Recently Scott Brinker, VP of Partner Ecosystem at HubSpot and famous editor of chiefmartech, joined me for a fascinating discussion on the state of Partner-Led Growth.
We dived deep into why partnerships are becoming one of the key growth drivers, the emerging role of ecosystems and cloud marketplaces, and how AI will change partnerships.
If you want to understand the future of partnerships, this is for you. Read on for the key insights, or watch the video for the full discussion.
80% of Non-Partnership Leaders Now See Partnerships More Effective to Reaching Their Audience
Explaining key trends that redefine SaaS partnerships today, Scott shared insightful findings from their latest research on the State of Partner Led Growth conducted by HubSpot, Partnership Leaders, and Pavilion.
Their exploration into this study started with an intriguing question: "What do non-partnership people in the revenue organization think about partnerships?" We partnership managers understand our value, but does the rest of the organization perceive it the same way?
Scott shared,
"I was actually pleasantly surprised by how much sales and marketing leaders, who aren't in partnerships, value partnerships as a channel."
The study found that over 80% of non-partnership leaders see partnerships as an increasingly effective way to reach their audience. Incredibly, a third of these leaders (33.9%) deemed partnerships significantly more effective.
This validation from those outside the partnerships signals a strong vote of confidence for partnerships as a critical element of the revenue engine.
Key Insights:
Partnerships are gaining recognition as an effective channel across different organizational leaders, including those not directly involved.
If organizational leaders recognize the value of partnerships, it's maybe a time to advocate for more investment in this channel.
Macro picture: Partnerships Help to Break Through the Noise in Tech Ecosystem
We discussed with Scott the key reasons why partnerships are trending up recently. After all, he has a front row seat in the evolution of the SaaS landscape, while leading the partner ecosystem in HubSpot.
Scott emphasized two key drivers: technology growth and changes in go-to-market strategies.
First, the "explosion of technology". In the marketing technology sector, there were ~ 150 vendors in 2011. Today the number has skyrocketed to over 11,000.
As Scott said, "All this innovation, I mean, it's exciting at one level." But such rapid expansion creates challenges for marketing leaders. Proliferation of technology vendors becomes a "mixed bag" for buyers, creating a necessity for software integration which often goes beyond their expertise. They start to think, "I don't wanna be in the integration business, I wanna be in the marketing business."
This problem presents a unique opportunity for partnerships and ecosystem strategies amongst tech vendors to develop and streamline integrations, benefiting mutual customers.
Second, Scott reflected on the evolution of go-to-market strategies. The digital age has led to a "thundering noise" in the SaaS landscape “allowing anyone to publish anything, anywhere, anytime, which they now do”. This new noisy landscape also makes it significantly harder for sales and marketing leaders to reach their audience.
The solution? Trusted sources and trusted networks. Word-of-mouth referrals are incredibly valuable, with Scott noting they are "by far, the most valuable lead source in the world." Service providers, consultancies, and agencies also offer trusted voices, enabling companies to break through the noise effectively.
According to McKinsey's macroeconomic projections, by 2030, a third of the world's economy (approximately $100 trillion) will operate through integrated partner networks.
This prediction stems from two key factors:
The rise of digital technologies which are making it easier to connect various aspects of business, creating interdependencies.
The recognition that we are moving towards a network world. The introduction of new analytical technologies and the efficient use of customer data are revealing patterns and paving the way for programmatic and systematic approaches to partnerships.
Despite this promising outlook about ecosystems, Scott emphasized the need for patience - new strategies take time to be fully adopted.
Key Insights:
Technology has grown exponentially, creating challenges of choice for buyers. Ecosystem strategies and integration partnerships are crucial to simplify the technology process for buyers.
The market is saturated with noise. Trusted sources and networks can provide valuable recommendations, cutting through the clutter and effectively reaching customers for sellers.
Foster relationships with service providers, consultancies, and agencies. These partnerships can act as advocates for your product in a crowded marketplace.
Insights from HubSpot's Ecosystem journey
When Scott joined HubSpot in 2017, the company had a small app store of ~100 apps. During the last five years HubSpot app ecosystem has expanded to an impressive 1300 apps.
Explaining the most critical factors in scaling their tech partner ecosystem, Scott notes that it isn't just about the management and partnership program. It’s about the opportunity presented to the partners. Two main components play a role here:
The addressable market: The sheer size of the customer base that a partner can tap into upon integrating with a platform is crucial. In HubSpot's case, its customer base saw substantial growth, jumping from 50-60,000 five years ago to nearly 180,000 today. This increase presented partners with a significantly larger pool of customers, offering a compelling incentive to integrate.
Serving more advanced customers: HubSpot started primarily catering to small businesses, but over time, it has steadily moved upmarket to engage more with mid-market companies. As these businesses grow larger and more complex, they rely on an expanded range of technologies, creating opportunities for HubSpot to integrate with other technologies in a company's tech stack.
The integration of technologies is a two-way street, with both parties witnessing a lift in customer dollar retention. Retention is a vital metric in SaaS, where customer acquisition often plays second fiddle to churn and retention rates. Boost in retention therefore is an important financial incentive to integrate both for the platform and its partners.
Key Insights
Growth in a tech partner ecosystem relies heavily on the opportunity presented to partners, particularly the size of the addressable market.
Mutual benefits, such as an increase in customer dollar retention, provide a compelling incentive for partners to invest in integrations.
The Rise of App Marketplaces and the Evolution of Go-to-Market Strategies
Today we see a growing trend of companies shifting their go-to-market motions towards app marketplaces, like those of cloud hyperscalers (AWS, Azure, Google Cloud), HubSpot, Atlassian and others.
Scott believes that this trend is accelerating, fueled by the success stories of those who have already succeeded with the ecosystem approach. However, tapping into these marketplaces as a distribution channel isn't without its challenges. It requires adjustments to how your marketing and sales teams operate, how they are measured, your quota system, etc. Integrating ecosystem and partner motions into sales and marketing can prove to be non-trivial.
An example of challenges is co-marketing campaigns with partners. While partner marketing campaigns prove to outperform direct marketing campaigns on engagement, conversion rates, and the quality and lifetime value of the leads, they come with one significant drawback: higher customer acquisition cost. Co-marketing campaigns come with a "planning tax", a term coined by John Miller, CMO of Demandbase, to describe the additional effort required to coordinate co-marketing campaigns across multiple large companies.
Key Insights:
The shift towards app marketplaces as a distribution channel is a trend that's rapidly gaining momentum. While it presents challenges, it also offers potential benefits.
The integration of ecosystem and partner motions into sales and marketing operations can be complex but is becoming increasingly crucial for businesses.
The Evolution of Data Exchange in Partner Relationships
From the Hubspot’s research, 73% of sales leaders report using partner data in prospecting and find it more accurate.
This brought us to the question of how data exchange and sharing among partners is evolving.
Scott believes that the timing for such an evolution couldn't be better. Traditionally, marketing has been heavily fueled by third-party data, especially third-party cookies. However, due to various factors such as privacy regulations, compliance, and data security, reliance on such data is dwindling.
The shift towards first-party data—information gleaned from direct interactions with prospects and customers—seems to be the immediate response. There's a wealth of such data, and we've only just started to operationalize it effectively in most companies.
However, Scott advocates going a step further. He suggests that partners should begin to exchange data—creating a pool of second-party data—to enable much more targeted engagements. This does not necessarily mean the exchange of personal data. Instead, it could be as simple as aligning on accounts, determining overlaps, and jointly strategizing the go-to-market approach for more integrated solutions. This, Scott believes, could unlock a vast potential.
Key Insights
Partner data is now a valuable asset for sales leaders looking to pursue new targets and improve their sales motions.
The reliance on third-party data is diminishing due to privacy regulations, compliance, and data security issues.
First-party data is vital, but there's an untapped potential in exchanging second-party data between partners for more targeted engagements and to offer integrated solutions.
Why We May Stop Counting Apps Entirely and Focus on Ecosystems Instead
In our episode with Scott in 2022, we discussed the rather ambitious forecast from IDC, predicting that we’ll see 500 million apps by the end of 2023 (see illustration from chiefmartech). While this prediction may have seemed improbable back then, given our increasing engagement with AI, such a projection today seems less implausible.
Scott's interpretation of the IDC report suggests that the majority of these 500 million apps will be custom, one-off applications tailored to individual company needs. They will be built using no-code and low-code tools. The commercial app universe, despite being substantial, is indeed much smaller. In fact, review site G2 hosts close to 100,000 SaaS products.
Still, Scott anticipates that AI will expedite the trend of rapid app development. The proliferation of AI "co-pilots" – systems that facilitate the software building process – means that not only can more people create software, but existing software engineers can also build better, faster applications. Consequently, the number of apps, however defined, is likely to burgeon.
But as the number of apps skyrockets, Scott suggests that the count of apps will lose its importance, much as counting the number of websites became redundant once their number surged into billions. What will matter is not the number of apps but how effectively the different elements of technology are combined and orchestrated to achieve business goals. This will give more power to ecosystems that do that well.
Key Insights
The emphasis will shift from the sheer number of apps to the orchestration and performance of businesses as software becomes more pervasive.
The Intersection of AI and Partnerships: Shaping the Future of Business Ecosystems
As we look into the future of partnerships, the advances in AI paint a fascinating, albeit complex picture. We probably will shift towards more data-centric partnerships and will potentially see big change in how partnerships are managed too.
Scott highlights this:
"First and foremost, we'll look for data partnerships, but I also think just in managing partnerships, we'll be able to leverage data a lot more effectively."
He adds
"AI isn't just for sellers, right? It's going to be incredibly impactful for buyers as well too."
The impact of AI extends beyond just the sellers. It has the potential to dramatically transform the buyer's journey. In the near future, it's not just humans interacting with humans, but also AI agents interacting with humans and other AI agents. This new dimension may seem a bit like science fiction, but Scott believes that it's closer to reality than we might think.
This transition as we include AI in partnerships likely will introduce a new dynamic. As Scott notes, "my agents, my partner's agents, my customer's agents, they all become part of the mix." This change necessitates a fresh perspective on ecosystem management, leading us to consider the implications for our existing channels, customer and partner touchpoints.
As Scott's insights indicate a shift towards AI-driven ecosystems, this transition opens an opportunity for partnership managers to explore new territories and forge stronger, data-driven relationships with partners.
Key Insights
AI's impact extends to both buyers and sellers, facilitating interactions and streamlining processes.
The inclusion of AI agents in the business ecosystem may create a new era of partner interactions and ecosystem management.