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Strategic alliances Strategic alliances Document Transcript

  • © Tech Mahindra Limited 2010 © Tech Mahindra Limited 2011
  • Strategic Alliances: Vehicle for Increasing Reach for GrowthAn Analysis of Strategic Alliances and Their Role in GrowthThis document is intended to study Strategic Alliances and Partnerships inindustry that are often used to achieve faster growth and increased market shareby offering synergy and often form groups to compete with leading industryconsortiums. 1 © Tech Mahindra Limited 2011
  • TABLE OF CONTENTS 1. ABOUT THE AUTHOR 3 2. EXECUTIVE SUMMARY 4 3. INTRODUCTION TO ALLIANCES 6 4. CONVENTIONAL APPROACH TO STRATEGIC ALLIANCES 8 5. KEY DRIVERS FOR FORGING STRATEGIC ALLIANCES 9 6. CHARACTERISTICS OF ALLIANCES 13 7. ALLIANCE PARTNER STRATEGY 16 8. CRITICAL SUCCESS FACTORS FOR ALLIANCES 20 9. THE ANALYSIS 21 10. REFERENCES 222 © Tech Mahindra Limited 2011
  • ABOUT THE AUTHORPRITAM SHRIKANT PARVATKARPritam Shrikant Parvatkar is currently Director of Global Alliances and Partnerships at TechMahindra Limited, India’s leading IT and Telecommunication Services Company. He has over 18year experience, of which 14 years in Telecommunication and Information TechnologyBusinesses and 4 years in Mechanical Engineering in the domain of Special Purpose MachineManufacturing.Prior to this role, Pritam worked in various leadership roles at Cable and Wireless, the leadingGlobal Telecommunications company and second largest UK fix and broadband networkplayer. He established their wholesale business and was responsible for driving the wholesaleand carrier services business, bringing in transformation to business with sustainablegrowth and was part of high performance turn around team.He has been associated with reputed companies like the Tata group in Tata Teleserviceslimited as head of business development of wholesale and carrier business, with data accesslimited to lead sales and product development and sales of international long distanceoperations and selling of internet access services for business class and dial up marketsand Primenet Global Limited to drive the business class internet access services business.He is a Bachelor of E n g i n e e r in C o m p u t e r S c i e n c e f r om V i s h w a k a r m a I n s t i t u t e o fTechnology, University of Pune with Distributed Systems and Parallel Processing as major.He completed his Leadership and Management studied from Indian Institute of Management,Calcutta and is developing his executive leadership skills to understand managing and drivingcompanies for strategic business growth.EXECUTIVE SUMMARYCollaboration in Business is no more than just a partnership of two companies to form analliance like a joint venture or marketing accords. In the Information Technology industry,collaboration is perceived differently. The alliance partnerships are today collaboration ofmultiple companies to provide customer with end to end experience where group of companiescome together for a common purpose. As a result, new form of competition is increasinglyspreading across global markets – in the form of System Integrators backed by Group ofTechnology and Industry specific product companies. The individual companies in any groupmay have different size, focus, offering. They may be strong in different markets. But theyhave specific roles within a group and these companies may associate with each other throughvarious ways such as loose collaboration to strategic partnerships. This association may beformal arrangements through legal framework, association through agreements or jointinitiatives to develop specific product and services to address niche markets.Legendary Japanese Swordsman Miyamoto Musashi said, “In strategy it is important to seedistant things as if they were close and to take a distanced view of close things” 3 © Tech Mahindra Limited 2011
  • An Alliance Partnership is a formal relationship between two or more organizations to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. The purpose may be varied such as learning from partners and developing competences that may be more widely exploited elsewhere or enable business to gain competitive advantage through access to a partners resources, including markets, technologies, capital and people. Some may be with purpose of providing speed and flexibility in delivering new products. This applies well in forming group of alliance partnerships to convert them to be strategic and provide offering that not only meet short term goals but provide a solid foundation for the long term goals. Partnership and collaboration are the secrets to any success. Choice of the right partners and managing a collaborative environment successfully is becoming more and more important and is shaping core strategy in a dynamic business environment. In that respect, many companies are forging close relationships with some of the most important technology vendors and service providers. This ensures that group of companies form a network to provide clients with unprecedented access to the highest technological and support skills within these organizations when they need it. This also ensures that participants in such network groups improve the development of the technology itself, helping to keep it closely coupled with the real-world business issues that are in demand in market. With this in agenda, we would analyze ways of forming such groups that can be strategic alliances and drive sustainable growth in Information Technology business. This paper studies the various characteristics and compelling propositions of such alliances and strategy adaption of various partners to drive growth in business. How the technology companies and services companies partner for formidable options to customers and compete on sustained business value propositions. INTRODUCTION TO ALLIANCES How did the idea of alliances begin? What made organizations to look beyond own organization to work with other organizations? The answers to these questions are not simple. Different theories have been debated and studied. But most prominent of all is the impact and influence of global economy. In early 1960’s, most of American large corporations were unchallenged for their technology, leadership, skills of marketing and ability to manage businesses with complex and large scale. However, this saw significant shift as mid 1980’s the revolution spread globally and many companies outside America started matching or nearly matched American corporations. This was paradigm shift in newer technology driven computers market to skill based matured industries like Automobiles, where new entrants adapted more readily to changing requirements in the markets. This led to formation of relationships across different markets and domain that eventually shaped in to Alliances and partnerships. Alliances can be described in many ways based on how two or rd more companies decide to work together. It can be cross referrals, Outsourcing to 3 p a r t i e s co-marketing, online a f f i l i a t e arrangements, business partnership arrangements, j o i n t v e n t u r e companies, legal partnerships or strategic alignment. These can have different drivers for different organizations.4 © Tech Mahindra Limited 2011
  • A strategic alliance is a voluntary, formal arrangement between two or more parties to poolresources to achieve a common set of objectives that meet critical needs while remainingindependent entities. Strategic alliances involve exchange, sharing, or co- development ofproducts, services, procedures, and processes. To these ends, strategic alliances c a n in f a c t ,f r eq ue nt l y do call o n c o n t r i b u t i o n s of o r g a n i z a t i o n -specific resources and capabilities(that may involve trade-offs in capital, control, and time). The generic motive, to a greater extentthan in the 1990s, is to sustain long-term competitive advantage in a fast-changing world, forexample, by reducing costs through economies of scale or more knowledge, boosting researchand development efforts, increasing access to new technology, entering new markets,breathing life into slowing or stagnant markets, reducing cycle times, improving quality, orinhibiting competitors.Another favoring factor for formation of alliance groups is increasing complexity of productsand services, and their design, production and delivery. It is difficult to find product today thatcontain components wholly and distinctly incorporating wholly owned and specializedt e c h n o l o g i e s . It i s r a r e s e r v i c e t o d a y w h e r e p e r f o r m a n c e i s n o t dependent onspecialization of various combinations of skills. And it is rate business today that does not rely forits raw material, marketing or distribution on people with diverse background, technical andmarket specific skills. Mitigating all above challenges under one roof is not only difficult but alsoundesirable. Because the greatest advantage of scale and specialization is often realization atthe component level than system level.To address these changes in the competitive environment, companies have created networkof alliances that collaborate to succeed together and gain competitive advantage. Criteria for BusinessPartnerships are many. Based on these two or more companies may agree to steps and rolefor forging alliance. Usually it starts with due diligence of each partner including SWOT analysis,cost benefit analysis and evaluation of these partnership drivers against virtual scenario ofnot partnering and effect of these on speed, focus and make verses buy situations.Usually most of partnerships are led by situations where two or more organizations are in needof one or more of below mentioned strategic approaches to deliver own business plan withminimum risks and maximized rewards. Some of them are -• Each side brings something to the table the other doesnt have• Each made strategic decision not to spend the time or money to do it alone, or can’t do it alone• Together, partners are better equipped to meet a market opportunity• Partnering with one or more other companies can help evolve unique selling proposition or differentiating market positioning that cannot be easily (or at least quickly) matched by competition• Alliance network can help gain critical mass for success, spread cost over large volumes and achieve economies of scale • Faster time to market where new technologies combined together offer solutions that have demand 5 © Tech Mahindra Limited 2011
  • CONVENTIONAL APPROACH TO STRATEGIC ALLIANCES The usual steps to forming a strategic alliance, each the subject of learned texts are:• Locate and validate the alliance within the long-term vision, mission, and strategy of the organization for short term and long term• Specify the objectives and scope of the alliance regarding the organization- specific resources and capabilities that are desired, and underscore the importance of these.• Question what to offer and what to receive in exchange to highlight interdependence. (Alternatively, what must be retained internally for strategic purposes, what cannot be done internally, and what could be done externally)• Evaluate and select potential partners based on the level of synergy and the ability of the organizations to work together.• Identify and mutually recognize the opportunities, including the transparency and receptivity of information they call for.• Evaluate negotiation capabilities.• Understand joint task requirements and develop and propose a working interface with the prospective partner. (This might necessitate an evaluation of the impact on shareholders and stakeholders.)• Negotiate and implement an agreement, anticipating longevity that defines progress and includes systems to monitor and evaluate performance (while eschewing performance myopia).• Define the governance system that will oversee the alliance, enforce its administration, build trust and reciprocity, and curtail opportunistic behavior.• Plan the integration and its points of contacts.• Create the alliance and catalyze it with leadership commitment.• Manage for value identification, creation, storage, sharing, and usage over time, while assessing the alliance’s interdependence with other relationships KEY DRIVERS FOR FORGING STRATEGIC ALLIANCES These days, strategic alliance is a usual strategy in many businesses. Two or more enterprises choose to cooperate to achieve their mutually beneficial objectives via partnership approach. Strategic Alliances are formed out of the desire of enterprises to achieve their independent business objectives cooperatively. But, in the true fact of today’s globalizes and complex market place, in order to gain competitive advantage, it is the need to make such a business arrangements among the fierce competitors in the market place. Usually these set of benefits are varied in nature. The drivers for such benefits depend upon the market, products, nature of business and many more dependencies. Some of them are common to most of businesses that are elaborated here.6 © Tech Mahindra Limited 2011
  • Capability EnhancementCapabilities are gaining critical importance as key differentiator for selecting vendors. In suchtimes, an enterprise may want to produce something with enhanced capabilities or acquirecertain resources that have limitation or scarcity of the knowledge, technology and expertise. Itmay need to seek those capabilities that the other firms have. Strategic Alliance with suchorganizations is the opportunity for the enterprise to achieve its objectives in this aspect.Improved Market Access and ReachLaunching new products in the existing markets or even introducing the existing products in anew market can not only be costly but can be extremely difficult and sometimes complicated.It may expose some challenges such as entrench competition, complicated and unmanageablegovernment regulations and operational difficulties. The opportunity cost and proportionate risksof direct or indirect losses due to incorrect or incomplete assessment of the market situationsmay be risk in addressing such market access aspirations. Choosing a strategic alliance as theentry mode can not only help overcome some of those problems but as well reduces thecost of entry and other barriers for increasing reach.Shared Risk and RewardsVenturing in any new activity independently may give you access to secure 100% rewards incase of success. At the same time it poses threat of exposure to 100% risks and hence makesbusiness non lucrative many a times. In such events, sharing rewards with partners as wellde-risk t h r e a t s t o s i m i l a r p r o p o r t i o n . Enterprises c a n r e d u c e t h e i r i n d i v i d u a lenterprise’s financial risk by strategic alignment with other companies. It is often difficult decisionbut distribution of risk and reward is often safer bet in many circumstances when certainty ofbusiness is challenge or markets are competitive. Unless the companies are not enteringmarkets with innovation that is usually not accessible to competition and has strong demand, theyalways have risks that cannot be under estimated. A strategic partner can help reduce and sharesuch underlying risks. In turn the rewards shared with partner are worth to de-risk challenges.Many a times it is observed that shared risks and rewards do not impact negatively on rewardsas collective strength of partners enhance the scale and volumes that often compensate forshared pie of rewards.Dealing with Political ChallengesEvery market has a governing regulation driven by local administration and politicalregime. Bringing your products into such new markets might confront the enterprise withpolitical factors and strict regulations imposed by the local administration and governance.Some markets will be liberal while some will be politically restrictive. Some are highly concernedabout the influence of foreign firms on their economics that they require foreign enterprisesto engage in the joint venture with local firms. In this circumstance, strategic alliance workas enabler to address such newer markets without objections from local political or administrativeregimes. 7 © Tech Mahindra Limited 2011
  • Achieving Synergy and Competitive Advantage Increased success rates are often driven by synergy and competitive advantages that provide edge over competition. Often businesses may not be strong or large enough to attain such elements on own. Sometimes, forming a strategic alliance or partnership may provide such leverage for gaining competitive advantage by leveraging on joint efforts with another company. The combined strengths of such partners may out pass individual strengths by multiple times and enable all partners to compete more effectively and succeed together. The synergy may help drive faster success and fundamental advantage that competition may take time to evolve on standalone basis. The value created by such synergy may be unique proposition that is compelling to customers and difficult for competition. Time to Success Usually organic growth starts fairly well with nice success curve but quickly attains critical mass from where success in organic manner may be difficult. The growth percentage may lower and sometimes not sustain. The corporations then have to indulge in to risky propositions to achieve incremental growth such as take out hefty loans and exercise risky propositions. Bigger debts and longer return on investment proportion may increase risk in business. Strategic partnerships forged to address such inorganic growth opportunity provide sustainable growth without loading with such debts and risks making faster return on investment and improved viability of business case. Reduce time to success may provide assured positive upside due to early mover advantage. Time to success is importantly becoming critical success factor in markets that are not fundamentally controlled by capitalism but often driven by demand supply gap in favor of demand. As more players invest and enter such markets, the demand supply gap narrows down and forces all players in to increased competition making market not only unattractive but increases risk for failure. Focus Every large and growing business has limitation of resources due to consumption of developed resources to be used for success. Further just because you can do something mean you doing it is always most profitable. Many a times, profitability can increase many folds by doing it through innovative or different means than on own. The percentage of doing it right and how many things one business can always do right is always a matter of imposing risk to existing successful business while driving business growth. Even large corporations are outsourcing very specialized and core functions rather than doing all on own. Unless you have intellectual property that is core of success of your business and need extreme protection for sustaining in the business, it is always a matter of choice in using your resources for what is most critical for success of your business rather than doing it all on own. It is important to focus on few, important and critical business drivers to be delivered through own resources and focusing on them rather than forcing your resources to do what you can get done in cheaper and better way. Even small businesses can adapt to this strategy to ensure they focus on what they believe is core to success of business and do not increase risks and liabilities by enduring in to what they can adapt from third parties. Partnering with players who can fill in these pockets of your business can provide more secured approach to business.8 © Tech Mahindra Limited 2011
  • DIY (Do It Yourself) Verses Buy SituationsIn strategic alliances and partnerships, you do not really go shopping. But indirectly you arebuying what you need to consume from a preferred supplier who has special treatmentfor you due to partnership approach and commitment you produce in relationship. Sincepartner is aware some part of your consumption will be coming from them and not made inhouse by you on your own, they may provide you significant benefits that surpass the savingsthat you may bring to the table by doing it on your own. Many a times, fierce pressure frommultiple factors from regulations to employee unions may impose such compelling requirementsto DIY (Do It Yourself), but then it will hold your business back, and it holds all the rest ofyour employees back. Aligning your business t o st r at eg i c p a r t ne r s h i p m a y provides o l u t i o n t o s u c h s i t ua t i o n . Another important factor always is what e conomies of scaleyou can deliver for your business in DIY compared to getting partner who can provide suchlargesse benefits. Does DIY has drivers of creating Intellectual Property that has contributionto incremental yield on investments and participation in differentiating your positioning? Ifanswer is yes, then DIY may work. If answer to the question is ― No or ― Uncertain, buy may bea better option. It is always matter of debate on this approach but often relevance ofsituation is important deciding factor for such situations. CHARACTERISTICS OF ALLIANCES To be successful, alliance group needs to be focused on a well-defined strategic purpose and clear roles of all the members. Alliance partners are collection of separate companies linked through collaborative arrangements. But it is not necessary that all components in one organization have such collaboration with all components in other organization. Constellation of alliances can vary by size, pattern of growth, composition, internal competition, and governance structure. What is appropriate for one may not be completely suitable for another. Hence it is important to understand these characteristics of alliances that define and govern such partnerships. Size Alliances are created out of need for creating larger consortium that can benefit from economies of scale or larger market share. When the markets turn competitive with number of players or groups winning some or other business, then the size factor has significant impact. When the competition amongst networks centers on the establishment of an industry standard, the number of companies in the network and their combined share of the total market share are critical to success. In good old days, Mips emerged as challenger to established giants in computing market. Eventually Mips was taken over by another large corporation but it created alliance model that gave run for money to established players and made them change business model from solo operating product companies to alliance driven solutions companies. While some of them engaged many technology companies and Mips engaged fewer larger companies, what made the difference was who commanded what market share to define future standards. When the dissimilar partners exploit economies of scale in own industries, a greater volume of joint business can help the alliance group in its common purpose. 9 © Tech Mahindra Limited 2011
  • Pattern of Growth Most of alliance networks do not come to operational model in fully formed model. They are built brick by brick, into pieces. Both rate of growth and sequence of joining members in an alliance network often defines role of each player in such alliance group as well affects network’s competitive success. To attract newer members to align with partner ecosystem, the potential for joint benefits must be well visible and articulated well enough to demonstrate how partnership will result in success for every member. Some companies in such partnerships will see early benefits and some will see it in time to come, but what is required is defined pattern in which joint propositions are growing. Often ally of an ally join up hands to build partnership and create formidable option, but then clear pattern of growth is missing because they are not purpose driven long term partners. Composition For convergence industries, more than size of network and number of partners, often the composition of each partner and alliance is critical to success. Composition ensuring that all technologies and all markets crucial to product are covered holds key to success. Combination of technologies and presence in different markets bring new opportunities that eventually become business wins. Sometimes partners with even matching skills can find different type of composition to work i n favor f o r t h e m . For e x a m p l e i n a u t o m o b i l e m a n u f a c t u r i n g i n d u s t r y , t w o competing companies collaborate to bring in excellence in supply chain management and even engine technology. Different competing brands may use same engine but composition of offering may differ. Even small businesses can adapt to this strategy to ensure they focus on what they believe is core to success of business and do not increase risks and liabilities by enduring in to what they can adapt from third parties. Internal Competition in Alliance Partners This is more common in system integration businesses. The level of competition will depend both on how many similar functions are offered by partners and what is structure of relationship with each other is defined. Such competition has two opposing effects on performance. To certain point, it increases flexibility, dr ive innovat ion and ensure security of supply. But it can fragment part of business so much that none of partner can reach to economies of scales and make enough margins to sustain business and hence partnership. Too much competition amongst partners may finally kill the partnership but reasonable competition can work without larger impact. Governance Structure Cooperation between companies is never automatic. The partnership must provide incentives f o r p e r f o r m a n c e . Without s o m e c o l l e c t i v e g o v e r n a n c e , t h e s e a l l i a n c e partnerships can turn to be simply haphazard collection of alliances.10 © Tech Mahindra Limited 2011
  • One of most important characteristic of this governance is how good it keeps collectivebenefits going on. Many formal consortia’s have governing bodies composed of multiplemembers of alliance partner companies but no individual member has a control. Thesealliance networks may function without joint management. In such cases, one company needto have clear lead and others are participants creating larger group. In such case leadcompany need to provide management to these multiple partnerships and execute role ofintegrator of different systems and services offered by members.ALLIANCE PARTNER STRATEGYWhile having alliance partners benefit but as articulated in previous section, it is purpose definedand aligned for succeeding together is what matters most. Putting in place a partner strategyrequires thinking at different levels strategically, tactically and operationally. A good partnerstrategy requires the buy in from the entire company, at least from its leaders - top executives,sales managers, professional services managers. The haphazard collection of alliances may notwork over the period of time and may lead to lack of vision. The role of strate gy in alliance is tobuild it piece by piece and gain some early benefits but as well ensure long term organizationalgoal is to core of this alliance partnership. Some of models are prevalent and one of mostaccepted model is level based approach to define strategic approach towards building allianceecosystems.Strategic LevelA coherent alliance strategy needs to rely on the underlying business strategy. Beforequalifying the alliance as strategic in nature, some of important aspects need to be welldefined.• Is the creation of (separate) alliances actually fits my business and sales strategy in the mid/long term• Shouldn’t we increase our sales forces instead• Wouldn’t it create too much conflict with the professional services and sales teams• Do we want to sell our licenses though resellers or do we simply want a co-sale, co implementation approach or a mix of both?• Is the company ready to put in place an internal infrastructure that supports and strives to maximize the value of external collaboration.It is important to answer these questions and define whether that partnership is strategic or not.If the partnership is strategic, it can be supported by hiring a partner manager that coordinatesactivities. It will be required to designate individuals within each team that will allocate time onpartnerships, decide % of additional revenues generated by partners and what markets arecovered, what new markets can be added and does organization believe importance ofexecutive sponsorship and investment of management time to drive relationship to successwith long term commitment.Tactical LevelMany a times, the partnerships may be need of hour and charter is to achieve define goalfor predetermined timeframe. In such cases, the alliance cannot be strategic partnership. It 11 © Tech Mahindra Limited 2011
  • will be more opportunity driven. These will not last for long and cannot fit to tactical level of partnership. The partner managers will move the strategic plan forward based on performance of such partnerships from time to time. This partner manager will coordinate the activities of the internal teams with the partners and put together partner processes with direct accountability of success of partnership. Sales teams will agree on opportunity specific arrangements derived from the strategic plan, few issues that need to be answered here are – What is sales engagement model Who will have direct accountability of success Who will take the sales lead when partners are being involved in sales processes when they bring new opportunities Are clear engagement models critical for successful partnership defined with the partner manager What will be role of Product organization and how they will be enabled for demos, solution centers etc. What is Marketing plan with such partners How Legal framework will work Are we willing to allocate individuals within the teams who can support the partner process How to define the coordination processes between the partner manager and the teams Operational Level Once you sign the alliance partnership and define tactical engagement model, it is important to have operational plan in place. Every alliance is build based on set of expectations and agreed deliverables. It is important to operationalize these alliance partnerships to deliver this mutually agreed deliverables. With your strategic plan and the designated persons, you can now operationalize the partnership. • Re-precise your targets and Identify the markets/countries you want to reach with assigned Sales targets for every region • Identify the engagement models you want to follow for each market/country - Evaluate what partnership models will best help you meet your strategic plan. Try to establish a model that fits for all but eventually we may need to draft different types of partner types • Develop a partner selection strategy by setting clear partner evaluation rules12 © Tech Mahindra Limited 2011
  • • Delivery roles and responsibility definition for addressing customer need• Agreed contact and escalation matrix for mobilizing the working of partnershipindependent of people relationship.• Trainings and capability building to adequately service the customer needs from time to time• Joint initiatives and proposition development to augment market offeringBefore approaching your targeted partners, it is important to have prepared. A valueproposition for each type of partner which defines what we offer them in terms ofmarketing, sales and complementary services need to be clearly defined.The value proposition which will come with partnership sales presentation must clearlypresent the value proposition that attracts and persuades potential partners. You need to besure to outline benefits and activities tailored for each potential partner.The Partner Cluster includes a broad collection of product companies, service suppliers, andoutsourcing vendors who work as virtual members of the partnership in providing componentsof services. The degree to which an organization uses partner services varies widely frombusiness to business depending on the size, location, industry type, and the strategic goals ofthe business.The management of the partner relationship within the company depends on the kind of partnerand what services are being provided; so for simplicity, the internal "relationship manager" willbe referred to as the partner account manager.Service level agreements (SLAs) are an integral component in the management of high- qualityservices obtained through vendors, suppliers, outsourcers, or any other type of third-partyprovider. The partner account manager is responsible for defining the terms of theseagreements, costs, and ongoing operational details involved in getting both the partner providerand the customer recipient to meet their commitments to the agreement.Rules of Engagement:• Confidentiality,• Contracts,• Services engagements,• Escalation,• Sales support, etc 13 © Tech Mahindra Limited 2011
  • Key factors for Alliance Success: With Accountability Regular communication Visible milestones Build success With Accountability Regular communication Visible milestones Build success Keep the Trust CRITICAL SUCCESS FACTORS FOR ALLIANCES It is not easy to initiate, build and manage alliance partnership to create an ecosystem that provide unified experience and set of offerings backed up by network of partners. These are governed by some critical success factors. While this cannot be defined as standard, most of experts and users of such models have reiterated some of success factors and compelling activities. Individual Alliance Partner Relationship Matters There is no shortcut to designing and implementing good partnerships. Even when no new money is spent, the task requires the same depth of analysis that managers usually do when they have to invest and define business case with assured return on investment. Partnerships Need To Managed To Appear as One Group as Whole Anything less than explicit group management constitutes a lost opportunity to create competitive advantage. Opportunity costs can turn in to real costs if a partner ecosystem is left untended and uncultivated Growth and Expansion need Caution and Calculated Business Call Often the different relationship success stories of various companies trigger pressure to forge alliances with different companies. Usually when your competitors expand alliance network, you often tend to come under pressure to increase your network by adding more p a r t n e r s . However, this may simply be theory and n o practical benefits or performance improvement may be accomplished. Alliance network should be expanded only when it makes strategic sense. More importantly this expansion should consider organizational constraints and align with them for growth of partner ecosystem. Then only your partner network will sustain. Your Partnerships Define Your Market Positioning This is essence of alliance partner network capabilities. Every network partner has capabilities and so do your organization. Every partnership need to provide defined benefits for the operating area of your company and add value to your market positioning. Lack of commitment is flip side of Flexibility Alliance groups can fall apart just as rapidly as they are formed. When rivalry amongst the alliance partner is great, competition will benefit and such partnerships will go negative to your success strategy. While you forge alliance with every partner, it is important to monitor value add from them and not result in loss in competitive edge.14 © Tech Mahindra Limited 2011
  • THE ANALYSISThe Globalization and emergence of multiple technology leaders has evolved in tocompetitive stage in market where collaboration is answer to limitations of doing on your own.Many companies are unable to grow and sustain pace in complex market environmentand they often have to search for partner or partners to form groups. These groups areformidable option to leaders and sometimes are far too large to be challenged. SuchAlliance and Partnerships with definite purpose is core to strategies of enterprises in recenttimes.Strategic Alliances that bring organizations together promise unique opportunities for allpartners. Successful strategic alliances manage the partnership, not just the agreement, forcollaborative advantage. Above all, they also pay attention to learning priorities in allianceevolution. Cooperative agreements between two or more organizations—are a means toenhance strategic resources: self-sufficiency is becoming increasingly difficult in a complex,uncertain, and discontinuous external environment that calls for focus and flexibility in equalmeasure. Everywhere, organizations are discovering that they cannot ―go it alone and mustnow often turn to others to survive.Change is only constant in today’s world. Competition is increasing due to access to skillsand technology is easier. Complexity in products and services is increasing. Markets a r efar m o r e d e r e g u l a t e d a n d f u n d a m e n t a l s o f b u s i n e s s a r e c h a n g i n g . Capitalism isunable to define who will lead markets. It is groups of partners that form Alliances revolvingaround strategic roadmap and defined goals that are not contradicting are gainingcontrols. The large corporations have seen huge pressures for sustaining such growth andprofits. They are looking towards new way of working everywhere. They are innovating andaccepting it is impossible to compete all alone.At the same time it is not only signing these partnerships and getting documentation in place.To make them deliver effective promises, the governance, engagement model, processesand people driving them need to be correct. This is extremely complex in technologycompany groups due to ever changing and evolving nature of product companies andchallenges to retain and use same talent in services companies. But without this, most ofAlliances fail to deliver. The message is clear, ―Strategic Alliances are need of the hour, butthey need to be managed well to succeed together and keep the promise to make customersdelight. 15 © Tech Mahindra Limited 2011
  • THE REFERENCES AND DISCLAIMER The study and analysis of the paper is based on large access to information available on Internet. Research reference from research firms like Gartner and Forrester has been considered. Various interviews and research material, white papers on Internet are referred. Multiple reading material and case studies are referred including Harvard Business Reviews and real life cases of alliance ecosystem in Information Technology markets. The discussion with key executives and presentations from leading Information Technology, Telecommunication and Product companies, software companies has been referred for completion of this report. This paper is purely for a report for educational study purpose and is not a commercial document. Any reproduction or duplication of any or part or full content of this report is strictly prohibited without written permission of the author. The views and material in the paper above is personal views and does not intend to provide any official views from any company or not expresses as part of any company. They are purely personal views and produced based on reading material and does not claim or depict any verdict. Any liabilities in direct or indirect, in any form, arising from or through or any reference to this paper is not responsibility of author and no claims shall be solicited in any form in any jurisdiction. The author does not make any representation or warranties with respect to the accuracy or completeness of the contents of this paper of content of this document, and specifically disclaim any implied warranties of merchantability or fitness for any particular purpose. There are no warranties which extend beyond the description contained in this paragraph. No warranty may be created or extended by any one distributing these content, sales representatives or written sales materials. The accuracy and completeness of information provided herein and the opinions stated herein are not guaranteed or warranted to produce any particular result, and the advice and strategies contained herein may not be suitable for every individual. Author shall not be liable for any loss of profit or any other commercial damages, indulging but not limited to special, incidental, consequential, or other damage.16 © Tech Mahindra Limited 2011