The Benefits of IoT Partnerships
The IoT market is in its early stages, and this challenges solution vendors to remain relevant as requirements and outcomes constantly change. In this setting, knowing how to form IoT partnerships is a critical strategic skill that can make the difference between staying relevant and going out of business.
Partnerships enable IoT solution vendors to accelerate. They help overcomes capability gaps and feature gaps in their solutions. They reduce time-to-market by leveraging partners’ existing resources and relationships.
Partner tie-ups align solutions with the platforms and ecosystems that customers are interested in. Go-to-market (GTM) is facilitated through a larger sales channel and greater coverage. Finally, strategic partners use partnerships as a way to “test drive” a company before making an acquisition.
In order to develop partnering as a core competence, vendors must understand the three components of a partnership – what you’re partnering for (partnership type), how you work with each other (partner relationship), and the scope of your engagement.
Types of IoT Partnerships
Partnership types fall into four broad categories (though real world IoT partnerships may involve multiple categories). The actual type of partnership is determined by the needs of the solution vendor and the partner(s).
1. OEM (Original Equipment Manufacturer) Partnership
A “developer” (hardware, software, or a service) has created a solution. The developer makes this solution available to partners who wish to embed some or all of it into their own solutions.
The embedded solution would be resold under the partner’s own brand. An example is an IoT device manufacturer (the partner) licensing special cryptographic code from a security development company. This code will be embedded into the chipset firmware on the device.
2. Technology Partnership
A company has developed some core technology. The company wants to ensure that its technology is compatible with complementary solutions in the marketplace. It creates a technology partnership program that works with complementary solution providers to ensure their solutions are compatible.
This may involve modifying hardware or software on one side or on both sides. When completed, the partner solutions are certified as compatible. One example is an IoT platform company creating a partnership program to ensure that other vendors’ solutions in the IoT stack are compatible.
3. Channel Partnership
An IoT solutions company wishes to sell its products to end customers through a network of resellers, systems integrators, and services providers. The company creates a reseller program and recruits “partners” to help resell its solution. It provides its partners with reseller pricing, solution training (technical and sales), marketing and pre-sales support, and post-sales technical support.
4. Co-marketing Partnership
A solutions company finds that customers are buying its solution and another vendor’s complementary solution together. The two vendors form a partnership to actively market their solutions together in order to enhance the value proposition for the buyer.
In some cases, the two solutions may be completely separate and no technology integration is required. In other cases, the solutions may involve technology integration and certification.
One example is an IoT platform vendor establishing a co-marketing relationship with a management consultancy. The management consulting firm develops an IoT strategy for the buyer and helps accelerate the purchase process for the IoT platform. The co-marketing partnership enables the consultancy to sell IoT strategy work while the IoT platform gets a solution sale that it wouldn’t have before.
Another aspect of partnering is the nature of the relationship. These can be strategic, non-strategic, or somewhere in between. The actual nature of the relationship is determined by the partnership type, the nature of the solutions and value provided, the partners’ needs, their capabilities, and place in the ecosystem and marketplace.
At the risk of oversimplification, partner relationships fall into one of the following four broad categories:
1. Strategic Partnerships
These partnerships provide a critical and differentiating advantage to both partners. They require a deep level of management commitment, a higher level of integration (people, process, and technology) and involve significant resources from both sides.
They may be manifested in various forms, including a joint venture, or a strategic alliance. Due to its strategic nature, a company usually has a small number of these types of partnerships.
2. Joint or “Two-Way” Partnerships
These are partnerships that both sides contribute to equally (to the extent possible). One example of a joint partnership is a co-marketing partnership in which both companies are actively trying to promote each other’s solutions. Strategic partnerships are a special form of a joint partnership.
For example, an IoT platform company will establish joint partnerships with all the LPWAN connectivity technology providers, because they want to be compatible with as many connectivity choices as possible.
At the same time, the various LPWAN technology providers will work with all the various IoT platform companies collaboratively because their customers use one of these platforms. In this case, both the connectivity technology provider and the IoT platform work collaboratively to ensure mutual success.
3. One-Way “Partnerships”
These are closer to relationships than partnerships, because one side is perceived to receive most of the benefits. This typically occurs when one side is more powerful or has more leverage than the other side and pushes its will onto its “partner.”
Channel partnerships tend to fall into this category, especially at the lower rung of the reseller base where the “partner” is just one of thousands of resellers, and they feel that they’re not getting any special attention from the solution vendor.
4. Coopetition Partnerships
These are a special class of partnership in which competitors work together in some very specific areas. They may cooperate on defining industry standards, addressing regulatory issues, education, and other things that serve each other’s interests, or advance the industry.
One example of coopetition is IoT edge device vendors working together to define security standards that ensure the authentication of connected devices and protection of the data stored and transmitted from the edge devices.
Partnership Engagement Scope
In addition to IoT partnership type and relationship, the scope defines what, where, how, and when the partners engage. Some of the parameters include:
- Geographic coverage of the partnership
- Markets and industry verticals affected
- Technology/solution/intellectual property covered
- Duration of the partnership
- Roles and responsibilities of key parties
- Resource requirements
Check out Part Two: How to Form Partnerships in an Emerging IoT Market – 5 Best Practices.
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