While every move of the leading enterprise application and infrastructure vendors is followed closely, far less attention is paid to their partner ecosystems, even though these represent a much larger spend than the revenues of the vendors themselves. Take Salesforce as a case in point, with an ecosystem that according to IDC is worth five times the vendor's own $26 billion annual revenues. Yet the same week a year and a half ago that Salesforce stunned the tech world with its $28 billion acquisition of Slack, its $570m bid for consulting partner Acumen Solutions went mostly unremarked. Even less attention was paid this March when it scooped up Traction on Demand, the largest remaining pureplay Salesforce consultancy in North America.
One company that did take notice is Tercera, a boutique investment firm that specializes in backing professional services firms that work with leading cloud vendors. This week it released some of its research to the wider world. The Tercera 30 consists of three top 10 lists of cloud vendors that the firm identifies as having the most significant services ecosystems. Chris Barbin, founder and CEO of Tercera, believes this is a resource that's needed for entrepreneurs looking to build consultancies in newly emerging cloud segments, recalling his own experience back in the mid-2000s as CEO of pioneering cloud integrator Appirio. He says:
As we were talking to many of the services entrepreneurs, they were asking us, who do we think are the next technologies that will shape or could shape additional practice areas for them? — where we think that the vendors have a good ecosystem [and] potential high services attach rates. And I remember, as an entrepreneur in the Appirio days, trying to sort through that, and there was no authoritative source. We would always be guessing at emerging practices.
Top ecosystem opportunities
The new report aims to identify the top ecosystem opportunities around those ISVs that both have a strong need for professional services partners and who also make an effort to nurture their partner ecosystem. There are three lists of ten each. The ten 'market anchors' hold few surprises — these are the largest, publicly traded, cloud-oriented ISVs, including the three hyperscalers AWS, Google and Microsoft, the enterprise application bellwethers Adobe, Oracle, Salesforce, SAP, ServiceNow and Workday, along with up-and-coming cloud data warehouse provider Snowflake. It's in the other two listings where Tercera has had to use its judgement to pick out the leading names — not all will agree with the selection it's arrived at. Barbin concedes:
We want to try to be as scientific as possible. At the same time, it's hard to be super scientific on the private companies, because there can be limited data.
Ten 'market movers' are publicly traded, fast-growing cloud ISVs such as Atlassian, Okta and Shopify, along with industry cloud players nCino and Veeva. The most difficult picks were the private companies that make up the top ten 'market challengers', ranging across data intelligence, headless commerce and content, process management and workflow automation, low-code tooling and security. With the key criteria being the size and scope of these companies' partner ecosystems, those with the largest valuation or revenues don't always make the cut. The selection is also restricted to ISVs that Tercera considers part of what it calls the 'third wave' of cloud computing.
Cloud consulting success factors
The report doesn't take the next step and name the top consultancies in each of those ecosystems — that would be giving away too much of Tercera's own 'secret sauce', says Barbin. As such it's of less interest to enterprise buyers trying to choose their consulting partner when implementing one of these up-and-coming cloud technologies. Instead I asked Barbin what advice he offers professional services entrepreneurs when setting out to build a successful practice or start-up venture in the field. He singles out focus as the most important factor. As he explains:
Too many partners too fast can be a risk. As you get to some level of scale — 50-100, 100-200 — you can afford to have a broader suite of partnerships. But as we know, managing some of these ISV partnerships, that's real work. Their sales reps change, they add new products and services themselves. If you're a $10 million business and you want to have five partnerships, frankly, that's a red flag to us. If you're a $50 million firm, and you want to have two or three, that makes sense, but you can't have too many too fast either.
Building the relationship with the ISV is crucial, he says. Especially for a start-up business, it's best to focus on a specific segment of its target market. He elaborates:
Having an anchor, and really treating that as your primary business offering, where you are pretty laser-focused on an industry or two, a customer segment or two, and treating that ISV like a huge customer, not just a partner.
As you look to go partner with, whether it's a databricks or a HashiCorp, you pick one of them. Think very much as, this is a $10-20 million account. How am I going to service that account? What are two or three things I'm going to do for them? And not go too broad too fast. A lot of these partners, they serve the large enterprise, medium enterprise, small enterprise, they serve eight industries, they're in every geography. Pick one or two customer segments, one or two industries, and one or two geographies, typically one geography.
For established services businesses adding a new practice, his advice is to choose an industry segment where the firm can bring existing expertise to bear. He says:
Stay in your industry lane, and maybe try to have the partner be a complementary technology to your existing partners. Don't go too far afield on that front.
And then the same rules apply, by way of focus. Setting up specific targets, what does success look like? If I want a new practice, does getting to a million in year one or 10 million in year one [look like] success? What does success look like for certification and training? How long does it take to ramp up new people?
Firms also need to adapt to some of the emerging trends in the cloud professional services sector, such as looking for nearshore resources, particularly in Latin America for US firms. With some client relationships becoming more long-term rather than solely focused on implementation work, some consultancies are building up co-innovation teams. He elaborates:
It's virtual teams, especially driven by COVID, where I need 6, 8, 10, 12 people, whether that's program and engagement managers, technologists, data scientists, engineers — a block of people that help an organization make the transformation to these new technologies. They're more contracted not on a project, but on a retainer basis. Let's bring them on for three months, let's bring them on for six months, for 12 months.
That can become similar to a managed services relationship, but it's different from the traditional practice of staff augmentation, where people just fill a seat for the client. These teams are much more focused on skills development. He explains:
The care and feeding of that team matters. It's the continuing education, making sure they're rotating on to other engagements. What technologies that they need to learn over time to advance their career ... The services firm has to be really good about training, learning and development, continuing education, and keep it fresh for the employee.
The services ecosystem is a key factor in the success of emerging technologies, but is often neglected by the very ISVs who ultimately depend on an effective partner base. While Tercera clearly has a strong vested interest in promoting its research in this area, it's positive that it's shining a light on those ISVs who are making an effort to nurture a successful partner ecosystem, as well as highlighting the success factors for firms that provide crucial support to enterprises deploying these emerging cloud technologies.