Partner ecosystems are a useful barometer of trends in the wider enterprise technology market. These professional services businesses play a crucial role in supporting customers as they implement and operate a vendor's products. Therefore, a thriving ecosystem that offers entrepreneurial opportunities to grow a substantial business is a strong marker of a vendor or segment that's on the rise. Last week I spoke to the authors of the Tercera 30, an annual listing of technology vendors whose ecosystems they believe offer the greatest potential for B2B technology services firms, to dig into the findings in the latest edition, published last week. Tercera is a venture capital firm that invests in up-and-coming technology services firms.
It's no surprise to see AI making its mark in the list this year, with big names nVidia and OpenAI joining, along with MLOps provider Dataiku, although the authors admit it's still early days in terms of business opportunities for consulting firms. Another key trend is the rise of composable architecture, with multi-vendor solutions becoming more commonplace in sectors such as e-commerce and security. But the changing economic landscape has caused turbulence in some of the more established vendor ecosystems.
Shifting vendor strategies impact partner opportunities
Shifting growth rates at the ten leading vendors that Tercera names as 'market anchors' have impacted partners, says Michelle Swan, Partner at Tercera and the report's lead author. Among the hyperscaler cloud vendors for example, AWS is being outpaced in growth by its rivals, and already has an established partner ecosystem, leaving little room for new players. She says there are greater opportunities for partners of Oracle and Google Cloud in particular, where there's more investment in building out the partner channel.
Salesforce provides another example of how a vendor's changing priorities can impact partner growth. After its shift away from the rapid growth of recent years to focus more on profitability, partners have faced more headwinds. They find themselves competing not only against their peers, with Salesforce continuing to recruit new partners, but also the vendor's own professional services offering, which has grown through some significant acquisitions in the past two years.
The upshot is that the best growth opportunities for ambitious technology services firms lie elsewhere, with some of the fastest growth in the market anchors category being seen at partners of Snowflake and Microsoft, along with AWS.
Another option for services entrepreneurs is to look at the 20 companies Tercera classes as either publicly quoted 'market movers' or privately owned 'market challengers', along with six more on its 'watch list'. Here, up-and-coming vendors such as nVidia, Hashicorp and, from outside the main listing but on the watch list, Box, are building out their partner ecosystems to bolster growth. On Salesforce's turf, new Tercera 30 entrant Hubspot offers opportunities for technology partners as it moves upmarket to court enterprise customers. Swan comments:
I would say [Hubspot] have a big ecosystem already, a pretty big one. A lot of it is these smaller agency partners. But as they move upmarket and follow a lot of the same playbook as Salesforce, and their deal sizes get bigger, and they look more towards that enterprise play, it's an opportunity for a much more technical group of partners. There's not as many of those in the ecosystem.
Time to skill up for AI
With pretty much every vendor in the Tercera list vying for attention this year as an AI player, Chris Barbin, CEO at Tercera, says that service companies have to skill up fast in AI — both as an aid to their own internal operations, but also to provide needed advice to their clients. He comments:
Every services company needs to be smart about what all the Tercera 30 are doing in the AI space. It's not just about pureplay AI, it's all of the AI applications embedded within the platforms. I think that manifests next year, by way of a lot of advisory and management consulting work.
Additionally, though, it's how do these services firms use AI to be more productive? Their own use cases are going to be incredibly relevant to drive productivity, to then learn how to deploy AI in the following year — to drive a level of productivity for their developers, their engineers, their project managers, to be better and faster.
Being smart about AI also means being able to sort the wheat from the chaff. As a veteran of the cloud industry — Barbin was founding CEO of early Salesforce partner Appirio — he recalls the era when cloud was trending and vendors rushed to put the cloud label on existing products, a phenomenon that became known as 'cloudwashing'. Today, he feels there's a fair bit of 'AI-washing' going on, and consultancies have a role to play in cutting through the noise. He says:
I think a big part of the service provider's job is to short out that noise, be a trusted adviser to the medium to large enterprise.
Alongside of that, the first task is going to be helping clients to prepare the ground for AI rather than going straight to implementing production systems. He says:
I think it's largely in the next 12 months going to be a lot of advisory type work. I don't think there's going to be meaningful AI implementation projects. Perhaps some integration work, some data cleanup work, to ensure that what comes out of the models is as accurate as possible and isn't in hallucinogenic mode. But I think there is a lot of prep and foundational work for AI next year, that's setting up the following decade plus, if you will.
So I think it's a combination of, I'll call it advisory, integration, data cleansing, it's the basics. It's not going to be 'We drove 40% productivity for Bank 123.'
As to the role that partners will play when working alongside the likes of nVidia and OpenAI, Swan concedes that it is early days in ecosystem terms for both vendors, although she notes that nVidia just hired a consulting services leader to help build its relationship with the big Global Systems Integrators (GSIs). She adds:
I think it's still early days to figure out what what those ecosystems look like. But also, what's the opportunity for new players? Is it going to favor just the GSIs? Or is there an opportunity for some of these newer consultancies to actually find their way in? I don't think we know that yet.
Composable architecture creates multi-vendor ecosystems
The opportunities are more certain in sectors such as composable commerce and security. This year's listing sees the addition of composable players Contentstack, Fluent Commerce and Stripe, while commercetools retains its place from last year. Solutions like Fluent's order management system have quietly been making significant progress in the enterprise market, says Swan:
I think enterprises realize, with all the APIs that are out there, that they want to be able to swap out, if something better comes along — they want that capability. Fluent is one ... and when you spend some time with their ecosystem, they have relationships with a lot of the GSIs already. You just don't hear about them as much, but what they're trying to do to the order management space is pretty disruptive, compared to some of the old-school players out there.
In security, Crowdstrike and longstanding player Palo Alto Networks join the listing, while Hashicorp retains its place from last year. It's perhaps a surprise to see a vendor like Palo Alto Networks, which comes from an on-premise background, join a listing that Tercera positions as representing the next-generation 'third wave' of cloud. But Swan says the company's growth is now coming from its cloud products and there may be opportunities for new partners to take over from some of its more appliance-centered ecosystem. She adds that security is a segment that, much like e-commerce, is one where partners are incresasingly working with more than one central vendor. She says:
Security is really interesting right now, in that I feel like there's like this level of composability and also a level of consolidation happening — there's so many different solutions out there ... a lot of the security specialists out there have to be partners with multiple, it's very similar to composable commerce, you can't just pick one ...
It does feel like Palo Alto Networks is a pretty partner-centric company in general, and that they're doing enough interesting stuff on the next-gen side of things, and they're growing fast enough, that I think they're worth security specialists to take a look at.
Looking at Tercera's investments overall — including those still to come out of this current fund — Barbin says that only half are 'pureplays' dedicated to a single vendor such as Atlassian or Snowflake, while the rest work with more of an ecosystem of vendors in the composable commerce or security space. He says:
I think it's probably going to play out where half of them are pureplays, half of them are a collection of best-of-breed or composable. Obviously, our [Appiro] legacy is, we were pureplay out of the gate, but then diversified ... That's a trend I think about to advise our shops and the next ones we invest in, is it all-in on one or multiple?
The role of partners in the enterprise technology market is often underestimated and their efforts fly under the radar in comparison to the attention paid to the vendors they work with. But I think the current trend towards composability across many sectors will make the role of these professional services firms even more significant. The vast majority of enterprises don't have the in-house expertise in architecture and integration to manage these complex landscapes, and will turn to the vendors' partner ecosystems for help.