Two years ago, you couldnt shut KPMG up. The consulting firms marketing people were ready at the drop of a hat to wax eloquently about their new strategic partnership with Cisco Systems. That formal alliance called for the networking giant to invest $1 billion in KPMG (an amount later pared to $500 million), train up to 4,000 KPMG consultants in Cisco technology and open six innovation centers.
That was then. Today, theres nary a peep out of KPMG when it comes to the Cisco alliance. Indeed, several requests to KPMG officials for comment on the status of the relationship were met with stony silence. That reticence might seem odd, because, according to at least one industry analyst familiar with the deal, the alliance is not faring all that badly. The analyst notes that although it was very rough sailing at first, with Cisco wildly overestimating KPMGs expertise in networking, the two companies have managed to open a number of solutions centers and get some KPMG consultants up to speed. The huge equity investment by Cisco, adds the analyst, virtually assured that the vendor would not pick up its gear and walk away when the going got tough.
However, in the world of high-technology strategic alliances in general, the silence after the hype is the normal course of events.
"The expectations laid out in these press releases are so high, the breathlessness of the hype is so great, that most of these alliances are doomed before they get off the ground," argues Tom Rodenhauser, a consultant who follows the professional-services industry. "On top of that, the measurements are fuzzy, so there isnt any valid way of establishing their long-term performance. In the end, nearly all alliances end up as nothing more than the formalization of the exchange of business cards."
One crude analogy, says Rodenhauser, sums up the industry view of exclusive alliances: the man who brings the town prostitute to a party and introduces her as his fiancée.
"The reaction to that announcement is the same as the reaction to an announcement of an exclusive business relationship," argues Rodenhauser. "Why hype something as exclusive when everyone is doing business with everyone?"
Rodenhausers skepticism is echoed by others who have researched the issue. Among them is Danny Ertel, CEO of Vantage Partners, which has just concluded a three-year, cross-industry study that surveyed 150 alliance managers. The reports conclusions are not reassuring: For firms with 20 or more alliances, the failure rate of those partnerships is an alarming 64 percent; for smaller firms, 52 percent of alliances are deemed failures. In all likelihood, say observers, those figures are much higher in the fast-changing world of high-tech.
"There is a whole category of deals that accomplish their mission by simply putting out a press release," confirms Ertel. "All they want is to generate buzz and gain credibility by association. There doesnt have to be any substance."
As for those deals that are actually supposed to produce results, Ertel points to several key reasons why they so often fail miserably. Poor alliance management tops that list.
"As soon as the ink is dry, you can bet that things are going to change," Ertel explains. "So how do you deal with the fact that the business plan isnt going to work out as you thought, either because customers are rethinking their priorities, or technology has changed? How do you manage to those changes; what are your mechanisms for problem solving? Do you start finger-pointing or pulling resources away? You need an organization that can respond to change."
"Sure, you need one person in each company whose job is to take ownership of the alliance," concludes Ertel. "But much more important is the organization, because no one manager can carry a deal on his or her shoulders."
The good news is that more and more high-tech senior executives are coming to recognize the importance of alignment, commitment and management.
For example, theres Gordon Reichard, the CEO of Telenisus, a managed service provider, who has resisted the entreaties of his board of directors to pump up the companys partnerships with banner announcements and press tours. "Given all the challenges in making any alliance work," says Reichard, "why start with the handicap of hype?"
Reichard has seen his share of ballyhooed deals stumble over account control disputes; lack of a defined benefit to the end customer (many vendor-integrator partnerships are just excuses to move excess inventory); and a failure to adapt to changing market conditions.
The following three go-to-market partnerships were all subjects of marketing hype, to one degree or another. But each deal had enough substance to offer a chance of success. Heres how six companies jumped the hurdles and embarked on real relationships:
EDS/Sun: a Common Purpose, a Common Foe
Up until a couple of years ago, EDS was arguably the worst partner in the high-tech industry. The company had numerous structural and cultural problems, along with overlapping business models with potential allies.
"Imagine, say, EDS and HP signing an alliance agreement and identifying three or four areas they were going to pursue jointly," explains John Wilkerson, president of Global Alliances for the Plano, Texas-based integrator. "All fine until you tried to sell the alliance to our field salespeople, who would say, I just lost a deal to those guys, and now my kid isnt getting a new bike at Christmas … no way am I going to cooperate with them!"
With Sun Microsystems, however, no such channel conflict exists, because Sun has no ambitions in professional services, beyond supporting its own products. And, just as important, says Wilkerson, the two companies share a common opponent in IBM, which is EDS major competitor in mega-outsourcing and Suns biggest nemesis in enterprise computing.
While EDS and Sun made their official media splash in July, the two companies have actually been going to market together for a year. Of the $3 billion in revenue that the alliance is projected to produce over five years, Wilkerson claims that $1.5 billion is already in the pipeline. Thus, Julys media blitz was built on a more solid foundation than promises.
Just how solid? Wilkerson says EDS is currently involved in a competitive evaluation—known as a "bake off"—for a $2 billion outsourcing contract with a giant communications firm. The competitors, which likely include IBM, have made their basic pitches, and frankly, there is not a lot of difference among them. The customers choice boils down to the fine points. Which bidder can bring the most "innovation" to the deal? Which bidder is more desperate for the business? As it happens, Sun CEO Scott McNealy is a personal friend of one of the potential customers major shareholders. McNealy not only phoned his friend, but also called the CEO, CFO and COO of the potential prized account to express his confidence in EDS and make it clear that Sun would be intimately involved in providing those technological fine points.
"When someone on the level of Scott picks up the phone," says Wilkerson, "it resonates with customers."
Another signal that the EDS/Sun deal is more than mere hype is that Scott McNealy appointed his brother, Barry, as account director of the EDS relationship. Barry had been running Suns automotive industry unit, but EDS is now his sole responsibility.
"Youve got two pure plays here, with 0 percent overlap, complementary offerings and one common opponent," reiterates Barry McNealy, who has been on the job for only a month.
To be sure, he admits, aligning two heavyweights is a big challenge. "Managing this relationship is akin to putting together a vast jigsaw puzzle," says McNealy.
But once you take account control issues off the table, he concludes, just about anything is possible. The sales leads can come from the service side or the product side; the two companies could go off and develop "productized" solutions in customer relationship management. In short, this could be the start of something big.
"Long-term, I cant say conclusively that this relationship will succeed," says a source outside the two firms who is well-schooled in the alliance. But the source does agree that strategically, at least, this is a symbiotic proposition. "This can really extend the reach of both companies ecosystems," he says. "Its all a question of how they execute it."
Lante/webMethods: Lets Get Serious
When Lante Corp., a Chicago-based consultancy, first brought webMethods into its orbit two years ago, it tossed the hot, young technology company into a bucket with other hot, young B2B integration partners.
"Our heritage is as a technology-driven company where architects rule the day, and back then, we had tons of prospective partners knocking at our door," recalls Julia Burns, Lantes director of strategic alliances, with a certain bittersweet air. "We were carried away with ourselves. We thought we were the greatest thing since sliced bread."
Lante, which at the time employed 600 people—about twice its current staff—was juggling 25 vendor partnerships, trying to satiate a large and needy dot-com clientele. Because those dot-coms required so many different services, Lante simply categorized its partners by type and function, rather than by the strength of the individual relationships.
"We were doing one-off deals with all of our B2B integration partners," says Burns. "There was no differentiation [among those partnerships], no opportunity to create critical mass with a few key allies and make them integral to our business."
When dot-com euphoria came to a screeching halt, Lante embarked on a major shift in partnering strategy. The company decided to make bigger bets on a few key relationships, and determined that webMethods should be one of its four remaining go-to-market partners.
Despite the previous lack of committed resources, the two allies had nailed several big wins, including a highly visible deal at Dell Computer. In fact, the webMethods manager for the Dell account was singing Lantes praises across the company. Sales reps around the country did not need to be coerced into teaming on more joint bids.
"We had gained their trust, by showing that we were not going to go into an account with webMethods and recommend someone else," says Burns. "If they brought the lead, they knew wed be true to them."
Lante made some other changes in its partnership strategy to encourage deeper, lasting relationships. It named "technology champions" for each alliance, who are accountable for achieving key metrics, like the number of trained and certified consultants, or revenue and lead generation targets.
Lante also has begun to drill deeper into its success metrics, using business-development codes to track partnering costs. The company hopes to get a better idea of whether the time and money it expends on a given alliance are paying off in closing deals.
Early returns on the enhanced webMethods alliance are promising. The two companies have three new multimillion-dollar projects in the works, including an expansion of the Dell pact. And Lante plans to increase its number of webMethods-certified consultants by 30 percent over the next two months.
However, Lante has yet to recover the traction it lost with webMethods back in the go-go days, and is working to reclaim its status as a "Premier" partner.
Pat Bolger, director of alliances at webMethods, is confident that Lante will meet the required revenue targets and gain top-tier recognition. The two companies, he says, share basic business values and a commitment to make the alliance stronger.
"Nobody is throwing money at us anymore," says Bolger. "You need to present a well-thought-out business case, and consulting partners like Lante are critical to that kind of sale."
Sierra Atlantic/Agile: Building Trust, Rep by Rep
The go-to-market relationship between Sierra Atlantic, an e-business integrator, and Agile, a developer of software that manages product design and engineering operations, derived from modest beginnings.
Four years ago, startup Agile had 10 customers limping along without a way to integrate their Agile apps into their Oracle enterprise resource planning systems. Oracle introduced the apps vendor to Sierra, which built an off-the-shelf tool enabling that Agile-Oracle integration to occur. The two companies offered the solution to a few of those customers for free and proved that it worked.
"Building trust with Agiles engineering department was the simple part," recollects Marc Hebert, Sierras executive VP of partner relations. "The harder part was getting into the sales and service organizations, getting them to trust that we wouldnt come in and screw up their accounts. They had to be willing to get in front of their customers and get them to pay us money, and such a thing takes time and patience, like cooking."
Having the financial flexibility to give away the first few deals helped, says Hebert, as did having an exclusive relationship that kept Sierra loyal. Strong buy-ins from both CEOs were also crucial to securing the necessary resources—one man-year, in Sierras case. But, ultimately, says Hebert, success always comes down to building trust at the grassroots level.
"The nature of sales forces is that you cant shove anything down their throats," says Hebert. "Theres only one way to work yourself into presales activity, and thats one by one. Each success spreads the word, and causes another Agile rep to sit down with one of our key managers and decide to take a chance on us."
"We needed some quick successes," seconds Ray Hein, director of global alliances at Agile, who was there at the onset of the partnership. "Sierra Atlantic [fit with] that need. They were a good development shop that, unlike a large traditional integrator, could help us achieve low cost of ownership, along with speed."
The two companies adopted a stealth approach to marketing the alliance, issuing announcements only to hype real business, and adhering to 100 percent customer reference-ability. What they lost in industry visibility, says Hebert, they more than made up for in credibility.
The two companies have 70 joint integration customers, of which 10 have used Sierra to implement their Agile apps. Hebert believes that if Sierra had been a little more adventurous a few years ago, it might have as many as 25 implementation customers by now. But that is water under the bridge, he sighs.
Agile, now roughly a $100 million company, is one of Sierras six go-to-market allies. The two companies meet regularly at all organizational levels. Sierra is tightly linked to the Agile product-development cycle, allowing the integrator to assist in front-end engineering and ensure that the proper support and service calls are routed to Sierra.
"Weve had our bumps in the road," concludes Hein, looking back over the past four years. "But what helped cement this relationship was that it was based on real, live deals being brought to the table."