Skip to main content

How Partner Ecosystems Became a Major Sales Channel

By December 20, 2023January 23rd, 2024Insights, Inside Sales Optimization
Published Date: Wednesday, Dec 20, 2023
Last Updated on: Tuesday, Jan 23, 2024
Ecosystem partnership becoming a major sales channel.

The “partner ecosystem” has become a hot button at a strategic level the world over – and its rise has been meteoric.

In fact, McKinsey predicts ecosystems will be worth $80 trillion – one third of global revenue – by 2030, a figure that shows no signs of slowing down.

But, as businesses eagerly pour budget into opportunistic partnerships, the designed purpose of the ecosystem – thought leadership, trusted advice and subject matter expertise – seems lost. 

Now, the question is: Are partnership investments being spent with the right focus, or just in pursuit of a quick buck?

In this article, I’ll answer that question, exploring how and why partner ecosystems are transitioning into a major revenue channel.

Recap: What is a partner ecosystem?

A partner ecosystem is a network of affiliates, advocates and referral partners who work together to complement each other’s abilities with trusted advice and thought leadership. Its purpose is to create value, build authority and drive trust among consumers.

Partners are more than just conduits for sales; they bring a wealth of industry-specific knowledge and expertise to business operations. Collaborating with partners who have a deep understanding of your target market gives you the advantage of having a trusted advisor in your corner. Their first-hand insights can help you develop products to cater to specific niches or market segments – enhancing customer satisfaction and creating stickiness among buyers.

There are a number of key benefits to a partner ecosystem, including:

Market expansion: Partner ecosystems enable businesses to reach new markets and customer segments by drawing on the strengths and capabilities of their partners.
Thought leadership and SME: Collaboration within an ecosystem includes the exchange of ideas, technologies and expertise, fostering innovation and accelerating business development.
Cost efficiency: Sharing resources and capabilities with partners can lead to cost savings. For example, organizations can jointly invest in research and development or share infrastructure and technology.
Agility and adaptability: Ecosystems are often flexible and adaptable to changing market conditions. This agility allows participants to share knowledge more effectively around industry trends and customer needs.
Enhanced customer experience: Collaborative solutions within an ecosystem can lead to improved customer experiences. Customers benefit from integrated and seamless offerings that address their needs more comprehensively.
Risk mitigation: Sharing risks and responsibilities among ecosystem partners can help mitigate individual business risks. This is particularly beneficial when entering new markets or venturing into uncharted territories.
Partners sharing risk mitigation.

How is the role of the partner ecosystem changing?

Partners play a pivotal role in the new buying journey. They influence prospects, refer leads, recommend your services and share customers to boost mutual retention.

But today, B2B executives are nearly unanimous in their expectation for partner ecosystems. Referral revenue once again reigns supreme as the leading partnership KPI according to the latest Nearbound survey, with 67% of revenue teams tracking it as a focus metric.

Of course, revenue is king – but what happened to thought leadership? What about SME? Does becoming a trusted advisor even matter anymore?

Put simply, the line between ecosystem and channel is blurring. As businesses scramble to do more with less, ecosystems have turned into a prime hunting ground for sales opportunities. Consequently, partner networks have become less focused on “interconnected business ties” for the benefit of the customer, and more for the purpose of ARR. The ecosystem is now a sales channel – in every sense of the word.

This has a huge impact for a number of reasons:

Partnerships are now opportunistic, not intentional

Partnerships were designed to add value: integration, reach, authority, guidance. Now, many companies chase opportunistic partnerships rather than intentional ones. We’re no longer thinking about what partners could bring to the table, we’re thinking about their customer base and the untapped opportunities within. In the same vein, we aren’t focusing on our existing customers and reciprocating value to them.

They focus on short-term gains

Businesses are constantly under mounting pressure to grow their bottom line. Many prioritize short-term thinking when selecting partners – basing decisions on quarterly or more immediate goals. The risk isn’t just revenue sustainability, but also long-term influence. A partner should be a partner for the long haul, not just once you’ve cashed a check.

Partners aren’t partners in the traditional sense

The very definition of a “partner” has been confused – and at times manipulated. Partner ecosystems are typically seen as an integration play, a revenue play or even a necessary evil. This leads to ties that are purely transactional in nature – without any alignment on core values or strategic objectives.

partner ecosystems working as an integration play.

Opportunity vs. long-term impact

Businesses are already reeling from the impact of this powershift. 76% of leaders say ecosystems will be the main disruptor to their current business model, and it’s easy to understand why. 

According to a recent Nearbound survey:

Integration users are 58% less likely to churn because of partnerships.

Deals close 46% faster when a partner is involved.

Deals are 53% more likely to close when a partner is involved.

But with so many reaping the rewards of a partner ROI, why wouldn’t you continue to lean into the ecosystem channel approach?

Saturation

Like any sales channel, the partner ecosystem is not beyond saturation. As businesses continue to farm partnerships at volume, it becomes near impossible to create genuine, trusted relationships with companies – beyond just referral agreements. 

Not only does this result in a fragmented ecosystem that lacks cohesion or sincerity, it also means that most partners aren’t picky when it comes to actually recommending solutions to their clientele – because they have no real, meaningful ties. Your software may be the better integration for a Fortune 100 business’s customer base, but if your competitor provides a 5% higher referral rate, chances are you’ll lose the recommendation.

Customer experience

Saturation doesn’t just influence partner compatibility, it also damages brand perception among customers. Where once the partner ecosystem was designed to be customer-centric – a network of partners clients can talk to free from bias or purchasing pressure – it’s now a commodity, and the customer is almost always forgotten.

When businesses rely too heavily on referral, they lose authority and their opportunity to sit at the table. Recommendations aren’t taken as seriously by buyers because they’ve become accustomed to the hard sell – especially in B2B where customers have likely established partner networks and tactics of their own. Consequently, they stop coming to their vendors for advice, because it’s deemed inauthentic.

Authority

The whole idea of the ecosystem was to network, drive industry knowledge, and share best practices and learnings. It was designed to enable organizations to bring in trusted advisors to help them help the client. 

An ecosystem is how everything lives and breathes together for the good of the bigger picture. We have to think of the relationships we have as an “ecosystem” that is there to support, nurture and enable. Revenue will come as a natural part of that, because businesses will naturally build authority with their client and be invited to strategy conversations as a trusted, impartial source.

A partner ecosystem networking.

The solution

So what do we do? We remember the value of subject matter expertise, thought leadership, best practices and most importantly trusted advisors. A trusted advisor does not make biased decisions relating to referral fees or class of partnership. They make decisions based on a client-centric focus – not a revenue-centric one.

Businesses preparing to invest in their partner ecosystem should:

Consider short-term gain vs. long-term value

Find the right balance. Consider whether you are prioritizing short-term gains over building sustainable long-term value within the ecosystem. This approach may lead to more transactionally geared partnerships, focused on immediate revenue rather than fostering a deeper, lasting relationship.

Align with your core values

Thoroughly vet partners against your core values and overall strategic objectives. A lack of alignment can lead to partnerships that aren’t sustainable in the long run – and have a severe impact on brand equity or reputation.

Emphasize quality – not quantity

In pursuit of rapid ecosystem expansion, refuse to prioritize the quantity of partnerships over the quality of each relationship. This will result in a fragmented ecosystem that lacks authenticity and fails to deliver substantial value for customers.

Nurture partnerships

Building successful ecosystems requires ongoing effort and investment in nurturing relationships. If you are not dedicating resources to support and evolve your partnerships – and reciprocate value – the initial investment may not translate into sustained growth and revenue.

Focus on the customer

It has to be about the customer. If the focus is solely on revenue generation, there’s a risk of neglecting the overall customer experience within the ecosystem. Sustainable growth requires a customer-centric approach that goes beyond your immediate financial gains.

Partner ecosystems focusing on the customer needs.

Final thoughts

Implementing an ecosystem may seem like the holy grail of modern sales strategy – but it’s important to remember the foundational principles that made them valuable in the first place. 

By doing so, businesses can ensure that their investments in their partner ecosystem translate into sustained growth, meaningful customer relationships and enduring industry influence.