Make partner-to-partner activity strategic, not reactive: IDC 11 June, 2007 By Patricia Pickett

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The analyst firm recently surveyed members of the International Association of Microsoft Certified Partners (IAMCP) to get a sense of the level and characteristics of P2P activity within that community and to understand the implications for technology organizations. While IDC has been conducting research around the notion of the ecosystem as a business strategy for the past three years, for this study it decided to focus on the IAMCP because one of the organization's key mandates is to foster business partnerships among members.

According to the survey, the IAMCP network engaged in $6.8 billion of P2P transaction activity over calendar year 2006 -- which means the association is extremely important to its member community, said Stephen Graham, group vice president of Software Business Strategies at IDC.

For the partner community, it "signifies that there is a viable business model here...and that these kinds of business transactions and this kind of activity is more than just happenstance," Graham said. Partners should consider P2P activity as part of their growth and engagement strategy, he added.

As for vendors, it's a wakeup call: P2P activity has been going on for a while and it isn't just a concept vendors are thinking about creating. "They don't need to think of it as something they need to build...but they do have to think about how to support it," Graham said.

The study also found that small and medium-sized IAMCP partners account for 47 per cent of the aggregate value for all P2P transaction activity. Graham referred to P2P activity as a "significant engine" in medium-sized organizations. Among mid-sized firms, those with 50 to 499 employees, the average size of the transaction, which came in at less than $500,000, is considered "very small," compared to the average transaction activity for large companies: $4.5 million. However, the aggregate volume of business coming in through P2P activity among medium businesses is very large, and the aggregate value of that activity is just over $2.5 billion. IAMCP has a number of partners whose P2P activity accounts for more than 30 per cent of their total revenue. These "high commitment" partners reported an average 2006 revenue growth of 23.1 per cent, compared to the IAMCP membership as a whole, which reported 18.2 per cent growth. Although IDC can't establish causality, there is a correlation between high P2P commitment and higher growth rates, so "there's something there for partners and vendors to look at," Graham said.

While P2P networks have often been discussed in terms of helping partners react to opportunities, partners should treat their participation in these networks as strategic rather than tactical, Graham said. Among companies with a high P2P commitment, the three highest-rated benefits of participation were: increased market reputation; increased overall profitability; and help with competing more effectively against bigger players. Among all partners surveyed, the ability to react on a deal-by-deal basis was second to the bottom on the list.

To successfully embrace P2P activity and networks as a new business model, vendors will need to make some radical changes to the way they think about P2P activity and manage it, Graham said. IDC has defined four disciplines that can help vendors make the transition. The first discipline is developing network-level knowledge. "There is a lot of information that your partner reps may have in their heads and you need to get beyond that," said Graham. It's important to gain information that goes beyond one's immediate partners -- something partner relationship management systems are unable to provide.

Second on the list is managing the structure of the network. "How and where you connect yourself to other companies really matters," and vendors should be mapping out what their partner networks look like, said Graham.

The third discipline is around influencing network behaviour. In P2P scenarios, vendors don't directly control the behaviour of the network as much, so the have to pinpoint ways to influence the network. Microsoft's approach has been to introduce an influencer program initiative, which is not as much a deal registration system as it is an information collection system, Graham said. "Now that Microsoft has that information, it can begin to look for ways to influence the companies that are actually having an impact on the decision-making."

The last discipline is establishing communities and networks of practice: "how you can get people in your company connected with others that have similar disciplines in other organizations and create communities around that," explained Graham