In recent years, you may have heard the term ecosystem thrown around—without much context around what that word really means or why it’s important. In software and technology markets, ecosystems have become more critical to understand and prioritize as customers increasingly seek services and solutions that work well together. A strong ecosystem strategy can help you drive more value to your customers faster. Here, we’ll break down what an ecosystem is, why it’s important, and how it works.
What is an ecosystem and how does it relate to ISVs?
An ecosystem is a network of companies that work together in a variety of ways to address customer pain points and drive new value to customers.
The concept of the ecosystem is broad, and definitions will vary depending on who you ask; we tend to break down the ecosystem into two different subsets:
The channel partner ecosystem: The distributors, consultancies, system integrators, next-generation managed service providers, and value added resellers who support and drive a customer’s digital transformation strategy through the hyperscalers (AWS, Google, Microsoft, and IBM). According to Crossbeam’s 2021 State of the Partner Ecosystem Report, 82% of B2B SaaS companies have some kind of channel partnership. As companies large and small continue to rapidly adopt and prioritize cloud, channel partnerships have evolved from a more transactionally-based model to a holistic, solutions-focused model. Often companies seek support and services across each step of their cloud journey, and channel partners are in a unique position to provide that holistic support.
The technology partner ecosystem: Companies with complementary technologies who partner to build integrations that drive additional capabilities and value for customers. Technology partners don’t always need to build integrations to drive value to customers; oftentimes, technology partners will start by coming together with a go-to-market motion to help customers understand how to best use both solutions in their tech stack.
At its heart, an ecosystem is focused on creating, building, and fostering partnerships for the benefit of the customer—think of it as a holistic answer to the questions, “How can I drive value for customers using not only my own technology, but also using complementary technology and/or services? And, how can I make this as easy as possible for customers?”
In 2021, IBM’s Institute for Business Value surveyed over 3,000 CEOs at high performing companies and found that building new ecosystems and partnerships was their top priority for enhancing customer experience and trust over the next two to three years.
Managing and executing a cohesive ecosystem strategy is becoming more and more of a focus for forward-thinking companies. Canalys estimates that the channels ecosystem market—companies that provide services and solutions to help manage ecosystems—comprises approximately 223 companies with $3.9 billion in software revenue, and that number is expected to increase to $8.9 billion by 2027.
Why are we talking about ecosystems now?
Ecosystems have always existed in some form or another; however, the prioritization of ecosystems for companies and customers has accelerated greatly with the rapid adoption of cloud computing and within the last couple of years due to the COVID-19 pandemic, as companies sought to put together work-from-home solutions for employees. Companies searched for solutions across the business tech stack and incorporated systems that were integrated or worked well together to help employees remain productive.
“People are looking to take advantage of holistic solutions that solve major pain points,” said Kate Kwiatkowski, Sr. Director, Partner Ecosystem, Tackle. “There is a substantial monetary value in ensuring the technology and tools you use are compatible; buyers don’t want to pay large sums for multiple platforms and tools that won’t talk to each other or work well with one another.”
The benefits of a strong ecosystem for ISVs
Customers expect their SaaS products to work well together, and in many instances fully integrate—no one seeks technology that operates in a vacuum. Making data-driven decisions is crucial, and business leaders in nearly every sector rely on data to mitigate risk and improve the bottom line. Having a strong ecosystem can underpin and support this new normal and drive better visibility for customers across their tech stack.
“ISVs need to be able to go to market faster, delight customers immediately, and respond to customer needs and requests quickly,” said Kate. “Building a strong ecosystem is critical to driving customer value in an increasingly digital world. Customers find more value from a product that works well with other key products in their tech stack.”
An ecosystem strategy also cultivates loyalty—once customers have invested in a solution that works well with other solutions in their tech stack, they have much less incentive to move away from that solution. Companies that build solutions that work well together can more effectively, and more quickly, prove out ROI for customers—and that means greater customer satisfaction which can lead to higher customer retention and customer advocacy.
The classic example of this is Apple: customers who have bought into Apple’s ecosystem of products and partners by and large remain within that ecosystem. This translates into enhanced loyalty for associated brands and technologies.
Partnerships: The building block of an ecosystem
An ecosystem thrives on the concept of partnerships: one company may address a customer’s specific pain point or drive value, but a different company might add incremental value or solve another part of the problem. Together, the two work better together. For example, Tackle works closely with DoiT International, a cloud consultancy and value added reseller who helps customers build on and with AWS, Microsoft Azure, and Google Cloud. DoiT helps customers migrate to, build on, and optimize cloud spend; Tackle helps customers execute a Cloud GTM strategy.
These partnerships create a vast ecosystem that translates into big business. For example, in its recent blog on the value of partnerships, Crossbeam reported that Highspot has observed that partners contribute 58% of the revenue generated by their top sales reps, and that working with partners influenced a 60% larger deal size.
In today’s world, it’s critical to make ecosystems a central tenet of your business for the sake of your customers: You’re not just partnering with a company because it’s good for your brand, you’re doing it because it’s the right thing to do to enhance and expand the customer experience, and to bridge technology gaps to solve problems for customers.
The ecosystem is an acknowledgement that no single company has all the solutions. What does your company bring to the table to solve business problems? What does the other company bring to the table? Partner offerings need to be aligned with your product roadmaps and priorities, and integrated with what your company is doing. This is complementary technology, not just an add-on. For most companies, there are some natural relationships (and often an overlap of customers and Ideal Customer Profiles)—for example, the cybersecurity ecosystem will include authentication-related companies with technologies built around password management and access management, so it might make sense for these companies to partner together.
Partnering with other companies in the ecosystem can take many forms. Some of the key steps we take at Tackle are focused on sharing information and aligning marketing strategies around activities and content such as joint case studies, webinars, sponsorships, blog posts, and so on. For example, we worked with Amazon Web Services (AWS) on a case study to highlight how we take advantage of the AWS Partner Network (APN) to drive growth and accelerate customer value.
We are also consistently evaluating how we can drive value for customers through deeper technology integration and alignment. Tackle’s Salesforce application, listed on the AppExchange, is a prime example of our focus on driving value by building on and integrating closely with Salesforce.
The major Cloud Providers–AWS, Google, Microsoft, and IBM–are fundamental in shaping today’s ecosystem landscape. These companies provide cloud services, software, infrastructure, and products that drive a vast amount of today’s commerce and business functions; all have built massive ecosystems to support and extend their capabilities, such as, the APN, Google Partner Advantage, and the Microsoft Partner Network. For many services and solutions companies, their ecosystem strategy is shaped by the cloud providers with whom they work and they’ve chosen to build a business.
It’s critical to build a strong relationship with a Cloud Provider in order to situate yourself firmly within that Provider’s ecosystem. The more your product can be associated with a specific Cloud Provider’s brand and viewed as an essential piece of technology to drive additional value to customers, the better. Yet, getting there requires more effort than simply choosing a company to partner with. Rather, it’s incumbent upon the ISV to build a “better together” story with a Cloud Provider.
Focusing on how you drive success for customers with the major Cloud Providers can also help you further define how your services or solutions expand to, or complement, other ecosystem partners also driving value on and with the Clouds.
Barriers and blockers to expanding the ecosystem
As with any new or emerging concept, challenges are inevitable. Companies don’t always adopt an ecosystem mindset, or, if they do, they might do it for the wrong reasons:
Not starting with the customer. Companies that build ecosystem partnerships through profit-seeking reasons will be less successful. The objective for partnering with another company begins and ends with the customer benefit.
Short-term thinking. You can’t approach the ecosystem with a short-term perspective. Building and maintaining partnerships takes time, commitment, and real effort.
Lack of executive buy-in. The concept of building a business focused on an ecosystem strategy is still early for many companies. Some in the C-suite may not fully understand what it is just yet. For companies to thrive on partnerships with other companies, the C-suite has to be on board and aligned with the overarching ecosystem vision.
Chasing logos. Some companies might be tempted to align themselves with brands with a lot of cachet. If there are no natural synergies between companies, then this is likely not going to drive the desired outcomes for either company.
In the end, it’s all about trust
Partnerships are built on trust between companies, and a successful ecosystem strategy thrives on trust—each partner must believe that the other has the best interests of the customer at heart, and that you’re working together to solve problems through technology. “A successful partnership always comes back to trust,” said Kate. “If something becomes a challenge or you hit road bumps in your work together, you need to have a transparent relationship built on a foundation of trust where you can address that immediately, focus on what’s not working, and have a plan to address it. A strong, successful ecosystem strategy thrives on forging partnerships built on trust, enablement, and alignment.”