5 minute read 8 Oct. 2021

CIOs are making these considerations to create alliances with a subset of strategic suppliers.

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How building your tech ecosystem fuels innovation and growth opportunities

Authors
Greg Sarafin

EY Global Alliance and Ecosystem Leader

Passionate about improving the pace and scale of value creation. Fearless business strategist. Former entrepreneur and dot-commer. Unabashed binge watcher. Traveler, foodie and father of three.

Jim Little

EY Global Microsoft Alliance Lead and EY Americas Technology Strategy Lead

Technology enthusiast. Former CIO. Passionate about helping companies re-imagine their business, value propositions, customer and employee experiences using technology.

5 minute read 8 Oct. 2021

CIOs are making these considerations to create alliances with a subset of strategic suppliers.

Questions to ask:
  • As you plan for your industry’s transformation (or future challenges), what capabilities do you or your clients lack?
  • Where are your potential partners headed, and at what levels are they investing in new technologies?
  • When will you be ready to migrate into that next level of trust relationship?

During times of change, those who are able to establish trusted relationships often emerge stronger, better able to adapt to future challenges. To keep up with today’s accelerated transformation and plan for sustained growth, business leaders must find ways to develop deeper connections within their communities and work with them to construct the tools they’ll need for the future.

The value of an alliance partnership quickly became clear at the beginning of the pandemic for EY and Microsoft. EY teams were able to leverage the Teams platform and deploy it at scale across the entire organization, rapidly developing an agile and trustworthy remote working environment that may have taken months longer to set up with a standard software vendor relationship.

As businesses build their ecosystems, chief information officers (CIOs) and technology leaders can find opportunities for innovation, transformed capabilities and new products or services, as well as identify gaps that limit the potential for future innovation or scalability. While suppliers will fill some of these needs, businesses can create more value in the long run by elevating certain partners who share their strategic intents.

Working together, the ecosystem creates a combined value for the customer that is greater than the individuals can provide alone. This requires relationship management, reputation management and a shared commitment to the customer.

Key question to ask: What capabilities do you or your clients lack, and could an alliance accelerate addressing those gaps?

Pick a partner, not a technology

Whenever companies are looking to create more value, the options are to build the tools in-house, buy from a supplier community or form a strategic alliance and fully leverage that company’s capabilities.

Until recently, most companies took one of the first two routes, but as technology hurdles have come down, the mentality has shifted, and the partnering model is now taking off. However, picking strategic partners today is about much more than the specific technologies they are currently offering.  It also involves evaluating if they are aligned with your company’s purpose.

  • Can they readily integrate across the rest of the ecosystem that you’re building?
  • Are they willing to dedicate engineering and other resources to collaborate?
  • Does their commercial approach align with your overall goals and objectives? 
  • And most importantly, do they have the capability and desire to actively participate in the innovation process?

Cloud and API technology is now powering the ecosystem economy, facilitating multi-party collaboration that is both rapid and cost effective. Also enabling this change are new opinions and practices around trust and data sharing over the past decade. Rather than being wary of sharing information, companies have embraced opportunities for making more data available for decision-making – up and down the value chain. As information flows freely, automation of services has brought costs down and created new opportunities for transformation. Getting a great rate from a supplier is one thing, but how they can help you differentiate from your competitors and become more resilient is key.

Key question to ask: Which vendors have the most reliable and least expensive services that can accomplish your goals or address gaps in coverage?

Managing relationships and setting expectations

An ecosystem differs from the hierarchical supplier world, where the parties meet periodically to discuss KPIs and make sure the service level agreements are met. Partners are interdependent peers who have made joint commitments to each other and toward common goals. Relationship management is key to building this trust and distinct value.

One trap we’ve seen CIOs fall into is sourcing suppliers and vendors strategically but then managing them in silos. Without group accountability for outcomes and the ability to solve problems on a bigger scale, this ultimately leads to suboptimal outcomes.

An ecosystem thrives because of the collective value of the brands and capabilities within it. If you run a small-to-medium-size enterprise and are looking to partner with a larger organization, that dynamic may feel mismatched. Working with a systems integrator or consultant can alleviate the imbalance. This can be highly valuable, as the integrator encourages the larger entity to bring more to the table and help you piece together the tools and resources that are available. 

An ecosystem thrives because of the collective value of the brands and capabilities within it.

Companies should expect and demand innovation from partners. If you're building your own innovation center and you're not expecting your partners to help fund it, or even bring people and ideas into it, you’re not maximizing the potential that exists. Ideally, your partners will take the relationship a step further, bringing some of their top people on board and promoting the service among their network.

Key question to ask: When will we be ready to migrate into that next level of trust relationship? And how do we manage that effectively?

Not all suppliers are partner material

As companies move from supplier relationships to strategic alliances, they take on brand and reputational risk, because they’re tying their brand to a counterparty’s. They might be taking on forecast risk if they base their forecast on a certain amount of sales and marketing support from the partner. They could also take on the risk of execution, such as go-to-market execution and marketing support from the counterparty.

In a business ecosystem, companies build trust through joint risk taking and brand sharing. However, this level of sharing comes with risks that must be weighed carefully. Some relationships that are served by the supplier model won’t warrant the additional overhead.

Companies will still have IT suppliers, for example. The key is to find the brand associations and services that can help you deliver what your customers need, including matching “purpose” commitments to sustainability, security and privacy posture and the ability to integrate with more “open” technologies.

Key question to ask: Where are my potential partners headed and at what levels are they investing in new technologies?

Reimagine your alliance relationships for sustainable revenue growth

In a post-COVID-19 business environment, trust and brand values can make or break a business deal more than ever before. Recent consumer sentiment surveys show that many customers consider these intangible qualities second only to price when it comes to buying a new brand and becoming a loyal customer, and the same feelings carry over to business-to-business relationships.

While some of these new imperatives may show up in annual reports, savvy business people are performing their own evaluations and gut checks. Technology plays a big role in trust and transparency. Data should be easily shared, easily discovered and, at the same time, closely protected to the extent necessary. Along with secure systems, flawless user experiences have come to be expected, so investing in these resources is essential.

When teaming with another organization, take the extra steps to get the sense that what they say is congruent with their actions – and keep in mind that others are looking at your company through the same lens. 

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Summary

Your business can be so much more than the sum of what goes on inside your four walls. Indeed, with cloud enablement, the sky’s the limit, and you can expand your ecosystem to welcome new alliance partners who will help you innovate and create more value for your customers. Ecosystem development requires thoughtful planning and careful integration but offers the opportunity to deliver wide-ranging benefits.  

About this article

Authors
Greg Sarafin

EY Global Alliance and Ecosystem Leader

Passionate about improving the pace and scale of value creation. Fearless business strategist. Former entrepreneur and dot-commer. Unabashed binge watcher. Traveler, foodie and father of three.

Jim Little

EY Global Microsoft Alliance Lead and EY Americas Technology Strategy Lead

Technology enthusiast. Former CIO. Passionate about helping companies re-imagine their business, value propositions, customer and employee experiences using technology.