services partner model.

Digital Bridge Partners has a long history of working with IT vendors to drive ecosystem transformation, including IP packaging playbooks, content development, and coaching capabilities. We have built and run some of the largest and most successful tech ecosystem support programs, for companies like Cisco, Microsoft, SAP, Sage, and IBM. Reach out to us to learn more:  [email protected].