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Partnerships in the world of 1 million software companies

Second part of our interview with Jay McBain, who leads Forrester's research and advisory for global channels, alliances, and partnerships. Part 2 of 3.

When it comes to big companies it's clearer how their ecosystems play, but in smaller companies do you see the same dynamic as well? Or they all are just parts of big ecosystems?

It gets trickier, when you're a small company. I'll tell you that the biggest 20 technology companies that I spend time with have it pretty simple. They have to build their own layer, which is the platform layer. Salesforce is less of a tool or a piece of software, than it is a platform where you have developers, ISVs, consultants and a mix of 250,000 new people in that ecosystem. When you are maybe a midsize vendor or a small vendor, your ability to build a platform it's pretty tough. Because on those seven layers that I talked about the seven pieces of software you're going to buy, you might be layer five or layer three. So what you have to do, without the ability to build your own platform layer, you're going to have to compete and win in this Salesforce ecosystem. But you're probably going to have to compete as well maybe in the Marketo Adobe ecosystem, you're going to have to compete in the ServiceNow or the Workday ecosystem, you're going to have to compete in AWS, Google, Microsoft. We think there's about 20 super winners in this space who own the ecosystems. Then you're going to have to go to compete and win in Amazon for business, then you're going to have to compete in Alibaba. How do you, from a B2B perspective, this is not B2C anymore, you're not buying on Amazon, you're buying on Amazon for business. How do you get your mid-sized company, and this is a marketplace SEO job, how do you get on page one? When you get a customer that comes in, how do you get to be that result? How do you get to be on Google on page one, how do you get to be on the marketplace at page one? And they go to make it in 20 marketplaces you have to compete in and be on page one of every single one. It's an important piece of math here, that there are 35 million permutations. If you look at the average buyer, they might be in 1 of 10 lines of business - marketing, sales, operations, etc., they will be in 1 of 297 sub-industries. If I run a midsize clinic, it's not health care anymore, I run a midsize clinic. Third is a geography - my midsize clinic happens to be that in the United States, in upstate New York. Fourth is the sector size and segment of the customer. I said, I had a midsize clinic and I said it has 50 doctors. So your experience in dentists offices or small hospitals isn't relevant to me. I want your resume to exactly be that. And then fifth is the tech stack has 40 layers. So your expertise, I'm a head of marketing I want to bring new patients in the door, so I don't really care about your security expertise or you're a multi cloud, hybrid cloud. All that stuff is great. I want to talk marketing automation, I want to talk lead passing, top of funnel. I want to talk marketing technology that's going to bring new patients in the door, that's going to stop me from getting fired next week. As that decision maker I'm going to go spend money on seven layers to go solve my problem, I want to get to a place with people in the room pitching, and there's going to be an average of five, that all have that on their resume - "I've worked on these three midsize clinics in upstate New York in the last six months, and got them from this many patients to this many patients, and the person we work with didn't get fired". They're going to type that into a marketplace, that big long paragraph: "I run marketing of ..." and they're going to type that into Google. In this new world, if you are a company trying to sell into midsize clinics, whether you're a software company, whether medical device company, whatever kind of company you are trying to get in front of that buyer, you're going to look at that ecosystem that gets built. So no longer are there 175,000 software companies, there's now a tech stack with let's say, 200 companies that build for midsize clinics. There's no longer millions of service providers, MSPs VARs, system integrators and everything else. All of a sudden there's maybe a 100 that have that resume. So your work in the marketplace or the part of your transaction is to narrow the world significantly for people that exactly do what you do, across those five vectors - that's the challenge and that's where ecosystems are taking shape now. In the past you had a linear channel program, and somebody with a midsize clinic would type in your partner finder. You'd send them to Larry in the white van who is two miles away. Because your algorithm is to say "give me the closest person". Nowadays it's not that, it's "give me the person with "midsize clinic, marketing, upstate New York, tech stack, etc.", give me all five of those vectors, give me the perfect five people, and I don't care if I fly them in and put them up at a hotel. That's the resumes I'm looking for, that's what I want the ecosystem and the marketplace to deliver for me. You are basically saying that everything is getting more fractured or customized, if you will. But at the same time, customers from their end, they don't want fractured solutions, they want complete solutions, they want someone to deliver it to them at once, and this drives explosion of channel and of a new type of channel.

I found your argument, that there used to be 10,000 independent software vendors and now it's 100,000 and soon will be a million, very interesting. Can you elaborate on it?

When I went through those five vectors: the buyer, the industry, the geography, etc. if I multiply all five of those together. there's 35 million iterations or permutations of specialty. So what's happened in the last ten years is there were 10,000 pretty broad software companies, you click "Install" it installs on your PC or installs on the server and does something. Today we have 175,000 [software companies]. We're going to a million. And why is there a million, that seems to be a really big number? But it will be higher in the future, because there're 35 million places you can write code for. And today there's no-code, low-code environments, where you don't have to be a DevOps person, you don't have to hire a data scientist. If you've got some intellectual capital, if you know layer seven of a midsize clinic and how to connect a couple of dots, you maybe use RPA, a robotic process automation tool, workflow tool, doesn't matter. You drag and drop your IP into technically "software". You go to GoDaddy buy a $5 URL, you go to Fiverr and get a logo for $10, get your kids to set you off on social media over the weekend, by Monday you're an ISV. You're the 175,000 and first ISV. But you're not a true software company, because when you click install, there's no real install, it's not a piece of software, it's more of a workflow and it's an invitation for that service company to come back and connect the dots for you with the 7-layer stack that you've actually chosen. So you're basically using software as a front end to get opportunity as a service provider - it's another part of the ecosystem. But to succeed in the future of marketplaces, you could compete with the millions of companies that do all types of things - accountants, and digital agencies, and system integrators, and born in the cloud and ISPs, SAS consultants and all these kinds of 25 different types, but you could also build out your own IP into software, codify your IP, and now you're participating with a one-two punch. You'll show up in the software category and you'll show up in the services category and when that person with the mid-size clinic comes in, that's their first search you're going to hit twice on the first page. "Not only is this company have the resume to do what I want to do stop me from getting fired, but they've got the software, it appears for them to come in and do what I need them to do". It's repeatable, it's a playbook, it's a process driven. So we're seeing a morph of companies to become software companies just to solve those 35 million problems.


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