015 - Ecosystem Economics - how to leverage ecosystem to capture market and beat the competition

Today we have an OG legend of BD on the pod.

Norma Watenpaugh helps some of the largest companies in the world (like Google Cloud) scale ecosystems to their advantage.

We breakdown how to think about the economics of your ecosystem to gain a competitive advantage, capture market and win.

Norma is the CEO of Phoenix Consulting Group - you can find more out about her incredible work here: https://www.phoenixcg.com/

And don't forget to continue the conversation at https://www.cloudsoftwareassociation.com/ and join up in the slack group.


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Jared Fuller  00:20
What is up partner up? We're midstream in February and I feel like everyone has been stuck in sales kickoff mode. It's that time of year where you're trying to get partners involved how to partners fit in and where does our ecosystem fit in? Does it make it into the executive slides or not? But welcome to episode number one, five, where we're sitting here, Justin and myself, he's got his guitar in the background there, Justin, have you have you tried to make the riff to our intro and outro music yet,

Justin Bartels  00:49
I think next phase, I got to work on a little bit, that one collects a lot of dust, my acoustic gets a lot more love. So I'm gonna have to fire up the amp and work on a couple of riffs with the electric guitar. But yeah, we'll see. Maybe next time,

Jared Fuller  01:03
in an episode to come we're gonna bring the rock and roll experience to Justin's gonna get the intro and outro song, the Justin Martel's version. But we're joined today by someone I'm so excited to chat with. David pilgrim actually introduced us is enormous, wanton Paul, who is the founder and CEO of Phoenix consulting group. And Norma, welcome to partner up.

Norma Watenpaugh  01:24
Well, thank you for inviting me appreciate it.

Jared Fuller  01:27
No, we're excited to have you because, you know, partnerships is a lot of consulting. And often, if you're inside the tech world, you're typically working with consultants, and you're helping them transform their businesses to transform other people's businesses. So you've kind of been in this consulting function of helping companies build their their partner ecosystems, generally speaking at Phoenix, is that correct?

Norma Watenpaugh  01:53
Yes, I've been doing that for quite a few years. And you know, just prior to that I had real jobs and actually helping companies build and scale their partner programs so that they could scale with, you know, fast growth markets. But last couple of years, I've been focused more on helping clients do the same.

Jared Fuller  02:09
That's awesome. And today, what we're going to be talking about is kind of like ecosystem economics. We've been on this trend and thread lately, of trying to stop talking about partner programs as partner programs, or partner teams or partner departments, and really having companies that have these programs start to think and talk in terms of ecosystems. And one area that we haven't really dove into is how to think about the economics of an ecosystem. So maybe we can start there. Because when we were chatting prior to the call starting, you said, We're like, Hey, we want to talk about ecosystem economics. You said, Well, we that has to start with customer experience. And to me that well, customer experience has nothing to do with economics. Tell me more. Tell me, why do you when we talking about building ecosystem economics? Why don't you start with customer experience.

Norma Watenpaugh  03:00
because quite often, and especially when you're dealing with complex solutions, and technical solutions, and digital transformation, or whatever the buzzword is IoT. Your customers experience your products and your services through your partners. Right. So that customer experience is the partner or the partners are the customer experience. So understanding what role they play. And quite often these solutions have five, six different partners involved and involved in different niches around that whole buying decision that the customer has the actual transaction, the implementation, and even the aftermarket. So understanding how all those different roles are is very important. And of course, that leads to economics, because how do partners make their money? It depends on their business model and how they create value for the customer. But that's what the customers are paying them for. So that's where the story of customer experience begins and how it affects partners, because their revenue and their business models are dependent on how they serve and create value for your customer.

Jared Fuller  04:14
So you you break that down on like where the partner touch points are to the customer experience. And I hate to say the monetization, but the economic opportunity of each of those functions, right? Like one individual who I know you know, because he was a part of one of your conferences, Jay McBain from Forrester, right? He talks about the trifurcation channel model, right of like cell service build, and you try to like break out the Okay, how are those three components being monetized or the customer experience is being touched? And then you move into what like what roles do the partners play? Tell me more.

Norma Watenpaugh  04:55
Yeah, it'll be it's all about the Witcher said the build service. Sell. But it's also At what point they intersect with the customer experience. And when Jay talks about trifurcation of the channel, he'll also talk about, Well, you've got influencers, they're non transacting, they're in their early in the customer buying journey. They're influencing your part, your customers, they're telling him, this is how you'd be a better bank. This is how you'd be a better agricultural Flying Service, or whatever that business is the customer is in. So they're providing that kind of advice, which at some point is going to translate to, okay, how do you digitally transform to serve that business? What is the ecosystem, you need to implement that digital transformation, that digital business model that you want to achieve? So that's all before anyone buys anything, any hardware and software services? It's at the point when they're still trying to decide, how do they create that digital business model or the IoT business model or whatever, whatever that business model is that customers are trying to implement to be more viable. And certainly, that's accelerated over the last year as COVID has tend to accelerate a lot of our decisions. But you know, that's one aspect of the buying cycle, it's even before the customer ever buys any, anything product oriented, they're listening to their trusted advisors, or consultants. And sometimes it's quite surprising. I did a, a years ago was helping a company move into the criminal justice market. And there it was the FBI, because they were advocating certain applications and certain software solutions. They weren't selling anything, they were just talking to Chiefs of Police saying, you know, if you had this application, you could catch more bad guys. It can become from very unusual sources, then you have the traditional transaction, partner who's selling, right, they're going to provision your your cloud application, they're going to help support it and help the customer implement it. But even then, there might be other services attached to that, again, that's something that could partner can sell. And that's a revenue stream for them. So they can look at how do we integrate that application with other software services that you have in your environment? Typically, marchetto said that a typical customer would buy five to six, seven other applications, you know, in their market nation, or whatever they call it, but other eyes fees that helped him manage events or webinars or whatever. So it was a larger footprint, the largest solution and just what they were. One of the interesting things about that kind of an ISV model is that it creates stickiness, it's hard to unwrap that,

Jared Fuller  07:55
right? We've certainly seen that, you know, Salesforce is, you know, their their earnings reports, you know, quarter over quarter Adobe's right, the integrated solution approach certainly works in the way that, you know, I've seen that broken down is like, is you typically end up, you know, thinking and talking through about breaking this down into a couple different types of transactions, there is the, you know, the influence transaction, and then there is the kind of like the aftermarket engagement. So whenever you're thinking about the influence transaction, it's anything you've said it before, it's like, how do you equip them to advise, right? And then the after market engagement? It's how do you equip them to, you know, serve onboard train, enable, let's talk about the influence transactions and building out that economic model? How do you start to think about equipping, partners to advise?

Norma Watenpaugh  08:52
Well, when you think about those types of partners are used to consulting partners. And what are they selling? at the at the heart of it, they're selling expertise. And so that's what you provide them. So the more they know, and understand what your products and services do, the more they understand how it drives business outcomes for customers, they're going to lead with they have what they're most familiar with, and where there's less risk. So, you know, that's all part of the knowledge base that they have. So a lot of that influence. model is yes, they want to see leads from you. Yes, they you know, they appreciate sales assistance. But fundamentally, they have to feel comfortable in in leading with you, they have to be seen as a trusted partner. You have to equip them with enough expertise, that when they go in front of a customer, they're representing something that's really going to be a value to that end customer. So here's where a lot of training goes to you or you can go to market with them around thought leadership because they like to, you know, KPMG likes To tout how smart they are about tax and audit, right. So, you know, to the extent that you can help them show that they are the trusted advisor, they have expertise, they have knowledge, they can understand your product know best how to implement it to support, whatever the customer problems are facing, the more they're going to lead with you.

Jared Fuller  10:23
Tell me more about how you think about this in terms of like building the, for lack of a better phrase, the partner operating model, right? If we're thinking about economics, there are some investments, you know, or capital or cost structure around these training programs. But even like the creation of those knowledge products that help partners, like, a lot of companies have, like business value consulting groups inside of them, right, where they're, they're actually selling consulting engagements to help the customer drive the best outcome. How do you think about where do you make your investments around these influence transactions? And kind of modeling? Do you need to zoom out and see the full picture? Or can you kind of start and go, Hey, we're really gonna double down here. So how do we think about making that investment, you know, economically?

Norma Watenpaugh  11:12
Well, I can tell you that for one client, we, we actually started going out and talking to customers, we, you know, talk to partners, and try to understand what those economic models were a little better. So we knew what was gonna motivate them. So, you know, you can probably make some guesses and get it mostly right. But to really understand, you know, where you're going to make big bets, it's probably best to go out and talk to partners, talk to customers, and understand a little bit better. And, you know, some of the things we discovered is that, um, you know, I think I talked to you about this before particular client had, like a 97% of their partners weren't even engaging, they only had a 3% engagement rate. So it was important to understand what was going on there. And most most companies see, you know, 8020 is a good model, you know, 20% of your your partner ecosystem is actually engaged in driving new business to revenue for you. So getting to that point, and talking to customers and understanding, you know, who did they rely on? Who were the go to partners? What was missing? And then you could work backwards with the partners and say, Okay, what would they see what motivated them? In some cases, with the partners that are providing services, what we saw is that, when you looked at their economic model, they were seeing several different revenue streams, one of them might have been transaction, but it wasn't the biggest part of their business, the biggest part of their business might have been the the consulting or the implementation services. So how do you leverage that part of their business? What kind of incentives and programs do you provide to enable them to be more effective in those areas. And in this particular case, what we found is that customers, the partners really liked the professional development, proof of concept, support they got from the client. So funding that had a lot of impact, particularly with smaller partners, where that was an investment on their part, they would usually do these proof of concepts before they saw any significant revenue from customers. So that helped them front end their expenses to go and really win the business. And that was a really big win for them. And of course, they made it back on the back end, right when they started actually implementing and charging for services. But it was important to go in and actually, you know, have those discussions and say that, okay, and in particular, sale around a particular software product, that margins were this much, there was some back end with incentives, but they were getting four times more service revenue. If they had IP, they were getting 10 times more revenue. So understanding those revenue models in that, you know, you might think that you're giving, and I see this as a mistake all the time with with heart companies that have very entrenched, sometimes legacy channel models. So it's all about the margin. It's not, it's not anymore, it's it's where are the services? Where is the additional IP a partner can bring into it? How long can they stay in account and continue to add value and grow the business for you? So it's mapping out all those different revenue streams, and understanding how to incentivize enable those different revenue streams?

Justin Bartels  14:42
I want to double click into that a little bit, especially the first part because I found chatting to a lot of partnership professionals, it's very natural for them to go and do, you know, have conversations to their partners around what are the problems are they seeing what challenges are they seeing? Are they servicing customers that relate to my product or offering But I want to dig into the customer conversations because I don't see a ton of partner professionals doing that. What types of questions? Are you talking? Are you asking? You know, your customers when you're diving into those sessions with them?

Norma Watenpaugh  15:16
This is the sort of thing where if you're coordinating Well, with your account sales, your direct account sales, you can get a lot of information here. Because you're right, I don't think the partner reps do that some, not the inside partner reps, right, the partner partners, your partners are certainly, but also you, you know, you often, especially with the larger enterprise accounts, you typically have a direct account manager in there, who can also have a lot of information there. When you go down market, small, medium business, you need to have those conversations yourself because they're usually not covered. But, you know, as as your account managers are planning their their account plans, you know, one of the things is to encourage them to talk to partner to to their customers as to who their partners are. Who are the trusted advisors, who's already in there? What kind of relationships do they have? Sometimes you find that partners are calling much higher in the organization than you are, they're calling on business decision makers versus it, or, you know, they've been golfing with the CEO for years, there's no doubt about those relationships. And that leads you to understand, you know, what partners are already in there, you have relationships with them, should you be building better relationships with them, and then talking to those partners about what opportunities there are, because they're always doing account planning to with those accounts, you know, so they might see opportunities, you're not, you might have a fit someplace that you didn't become aware of, um, you know, I have a war story in the past where, what our direct sales team thought they had a 500 k deal with a bank. And then they found out that one of their major partners had been golfing with the CIO for 30 years. And they actually had a $5 billion deal, because he was seeing the the opportunities within that account at a much higher level and could see a lot more different, you know, initiatives and projects going on, where the product was a good fit.

Justin Bartels  17:27
It's such a beautiful, simple question to enable your sellers and your account managers to ask and their qbrs, their ongoing touch points. I think this is a that's a great tactical, you know, step one, if you're a new person who's starting an ecosystem, our partner program, start by enabling your sales team to ask that question, or lean into technologies like Gong or chorus to find trackers and commerce recorded conversations where your customers are mentioning partner, and that's a great, great first leaning point, just to understand why our customers working with those partners, what type of partners they are, so that you can then start to frame out an ideal customer profile or your your best set of target partner to maybe bring into the ecosystem. I love that. You mentioned, talking about intellectual property, kind of like,

Jared Fuller  18:17
I don't know if we'll go into the services side, but I'm particularly interested in the IP in developing intellectual property with your partners. Because in my opinion, over the next 10 years, our service partners, margins and service opportunities going to become more or less, I mean, the cloud changed everything. But I think AI is also going to change a lot, right over the next 10 years. And as it relates to these business application, you know, software's whether it's marketing sales, what have you is that the, the margin for the partner is going to become less service oriented and more expertise oriented, more IP oriented. I have some friends like max trailer Max is really great at helping agencies build what he calls knowledge products, right? So manufacturing demand for intellectual property. How have you, because this seems on the influence side, part of what would be most helpful pre sales is like, there is a strategic advisor, and they are a partner, and they're coming in to help drive this expertise. Presumably, if this is a new partner you've recruited, or you're going out, and you're going to recruit 50 of them. They don't have that IP yet. This is something that you're going to help them build. Talk to me about how you think you should be building that knowledge product for your company, or like, how do you advise companies on like, Hey, you need to go build intellectual property inside of someone else's company that isn't on your payroll. And like, you kind of have to be pretty whip smart to whip up an IP product around this. I'd love to get more of the normal thoughts on this.

Norma Watenpaugh  19:53
A lot of times it's leveraging their own expertise. I mean, I remember having a conversation with a company that did IT services for construction companies. And we were in a in a discussion where this woman who specializes in selling buying and selling companies was telling him if you've got IP, you're like five times more valuable to a buyer than if you're just selling services. And the lights kind of went on with this guy. And he said, You know, one of the thing that the construction companies are really bad at is managing the documentation, there's a change order, you know, they want to move a beam someplace, and they have to alter the documents, and they screw it up, they don't document it, right, they put in the beam, Ron, and he thought, you know, one thing we could really help them with is that kind of solution, we could develop IP, we could develop an application that helped them, you know, Track Changes in building specs and building orders. And so he went off to do that. And then of course, there are a number of different, I don't know which one he finally went with, but there are there are software products out there that help track, you know, change management, and track document and versioning. And, you know, he could use that, and to leverage the workflow, applying his own vertical expertise in the construction industry.

Jared Fuller  21:17
So that that that kind of goes down the path of, you know, you have a platform, and companies can build, you know, actual software IP, right. So building on the application layer to extend your products value. What about on the the intellectual, the true intellectual property side of where it's actually a knowledge product, and it's a process for, let's say, auditing, right, current processes, and then making recommendations and guiding your strategy, which is such a fluff word. But a lot of companies do need that strategic help. And if you're going to get good partners, like you want to partner with Accenture, or Deloitte, or even, you know, name a big si or big five, or whoever even just a mediocre one, they're going to have some expectations of like, Okay, how are you going to help me build the IP for Acme co for software x? Which is more of the strategy? Do you just let your partners go and run with it and try to figure it out? How do you think about building the more strategy expertise side of it,

Norma Watenpaugh  22:14
that really kind of plays the core of what strategic alliance professionals do, is that they would work with because you can't make that kind of investment with every partner, right? In many cases, you expect the partner to, like this construction company that I you know, it company that I talked with, is that they saw the opportunity and they ran with it. But if you're working with a larger partner, sometimes you have to, you know, work with them more collaboratively to get to that point. So, and make some more resources available to them. So there's this kind of front end thing of understanding, where are the market opportunities? Where do you want to make these investments, what makes sense for both of you. So if you're working with that size, they're often very vertically oriented, they have practice specialties, so trying to line up with where they are really focused on the market, and where you can bring something that's unique. It takes some discussion, it takes some discovery to say, okay, we can do a healthcare application of our widget, you know, whatever it is, and they're bringing the vertical expertise, you provide some resources that help them with the deep product or deep API expertise, and kind of help work with them to build that application that, you know, variant of your application and then go to market around.

Jared Fuller  23:34
I love what he's, I don't know that I've actually ever heard a definition of a strategic alliances, person. But in the context of that question, it's actually really good, right? Like, if you're a strategic alliance person versus just an alliance or you know, channel or business development, your goal is to help develop strategy for that company to go sell into the market

Norma Watenpaugh  23:55
to create new market,

Jared Fuller  23:56
right to create new markets. Right, and that

Norma Watenpaugh  23:58
it's not just, it's, it's how do you get open up new revenue streams that you didn't have access to?

Jared Fuller  24:05
That's fantastic. I think there's a lot of strategic business development Alliance positions out there in I think, in startup land more so than, you know, the upper end of your mid to enterprise companies. And I think they lacked that concept around it exactly what you just said, is that, like, Look, you're here to develop new markets and build that strategy. I love that answer. I love that answer. What I'd like to transition to now is like, if we're talking about the influence and the, like, the post sale side of things, how do you start to think about benchmarking for that influence, whether you're selling intellectual property, etc, like the, you know, unit economic side of the equation for kind of benchmarking influence type partners.

Norma Watenpaugh  24:51
That is an angel question. Is the channels fairly straightforward, right? There's a PL, there's a number on it. You know exactly what that customer that channel partner is delivering on the influence side it, it might be more fuzzy, and yet, it could be very, very large. And it takes some tracking, because quite often you're selling independently then from their services. So quite often, you often do, maybe a deal referral, which will kind of help monetize what that opportunity was where they bring you an opportunity, you close it, you know how much you sold it for. So you know, how much you know, the impact of their influence was. So that's one approach. But quite often, these some of these partners don't take deal referral, or you don't often have a lot of visibility into it. Sometimes the best you can do is maybe track the top 10 deals in your viewfinder to make to see how those things are going. But I think that's always been a perennial challenge. There's a couple products out now I think work span is one that abels enables Lyons managers to kind of work together to track more their joint pipeline. So it kind of backs up earlier in the process. If you're doing joint demand development, what are the leads you put in the pipeline together? So you can track those to closure. But, you know, that's still kind of the holy grail, it's very

Jared Fuller  26:23
difficult to do, and that's unpacking things like, you know, acquisition costs and these unit economics of like, you know, cuz in the SAS world, right, we all know that we're trying to manage our businesses on some, you know, maybe CAC to LTV ratio, right? So customer acquisition cost a lifetime value, and we know that, you know, less than three, not very good, three years, you're good, you're fine, you know, for You're doing great. And five, you're kicking butt, like, you probably need to be spending a lot more money than you are spending, right, you need to put a lot more fuel on that fire. Have you seen any nascent or emergent? Like, I would say frameworks like that are simple ways of like, if I, if I just know nothing about a SaaS business, but I know their CAC, LTV, I can infer whether or not they have a healthy business with a very simplified, you know, boil down, have you seen any of metrics or benchmarking or leading indicators are lagging indicators that are that is similar to like CAC, LTV and SAS.

Norma Watenpaugh  27:24
I'm not really seen any benchmarks. They're gonna I've seen some attempts at tracking what the total cost of acquisition total cost of investment into a program and versus the outcomes and in revenues. What I've seen is a lack, you know, garbage in garbage out the lack of just like the discipline of of putting in good data to begin with. I'd love to have a better answer than that. And I think we're still early days and understanding the impact of influence and how to measure that.

Jared Fuller  27:59
I think, anecdotally, I mean, Justin, you just just ran through the qbrs. Right. And, you know, it's not the full picture, but I mean, what do you what do we see across, you know, win rates, right? I mean, we're talking well over two X on win rates, right. You know, and then time to close, like competitive win rates, there's a bunch of other tangential benefits that are hard to distill down to the same kind of core.

Justin Bartels  28:27
Yeah, I think I was thinking like a pilot approach to it almost with a partnership to have if you can isolate a team where the partnership and the collaboration for it really makes sense as a first stepping stone of that partnership and then you use that to compare against another group that looks very similar that sells the same product to a similar market but just didn't have that partner involvement. I think that'll tell you a lot about impact on win rate, up size How big is that opportunity for both you and the partner? how fast that close and whether that you know isn't isn't influential to use the cliche you use the term influential play and partner motion for it you know, the two entities working together but it does seem like and talking to more and more partnerships professionals the whole sourcing influence bucket what counts as influence how do you track it how do you gradient it put a gradient to it still seems to be the one of the age old thorns and the partner partnership professionals sides.

Norma Watenpaugh  29:27
Now, although I have much we're just talking about I've seen one or two companies really track partner involved to partner and very precisely success factors was one who did this and this I last saw some really, you know, hard data on this was some years ago. Chris says success factors has an enterprise level LMS SAS product owned by SAP, but this one particularly saw that the deal sizes were like three times larger, they closed faster. And they closed with a higher probability. And the top performing reps lead with partners more. So they were able to track that pretty, pretty intelligent, hard numbers. And it's like, why wouldn't you do it? Right?

Jared Fuller  30:14
Right, right. And then moving, moving kind of across that closed one line into, you know, post sale or aftermarket. It seems like the benchmarking there is, you know, maybe structured two ways, like you kind of have, you know, was it product usage or an adoption, consumption, cross sell upsell? How do you think about, like aftermarket or post sale? benchmarking?

Norma Watenpaugh  30:40
Um, I don't think there's still a lot of data on it. But I think it's, it's very important to have partners that are in that space, you can start doing the benchmarking on it, and what happens when you don't and when you do, I think you're going going back to marchetto, because when they started their, their partner program, they they started with a traditional enterprise bars, trying to work through them, and they didn't go anywhere, right, then they started working in agencies, that began to work, not only because they were recommenders, but at the back end, at the back end, customers still wanted to do marketing campaigns, and they wanted somebody to help up, set up marchetto and launch it. So they were in there making sure customers got value long term value out of their platform. And that's what I think we're, you know, we need to put a little bit more intentional focus on is not just getting the product install the customer bought, in fact, I just saw another software service that will remain nameless, who customer turned it off, because they weren't getting any value on it, they had done a very minimal implementation hadn't grown that implementation, they didn't know what value it was, they just felt uncomfortable using it. And so they said, well, we're gonna go with something else. Whereas if they'd had a partner, or someone in there to help show them, how to use the product more effectively after market after sale, use more, you know, the, you know, the rule that that when you sell software, what kind of plan only uses 10 features out of 2000? Something their help? How do you implement more about how to use more of it? And how to measure their impact? They might have had a lifelong customer there.

Jared Fuller  32:19
Right? Have you have you seen that translate into any operating models before? So typically, some head of operations or finance is building the the plan for the fiscal year, right? And they're working on it, presumably, six months, three months in advance, and then you have your acquisition, and then you have your activation funnels for your business. And then Have you seen partners make their way into that into like, the activation side, where it's like, we're presuming that we're gonna see 25% partner growth this year, and this is going to impact you know, upsell, cross sell uptake, consumption, adoption by x.

Norma Watenpaugh  32:54
I have not seen many organizations address that. Deliberately, I'm beginning to be getting to see them do that more. In fact, I'm talking with this particular company that have their their switch turned off, they're beginning to pull in more partners that can provide the post consulting. As they they understand that departments, if customers don't continue to use the product, you know, that it doesn't drive usage, it doesn't drive upsell or cross sell, it doesn't drive more consumption of service. So I'm beginning to see more of that. And I think it's important to start laying those baselines, you know, you can start building within your own your own business model, you know, after acquisition, what is the ramp, typical ramp rate, it's usually pretty abysmal. But what happens if you put in, you know, hook them up, hook your customer up with a partner that can help them? You know, drive success on your platform? Right?

There's one scenario.

Norma Watenpaugh  34:00
And of course, they're gonna be making money off of it. Right. So that's another part of the economic model.

Jared Fuller  34:06
I feel like there's this big need for maybe it's just me, I'm a geek for operating models, like I love the, you know, the financial plan for the company and going deep into how are we? How are we going to grow revenue by 40% 80% 20%, that next year, and all of the ways that rolls back up into, you know, the, the, the net dollars at the end of the business, and there's just very few people that can speak confidently to how even in their own company, how partners can impact that directly, right, and like, where those investments are being made. I feel like there's an opportunity there, to kind of go deeper, and to spend more time on how to integrate, you know, partner into your operating model. But I think that's probably I guess, a topic for another, another show sometime. That's one I'd love to geek out more

Justin Bartels  34:52
about a spreadsheet tonight and he's gonna start cranking is what's gonna go down and he's gonna hit me up tomorrow morning, and he's gonna be Okay, I think I've got it. And that is gonna be bleary eyed, no sleep. And that's what's gonna happen tonight. And I

love it. You know,

Norma Watenpaugh  35:10
I've seen economic models around the SAS business model where you where you factor in an attrition factor, right? So is drop off after a certain time, but never as a growth model where you have partners in there, you know, rather than assuming there's an attrition, there's always gonna be some, but, you know, how do you actually drive the aftermarket? Yep. So the cross sell the greatest consumption, you know, ramping up the consumption faster.


Justin Bartels  35:39
One idea, this is really opened my eyes to is you know, oftentimes, when you're enabling your sales team, and your your product marketing team is talking about the product you're selling, and who you sell to, they have a persona deck, right, and it has your ideal decision maker, the champion, this person, that person that's all involved in the deal. But rarely do I see a partner in there as a persona? And, you know, through this conversation, when it is popping up to me, is that partners there, whether you're thinking about them and building for them, and building an ecosystem around them? Or they're, or they're not? And I didn't really have a question for that. It's just an idea that popped into my head of like, wow, can we talk to our customers about to understand them and understand their, their buying teams and their personas and all their wants and needs, but we forget about this critical third party that is in most of our customers, you know, in some, to some degree, which is this partner, that's also a part of their team, advising them, making sure that they get the most out of their technologies, the solutions they're bringing on? And go for it.

Norma Watenpaugh  36:46
Right, it gets overlooked. And quite often, you know, it's one of my roles as a consultant is to tell my clients to do don't overlook that when you're doing your account planning with your customers. who's already right, who can help you, right? who's working again,

Justin Bartels  37:03
when I imagine even getting on your product marketing teams radar for that, when they're talking to you know, your customers about what features should we roll out? Who are the players in your company, also getting them to ask who your partners that you lean on for this? How do you resource it, I think, could also make some dramatic strategic shifts within an organization if you're a partner professional looking for leverage internally.

Thinking about

Jared Fuller  37:32
you said something that I feel like every a lot of the audience, there's folks that are very tenured and been doing business development, and perhaps they're jaded, because they've seen business development rise, you know, from nothing to where it's at today. I think it's playing an increasingly important role. But in the beginning, I think, you know, 10 years ago, very different than it was today. 10 years ago, it was really seen as transactions, right? Like 20 years ago, it certainly was right, like it's on prem, you're trying to drive business, the move to the cloud. And you've consistently said to us that like, you know, not all partners are transacting partners. Right. And I feel like when most companies are spinning up a new channel or a new BD program, or do something, they think about it solely through the lens of transactions, tell me what you mean, when you say, not all partners are transacting partners?

Norma Watenpaugh  38:24
Well, just what we were talking about, sometimes they're not selling your product, they're not taking a margin or gaining incentives on the back end, what they're doing is serving their clients. And they're doing that by recommending things that they think will solve the client's problems, but also probably has other revenue streams around it. That helps them like consulting, like services, perhaps even IP. But they're not strictly what we think of as a channel where they are, you know, got you in their little kit bag and trying to present the customer, a business case to buy you. It's, it's more they might come in and say, Well, I think company XYZ has really great solution for you, or what you're trying to do. And I'll be happy to bring them in here for you to talk to, but it's not. And by the way, we're going to get 10% margin and, of course, incentive at the backend.

Jared Fuller  39:35
Of course, I think where I'm trying to go with this is I know we were kind of just talking about this topic. But let's assume there's no transaction and the way that I do it is I try to tie it to opportunity. So it's not just new business logos. Like if I have partners, helping customers and there's an upgrade and expansion and upsell, there's more spend in that account. We'll attribute that partner to it and we can assign, you know, resources against that because they're trying to grow the accounts, in that situation still feels kind of transact any, you know, like, there's some transaction involved, it just isn't new business logos, right. So it's not a new logo coming in, but the customer is, you know, expanding. Have,

Norma Watenpaugh  40:15
yeah, they're extending on your platform. And you know, the end, you know, the transactions on the partner side, and that they, they're selling something, right, whether it's, it might not be your, your SaaS product. But it's services, it's consulting, it's IP, it's something because they're, they're trying to build a business as well. But the transaction isn't, isn't your transaction.

Jared Fuller  40:40
So the way to measure the non transacting partners in the traditional sense, would be around. Obviously, maybe this is fairly common in today's SAS world, like customer health, right. So you can typically put some numeric value on customer health between zero and 100. And then the growth of that account in terms of spend with the company. So although they might not be necessarily driving, like, oh, here's this paper to go upgrade to this product that you sell. But you could say, Hey, I have a post sale channel or partnerships person, here's the book of partners that they manage. And you can measure things like partner attach rate, like are their partners in more accounts, customer health, NPS. There's a bunch of other indicators that you can utilize to kind of justify the the model there that isn't just a transaction.

Norma Watenpaugh  41:29
Yeah, that's this shirt. And and you know what, you go through your own businesses, which you're ultimately want to see. But it's coming from their influence, not their sales efforts around your product.

Jared Fuller  41:43
Right, right. One thing that kind of going beyond economic system economics now we're kind of coming up on the end, and Justin has some like heavy hitter questions that he put in there, like BigQuery questions, which I love ending with these because then that means we probably need to do another episode on it is I don't think a lot of companies Justin, this is your question. So I'm stealing it from me, please rephrase it, but it's like, how do you decide on the right ecosystem mix? Like, I don't know that I've been intentional about To what degree I make investments in alliances versus channel. And if you've if you've ever helped companies and thinking about business development, like there's tech alliances, which is a co sell motion, there's channel, which is a service and sell motion? How do you think about where you place those bets?

Norma Watenpaugh  42:35
Yeah. And it's always a depends question, right? It depends. One of the things that I look at, when customers are asking me that sort of bag or client, my clients asked me that sort of thing is, service capacity is one of the limiters on the velocity of your business. I've seen this in a lot of different contexts. But if there is $4, of consulting, or services around every dollar of subscription, well, you have to have that kind of service capacity to drive your business. Right, if there's only $3 in the mark in the marketplace to drive your business, you're, you're constrained. So this was particularly the case. And in one company I worked with, in that there was a 10 to one ratio, in that they took tender. And as a company, you could not hire and train and and onboard that many professional consultants, personal services consultants to drive the level of business that you wanted to reach, you had to work with partners who had those consultants and the desire to do it. So a good part of our business was saying, okay, there's this much demand in the market, we think we can capture this much of it, but it's going to take this many consultants delivering this many hours to consulting, in order to get there from here. And so we could do that calculation and say, okay, we need 4000 consultants in the next year up, ready running, what is it going to take to get there from here? And we kind of backed into that model and saying, okay, we need, you know, X number of consultants, most of them at that stage came from the larger consultants, but we found there were a lot of nice niche players who could get up and rolling faster. So we look for those too. But getting them on board, getting them trained, and getting them deployed, so that we can to meet the market demand. And that was particularly in a case where the market was just growing exponentially. You know, what Jeffrey Moore calls a tornado. In in a tornado, it's not just good enough to grow fast. You have to grow faster than that tornado or you're losing market share.

Justin Bartels  44:44
Interesting. So how did you how did you specifically do that? 10 to 110 dollar services to $1 of subscription versus four to one. How did you specifically get to that ratio and in this client instance?

Norma Watenpaugh  44:57
Well, it was it was by auditing some implementations. We knew what the customer bought, we knew how many, how much services in this case, we started with our own professional services, okay, we had to have this many hours of consulting to do that implementation. And the nice thing about that is when you go out to these implementation partners, and you say, hey, there's x bazillion dollars around an implementation of this site. And that's when they start to engage, right? Because they know where they know what the opportunity is for them.

Jared Fuller  45:27
The This is where I've seen some companies, I won't name them because they're public, I think they're playing Six Degrees of Kevin Bacon. Here's what I mean by that, is that like, oh, for every dollar, you know, to our ecosystem, every dollar you spend, and you know, our customers spend in software, they're spending this much on services. And I think sometimes the lines are very fuzzy on like, what constitutes services that are actually helping and helping the software? Like, a lot of times it's tangential business problems that then they're attributing back to the software impacting, did you have any kind of tips or tricks or on like, yeah, there's obviously the direct contracted revenue that a partner has. But if you actually break down their proposal, maybe you know, it's a 400 k engagement, maybe 100 K is related to the software that you sold, are you gonna attribute all 400 K, are you gonna attribute that 100 K, you need advice for folks on how to actually monetize and say, here's your service opportunity,

Norma Watenpaugh  46:22
there is actually a need to take a look at the service continuum, because of different types of services, right? Some is going to be very how you're going to be a better bank kind of consulting. So this is very high level McKinsey kind of stuff. But that's part of the service continuum. There's also the kind of services that might relate to implementing configuring training the users to use your software. And then there's another set of services that might be related to integrating, creating those API integrations between software and five other pieces of software running in the environment. So there's that continuum of the services, you need to kind of get into an and break it down within an implementation or, or family of implementations and understand what those different components are, because they did have different values to because the services that can be done that are kind of configuration kind of sort that kind of low value in terms of low margin. So you know, but consulted on how to be a bigger bank, as high margin stuff. And, you know, not every partner in your portfolio is going to have that capacity, that trust with the customer. But those that do are going to get in very early and have a lot of influence.

Jared Fuller  47:40
Yeah, at the end of the day, if it's a part of a bigger project, your software isn't a line item of a bigger services engagement. But the customer ends up growing, they have a healthier business. That's net net Good for you, right? It's a rising tide raises all ships. I feel like that's such a such a good note to kind of end on today, Norma is around. At the end of the day, if we really do care about what we do, we have to care about better customer outcomes. So like you started this conversation with starting with the customer experience, and we're ending the conversation with, you know, ecosystem economics is about the customer outcomes. And we're going to be measuring revenue, and the service is to software ratios, right? Hey, it's okay to like, participate in that ratio being something like driving a better bank? Well, I don't know about you. But if I'm a software CEO, if I'm a founder, if I'm a member of the board, I want my customers to be healthy customers, not declining customers, because they're going to spend less money year over year, right? No one wants to go into an industry and sell to an industry that's going down. So we got to help with business development with partnerships, build better customers. And I think that is actually the ultimate goal of partnerships is enormous, summed it up for us. Norma, thank you so much for partner coming on partner up. One final thing I do want to say give a massive shout out to Evan and souvenir and the 4000 people at the cloud software Association. If you're not in the slack group, go get in the slack group. There is like weekly webinars, there's amazing content. And it's all partnerships, people. So if you've been looking for a network of folks like you to take kind of the learnings from this podcast off the air and talk with more people, go check out the cloud software Association join up in the slack group. And you're gonna love it. You have a great time, Justin, I are in there. So Norma, any parting words today during sales kickoff season for the partner pros out there?

Norma Watenpaugh  49:39
I think it's always start with the customer. You know, take the customer centric view of how you partner. I love it.

Jared Fuller  49:45
I love it. Well, we'll see you next time on partner up. We got Scott Barker coming up next from outreach. So that's going to be a fun one on how to use community for building partnerships. So we'll see you next time partner up all right, all right. So we'll stay on here. We'll leave recording running for a minute. Just to see if anyone's on. I think there was some folks having trouble getting into Riverside. Let's see anyone there for QA.

Justin Bartels  50:13
Jared, we do have a question from the chat. Norma, how much of a difference? How much of a difference Do you see with distribution of the traditional tech model? From the 90s? And what's happening with SAS?

Norma Watenpaugh  50:31
And this person is assuming I saw the 90s. Well, I did

Jared Fuller  50:36
extensive VA systems in there, and you and Bobby Nat back in the day and other guests on partner up.

Norma Watenpaugh  50:43
And after I did, actually, um, what are the differences? Um, well, I think a lot of it has shifted, I mean, I was kind of at the beginning of that, where you know, ba was all about API's. And that's where a lot of the service has happened today around SAS, SAS software is around the API's. And I would say that was kind of the true transition point, isn't 90s, there were still a lot of on prem, as still, you know, a

lot of

Norma Watenpaugh  51:15
you know, software, perpetual software licenses, that, you know, build up through shelfware. I never got used horror stories there may work for a million dollars, the CBOE and then forgot that there was, you know, $4 million of implementation that went with it and never value out of it. But I think now, it's what's really different, I think, is the expectation for time to value. No one sits around six months, two years to implement their software to see value. It would be a death knell, you know, with with SAS software, you know, I'm seeing implementations, well, you know, some, some are like almost immediate, right? when you, when you pick up your smartphone, and you download an app, you want to see value right now, in enterprise software, sometimes you're seeing like, you know, 30 days, you want to be up and running and transacting and doing whatever it is that you're doing with the software right away. So if I think of anything, SAS, the difference in the SAS model is that the expectation of time to value is much shorter,

Jared Fuller  52:18
you hit the nail on the head, time to value is everything and the consumerization of enterprise experiences and even partner experiences. Like we live in breed that every day and drift, like that's all that we talk about Justin is how the world has changed. The world has changed, the world has changed. We expect things now I mean, the time I've been on this podcast, 123456789 notifications on my phone, and I don't even want to check slack. Right, like the Xbox, like, people need things now. They need things now. I think you hit the nail on the head in terms of the biggest difference, back then they were buying a promise and they knew they committed to a process. Right? Like, okay, this is a journey for a year, two years to do some, you know, you know, yeah. I can't imagine a person reaching your customer today and saying it that way? No way. No way. And I think my take on that would be that. It's really that. In a lot of ways, I've been seeing this more and more, I feel like partner is lagging behind the market by a factor of three. And the way I can kind of break that down as it's like, maybe it's in three years, maybe it's in three, three months. But what I mean to say is, whenever you're looking at the latest trends, right, most partners, they lagged behind the cloud native stuff because they didn't see service opportunities, right? But whenever you're looking at today in today's world, that it's like AI, mean, I'm talking to the world's leading si is around their, their AI practices. There's lots of AI out in the market, but they're behind the curve, right? And that time to value thing is like, it seems difficult to their business model. And I think the best analog here is actually in software development itself. Most projects started as waterfall. Right? a waterfall project was what you scope everything out, and you deliver everything. And that was Microsoft, right? Think about I mean, Justin probably doesn't even know about this. He's never had to update Microsoft Windows. Justin ever had to update windows?

Justin Bartels  54:33
Yeah, back in the day,

Jared Fuller  54:34
back in the day, okay, you got to update Windows PC, that was a waterfall methodology. And now we're used to like, you know, just continuous deployment, right continuous development. And I think channel is really lagging behind in a factor in that. I imagine channel partners or service partners, they're like, hey, day one, day two, day three, you're gonna see value with us. And we're gonna make it better week over week, right and take the agile approach as opposed to the waterfall approach. So there's my pontification philosophy on the markets there. We got another question in, would you say the integration partnerships are more important than revenue partners in building an ecosystem for your product?

Norma Watenpaugh  55:17
I don't know, if I would put one priority over another. I mean, definitely, you need a partner that can help you close the deal. The integration partners help you stay in the deal, right, the retention, once you're integrated with five other different software products, you're not you're not an easy rip and replace. And it might be the same partner, you know, it might be the continuation of services that your transactional partner is bringing?

Jared Fuller  55:44
Absolutely. It's, um, I mean, lifetime value is the name of the game in SAS, right? So that's acquisition plus retention, and upsell, and activation is just two sides of a different coin.

Norma Watenpaugh  55:59
value, but it's also you earn that value every month, you know, every renewal? Yep, you're having demand in mind the customer. I used to get that when I bought way back when I worked for Sun Microsystems, um, that we didn't deliver product, we abandoned it.

Jared Fuller  56:23
unbanned abandoned it What?

abandoned it was.

Jared Fuller  56:31
Just Here you go. Yeah, because there was no ongoing. I mean, it was here it is, there you go.

Norma Watenpaugh  56:38
shipped it delivered it. Walk away.

Jared Fuller  56:44
Any other questions? I know, we're coming up on the top of the hour. And we gotta let Norma get back to transforming these big coast channels. Normally, before we bounce, I'm just curious if you could talk about any logos that you'd worked with in the past that you can actually talk about?

Norma Watenpaugh  56:59
The ones that can't talk about No,

Jared Fuller  57:00
no. Well, obviously, I want you to talk about the ones you can't talk about. But I would just be curious, like, you know, can you name some of the companies that you've worked with

Justin Bartels  57:06
is broken today?

Jared Fuller  57:10
transformation projects that like I think the world needs to know about to go Oh, yeah, there's, there are big companies doing these things. And there are people like normal out there that are

Norma Watenpaugh  57:19
no, no, you know, I've worked for past three years with Google Cloud. And the reason being three years ago, they really weren't positioned with it with a with a partner ecosystem that could take them into the into enterprise and migrate big workloads, their cloud channel, and I, you know, I don't think they would, you know, who slapped a lawsuit on me for saying this, but their, their cloud ecosystem three, four years ago was really about selling G Suite. Which is, which is a different skill set than you need for the kind of GCP platform they're running today, you know, to do migration to do integrations to leverage AI. And, you know, it's been a, it's been a journey and a lot of investment on their part to reshape their channel, ecosystem, both, you know, all build, sell, and service to be able to, you know, serve the enterprise and, and catch up with their big competitors.

Jared Fuller  58:25
Amazing, we done we'd love to have you in the cloud software Association. So whenever you get time in your free schedule, hop in, and we'll post the episode and get it out all there but I highly encourage you to join because I think long tail they probably want to have you on like a deeper like webinar series around this and some of these projects that you've been involved in. So I'm going to go ahead and we're gonna kill recording right now. So we have enough to wrap up and get normal after next thing.

So thanks

Jared Fuller  58:54
CSA and the folks that join in and chat for this round and we will see you next time.

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