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Hidden Gold in Partner-to-Partner Transactions

Anecdotally, partnering with other partners is often touted as a winning strategy for providing more comprehensive solutions to customers and landing deals that one solution provider's expertise alone isn't enough to guarantee. Analysts at IDC, the Framingham, Mass.-based market research firm, worked to put a dollar figure on the value of partner-to-partner (P2P) transactions by studying interactions among members of the International Association of Microsoft Certified Partners (IAMCP).

According to the June study, "The Impact of P2P: Measuring the Value of Partner-to-Partner Business Activity in the IAMCP Network," transactions among IAMCP members accounted for $6.8 billion in revenue during the 2006 calendar year. Small and midsize IAMCP partners averaged nearly half -- 47 percent -- of their entire revenue that way. And that's just among members of a single organization.

The independent study is being taken seriously inside Microsoft, where Todd Weatherby, general manager of Small and Midmarket Solutions and Partners, calls it "the most concrete thing we've seen anywhere about the P2P opportunity."

Study author and IDC analyst Stephen Graham points out that the IAMCP's mandate is to promote P2P business activity, so the results aren't reflective of all partner activity. Still, the numbers show a very healthy opportunity within such organizations.

"When we looked at the aggregate [figures], it was very interesting and positive," Graham says. Because IDC had never done a study of this nature before, the researchers had no solid idea of what to expect, Graham says. "I'd suspected there would be some activity," he says, but the overall numbers actually suggested a very viable profit channel.

To get the data, IDC conducted a survey in January 2007 among the IAMCP's roughly 4,000 members worldwide. IDC's study included 429 valid responses from IAMCP members in more than a dozen countries. Survey respondents were asked to assess the value of P2P transactions within the past 12 months across the IAMCP community, according to IDC's abstract for its resulting research report, which sells for $4,500.

How did partners make all that money? "There seem to be a lot of services," Graham says. "A lot of times they said they were looking [to other partners in the IAMCP] for solution-specific expertise, and increased sales and marketing coverage."

The findings suggest to Graham a new way of thinking about partner and professional organizations: "Companies are looking to P2P activity as a source of long-term business-building activity."

The traditional role of P2P interaction, in Graham's view, is "always thought of as a tactical and reactive strategy: 'I need someone because I can't do this part of a deal.'" In other words, partners look to other partners to help cover their own weaknesses in a particular area.

But the companies making a lot of money through P2P transactions -- IDC defined them as those earning at least 30 percent of their total revenues this way -- view it as "a business strategy, and see it as a long-term business advantage," according to Graham.

In fact, those businesses successful at P2P deal-making listed the tactical aspect of the relationship next-to-last in terms of its importance as a reason for their P2P activities. That's why a "professional association" topped the list of the most important tools or business resources they currently use. "Partners are finding value in their own professional and business networks," Graham notes. "The vendor resources they're working with are important, but this [transaction activity] is more a function of the business networks they're developing."

Those networks are paying off handsomely. Graham found that those IAMCP partners with a high commitment to P2P as a business strategy reported average revenue growth of 23.1 percent in 2006, while the total IAMCP membership reported 18.2 percent.

Allison Watson, executive vice president of the Microsoft Worldwide Partner Group, is focusing some of her resources on building on IDC's findings to help partners increase their opportunities.

"The power of this ecosystem is the ecosystem itself," Watson says. While she characterizes Microsoft's current efforts to help partners connect with each other as "leading edge," she adds: "I think you'll see us take a much stronger strategy on that moving forward, because we think really it's a key to explosive growth because it happens without us having to plan. Partners do it without our involvement."

By the Numbers
Golden Surge, Certified Plunge
The Microsoft Partner Program has grown dramatically in the past year-plus, with worldwide membership now at 400,000.

Figures from Microsoft for June 2007, compared to those from February 2006, show strong growth overall. The biggest gains come among Gold Certified Partners, while there's been a precipitous drop in enrollment at the Certified level.

Partner Level 2007 2006 Change (%)
Gold Certified 10,000 7,000 +43
Certified 20,000 30,000; -50
Registered 370,000 325,000 +14
Total 400,000 362,000 +10

About the Author

Keith Ward is the editor in chief of Virtualization Review.

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