Ecosystems and partnerships a revenue driver for IT and Tech companies

15 October 2018 Authored by Consultancy.uk

The shift from closed business sectors into intersecting ecosystems provides huge revenue growth opportunities for IT and technology companies alike. However, much of that potential remains untapped, and to be truly successful with the tactic, companies must strike partnerships not just in their own core field, but in new areas in the future.

Businesses are moving beyond traditional industry silos and merging into richly networked ecosystems, creating new opportunities for innovation alongside new challenges for many incumbent enterprises. An ecosystem is an open, multi-sided collaboration between different parties. These parties can include the internal units of an organisation, current and future business partners, and even customers. 

By using them, companies open up a new avenue for revenue growth, and looking forward, ambitions regarding their use are sky-high. According to a new report from international consulting firm BearingPoint, when asked what the percentage revenue uplift which was expected in the next two years from a successful partner ecosystem, a significant 44% of IT & Technology companies said they expect their revenues to grow by more than 16%, and of that, 22% anticipate growth of more than 21%. More than a third (37%) anticipate an 11-15% increase in revenues and 17% expect to see 6-10%. Furthermore, just 2% expect just a 1-5% revenue boost in the next two years.By what percentage would you expect your revenues to growThe main reason behind this is thought to be the value of partners in helping taking advantage of new, digital opportunities. An effective ecosystem can enable an exchange of ideas/products/services or information in an alternative way and will include operative processes and tools to share the benefits between the parties. Such an ecosystem can help generate new ideas, drive innovation, expand offerings, increase reach and grow revenue.

According to BearingPoint’s study, many players in the landscape are already understanding the value of ecosystems. For example, almost half (48%) of IT & Technology companies already have a partner ecosystem in place – more than any other sector, according to the analysts. Looking ahead, the sector is likely to maintain this leading position, with 69% of the IT & Technology companies agreeing that they must develop partner ecosystems to drive innovation in the face of digital disruption.

Asked who they are partnering with, IT and Technology companies are predominantly favouring already established IT companies, and technology providers at 60% and 53% respectively. Business strategy consultants came next, at a distant 41%. This illustrates a window of missed opportunity, as while these firms have to some extent embraced ecosystems, they have done so with caution. They are slow to branch into new areas which will yield major profitability. Internet of Things players, for example, were named as partners by just 26% of respondents, while companies in other sectors account for just 18% of answers. As businesses of all shapes are increasingly expected to display more holistic offerings, such as small level cross-sector partnerships is a major area for potential, then. Which of the following types of entities are you currently partnering withGrowing an ecosystem approach is easier said than done though. The challenges facing IT and Technology companies in managing and enhancing their partner ecosystems are mainly technological in nature. Some 51% of respondents told BearingPoint that they are struggling with a complex IT environment that cannot support a minimum viable product or fail fast concept. At the same time, almost half of respondents, at 48%, said they do not believe that they have the right technology and platform to manage partner ecosystems, despite 47% concurring that this is an essential requirement for success   

Commenting on the results, Henri Tcheng, a Partner at BearingPoint, said it is key that companies get this right. He explained, “It seems that establishing, orchestrating, and managing an ecosystem of partners, and then using it to co-create and monetize innovating offerings, is not a simple task – even for IT & Technology experts… If tech companies continue to lag in execution, many will become defunct like many leading technology brands in the past who failed to adapt to a rapidly changing business environment.”

Cross-industry collaboration for disruption

The reluctance of IT and  Technology companies to partner outside of their industry is in stark contrast to the reverse. IT and Technology companies are the number one destination for companies looking for partners in other sectors. These include the automotive, banking, insurance, telecoms and media, and transport sectors. This cross-industry approach is important because it supports the rapid emergence of new cross-industry business models as everything becomes connected and digital, says Angus Ward, a Partner at BearingPoint.What are the current challenges with managing and enhancing the partner ecosystemWard elaborated, “Today, IT and Technology companies are almost myopically partnering with companies that look exactly like themselves. They are investing in sustaining innovation and not disruptive innovation, adding features to existing products rather than finding the “white space” and creating new products and services.”

Angus concluded, “There are real opportunities that lie in the “white space” between traditional industry verticals like automotive, banking and telecom companies. Not just to enable digital transformation, but to create new sector-specific products and services that can leverage new digital technologies. These sectors need this disruptive thinking as new digital technologies enable them to reinvent and move into adjacent markets. That said, these sectors are now being forced to go out and acquire the knowledge and capabilities themselves to become digital masters, meaning they will be much more self-sufficient in two years' time. If IT and Technology companies do not act fast, they will find they have missed this valuable opportunity for immediate and future growth. The window of opportunity is closing rapidly.”

Related: UK companies building ecosystems could tap into £75 trillion of value.

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