Strategic Alliance Guide for Enterprise SaaS

Hello, I'm Hiro. In my article "How to Create Japan Go-to-Market Strategy of SaaS Companies" three years ago, I shared my thoughts on SaaS partner models and how to collaborate.

In this article, I want to focus on the alliance strategy of high-value (ARR in millions of dollars) enterprise SaaS and share the best practices I've learned.

This article was originally written in Japanese and was well received, so I translated my Japanese article into English.

Let's get down to business.

Table of Contents

1. The Importance of the Alliance Department and the Gap in Internal Recognition
2. Differences between SaaS Vendors and SIers
3. Common Misconceptions of Alliance Managers and Correct Practices
4. The Essence of Alliance Strategy
5. Best Practice Summary

1. The Importance of the Alliance Department and the Gap in Internal Recognition

The alliance department plays a vital role in exponentially growing businesses beyond the limits of direct sales. However, its importance and difficulty are often not understood internally, leading to a negative image due to the invisibility of its activities to other departments. Complaints from the direct sales department, such as "We get no opportunities from partners" or "Partners can't close deals by themselves," are actually quite common.

In Japan, unlike the U.S., over 70% of software engineers are employed by system integrators (SIers) or consulting firms. Japanese companies still heavily rely on outsourcing for system development, making the success or failure of alliances critical for high-value SaaS vendors.

However, alliances are characterized by the difficulty of achieving short-term results. Thus, it's essential to regularly share mid-to-long-term plans, progress, and outcomes internally to deepen understanding. This is primarily the responsibility of the alliance department heads.

2. Differences between SaaS Vendors and SIers

SaaS vendors and SIers differ significantly in their sales approaches and customer engagement methods. High-value SaaS vendors typically engage in problem-solving sales (a.k.a solution selling, value selling), appealing directly to top business unit leaders and executives. They tie their product value to managerial challenges, proposing significant solutions linked to corporate strategy.

On the other hand, SIers traditionally have strong relationships with IT department ground-level staff and managers, focusing on technical problem-solving. Their traditional approach, sometimes referred to as "order-taking", emphasizes proposals that meet direct customer needs, including scratch development, and are less accustomed to strategic, executive-level propositions like those of high-value products.

Given this background, mere product training is insufficient for partners. It's also crucial to enhance sales capabilities and engage in joint selling, such as Value Selling and Sales Play training.

Consulting firms, meanwhile, typically deal with executive-level clients. Their proposals address top-tier corporate challenges, naturally leading to higher amount values. SaaS solutions that don't resonate with executive issues or are not profitable in implementation won't be promoted.

However, consulting firms often initiate proposals from the planning stage, which can extend the proposal period – a downside for SaaS vendors with high quarterly sales targets. Depending on the target account, it's beneficial to utilize both SIers and consulting firms for partnership advancement.

3. Common Misconceptions of Alliance Managers and Correct Practices

One common misconception among alliance managers is believing that just maintaining good relationships and information flow with the partner's main contact department will naturally lead to pipeline generation. This is a clear mistake.

While the partner's main contact department plays a crucial role, the actual pipeline creation happens with account sales. Therefore, SaaS vendor's account sales must work closely with partner's account sales, jointly developing account plans and other actions.

Typically, alliance managers don't have the sales or solution selling capabilities to generate opportunities by themselves (though it would be ideal if they had). The correct approach is to connect internal account sales with partner's account sales and promote joint selling.

To facilitate this smoothly, it's necessary to ensure that both the alliance and direct sales departments benefit from orders. If only one side benefits, it's challenging to get cooperation from account sales, leading to outcomes that don't align with the company's business expansion goals.

Most enterprise SaaS vendors have a Deal Registration system, enabling joint selling from the early stages of an opportunity. Other effective approaches include:

• Setting regular opportunity review meetings and inviting both companies' account teams for appropriate partner follow-up.
• Organizing workshops to intensively improve account planning and proposal capabilities.

4. The Essence of Alliance Strategy

In considering alliance strategy, while joint marketing is essential, especially in the early stages of a partnership, the key to success lies in collaborating with account sales.

Enterprise sales organizations of SaaS vendors are typically divided into teams based on industries like finance, public sector, telecom, manufacturing, distribution, and services. For alliance managers to be effective, it's crucial to regularly deepen relationships with each team's sales manager. Internal political skills are also important.

Deciding on target accounts with the partner's sales manager and repeatedly engaging in joint selling will gradually build the partner’s skills, enabling them to independently discover and close deals. However, as enterprise-level proposals often take six months to a year or longer, cultivating this capability is not an overnight process, which is why alliances take time to yield results.

Moreover, to truly motivate partner account sales to champion your product among many possible offerings, it's essential to combine bottom-up initiatives with top-down support. Clarifying the mutual benefits of partnership and securing top-level agreements sets sales targets for the SaaS product within the partner's sales department.

Events like dinners or golf, deepening relationships with top executives are crucial. Coordinating attendance by executives from both companies at quarterly business reviews (QBRs) is also highly effective.

Another key aspect is creating and promoting offerings (packages combining SaaS product and partner's products/services). "Offering" might be an unfamiliar term outside the alliance department, but it is commonly used in alliance contexts.

This is because one of the outcomes required of the alliance department is the creation of this offering, which makes it easier for partners to sell SaaS products, and also allows SaaS vendor's account sales to select partner offerings that match the customer's needs. For instance, creating industry-specific offerings, like for manufacturing, significantly eases proposal efforts.

As a reference, here is an example of Fujitsu's Salesforce offerings.

5. Best Practice Summary

As discussed, there are five practical points in enterprise SaaS alliance strategy:

1. Strong relationship between top management
2. Joint account planning and selling by both companies' account sales
3. Creating offerings that leverage the partner's strengths
4. Establishing a business rhythm with regular opportunity reviews and QBRs
5. Providing training programs to enhance not just product aspects but also sales capabilities

While alliances may not always align with direct sales intentions, it's vital to unite for the grand purpose of expanding SaaS business, aiming for sustainable business development through long-term relationships with partners.

Considering this, the role of an alliance manager is highly strategic and exciting. Given its impact on the market, it could be an interesting next career step for enterprise sales professionals, which is close to required aptitude.

What do you think? I hope you find at least one point in this article that you can apply to your business. I would be thrilled to hear about any results from your practice.

Thank you very much for reading to the end!