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The Maturing IoT Ecosystem |
NEWS |
Since early 2015, ABI Research has been collecting data and ranking system integrators and value-added resellers operating in a variety of partner program ecosystems in its SI/VAR and Partner Program IoT Ecosystem Market Data report. It has become apparent that even though the companies included are just a snapshot of the overall market of thousands of IoT providers, developments within these partner program ecosystems reflect the trajectory of the overall IoT market. By determining what pieces of the IoT value-chain these companies are offering and what vertical markets these companies are targeting, changes in end-user demand over time can be determined.
Other trends that define the role these partnerships are playing within the larger
IoT ecosystem can be determined as well. Over the past three years, 47 out of the 516 companies were acquired, rebranded, or ceased operations. Of the 38 companies that were acquired, 66% were acquired by a company outside of the partner program ecosystems the acquiree was operating within. 26% of acquired companies were acquired by a partner program member, while only 8% were acquired by the partner program parent. Partnerships and acquisitions both defragment the convoluted IoT landscape, but they do it in different ways. The role of each blurred in the early days of these emerging partner programs and ecosystems with companies such Cisco, PTC, and Autodesk acquiring respective partners Jasper, Coldlight, and SeeControl in deals that shaped the overall IoT landscape. Since then, the lines between partnerships and acquisitions have become more rigidly defined as both IoT providers and the overall marketplace have matured. Today, the decision to partner or acquire is not only mutually exclusive but also deliberate, intentional, and strategic with more companies opting to establish partnerships.
The Continuing Shift to Value-Based Partner Engagement |
IMPACT |
These IoT partner program ecosystems stem from the more traditional partner programs that served mainly as a strategic tool used to reduce the cost of sales to partner program parents by moving the sales point to their channel partners. The traditional partner program parent-member relationship was based on a volume-based partnership, but with IoT this is shifting to more value-based partner engagements. This is due largely to the fact that partner program parents and members need to work together more closely to establish long-term relationships with customers that go beyond the initial sale of sensors and other related hardware to long-term connectivity and value-added services and solutions. The value created from these partnerships needs to benefit not only partner program parents, but also members of these ecosystems. Certification programs, specialized training and sales support, and networking events help provide this mutual value. Certification programs such as AWS’ IoT Competency Partners are geared at highlighting providers who are technically proficient and have consistently delivered successful solutions to customers.
As the overall IoT ecosystem matured, so too did the expectations between partnerships and acquisitions. There is a common misconception within the market today that these partnerships serve as a sort of way for a parent to test out a company before acquiring it. The data ABI has collected from these partnership programs over the past three years suggests otherwise. The motivation for partnering is typically sales driven to gain access to customers with less effort. In IoT, this can manifest itself in a cloud company partnering with a device company in order to deliver connected devices to end-users without having to expend the significant capital outlays associated with actually manufacturing the hardware themselves. On the other hand, the major goal of an acquisition is for a company to expand its market share by acquiring more customers in a different market segment in order to augment its market profile.
Deliberate, Intentional, and Strategic |
COMMENTARY |
The bottom line is this: if a company decides to partner with another company via one of these IoT ecosystems or alliances, it has already made the decision not to acquire them down the road. The function of these partnerships has become better defined as the companies have matured and established use cases for their solutions, decreasing the need for acquisitions. While acquisitions consolidate the marketplace by reducing the sheer number of providers operating in it, partnerships consolidate the marketplace by making the existing landscape easier for end-users to navigate. The role of acquisitions is for a company to cement a competitive advantage and reach additional end-user segments, but through these partnership ecosystems, companies can gain the same competitive advantages without having to risk spending significant resources to acquire a company.
Instead, larger companies have realized that they can leverage their existing partner program ecosystems with their IoT solutions to defragment the market and make it easier for customers to have access to end-to-end IoT-enabled solutions. By utilizing these ecosystem partnerships, companies can more readily address issues of device management, security, connectivity, and analytics from a simplified set of service platforms. Partner program members have realized that they also can leverage their partner program parents’ ecosystem and network in order to develop strategic or operational advantages. Additionally, partners allow the parent companies the ability to reach more customers than they could support on their own and also to provide focused, local, and specialized support. Partner programs allow parents and participants the opportunity to scale their message and solutions along with sales and support so that global customers can be served on a local level. It is significantly less risky for a company to partner with another company than it is to acquire it, and it is that lack of risk that is elevating the role of partnerships within the IoT ecosystem today and diminishing the need for acquisitions.