Travels in alliances land #1 - how big is BIG?
I read a post on Linkedin recently which explained that alliances had contributed $5B to the bottom line of a large consulting and integration firm over the last three years.? A quick bit of mental arithmetic and assumption that alliances engagements were the same margin as their global net profit and I got to just over 20% of their profit was due to alliances.? 20%!? That is very material.? 20% of their headcount would equate to employing around 85,000 people.? That felt pretty big.? The company in question’s website has just over 70 partners listed which implies very rough average of $100M revenue per year each.? It got me thinking “What is a ‘big’ strategic alliance?”? Is it $100M turnover?? $500M?? $1 billion??
What do you think counts as ‘big’?? Maybe the absolute revenue number is not the right criteria and instead it’s the % of overall company revenue or market share that tells you if the alliance is big/successful.? I’ve been part of alliances that range from starting up from literally nothing, to where a single deal was north of half a billion dollars.? A quick bit of digging around to whet my curiosity these are a few reference points I found in the public domain.?
I’ve been thinking, doing and writing about strategic alliances for more than 20 years.? When something in the alliances space catches my attention that I can share, I will – so if ecosystems, partnerships and alliances are your gig and your passion too I hope you’ll find these scribblings useful.? If you enjoy this article please follow me, subscribe, like, comment and repost.? My book on strategic alliances is here if you’d like to hear more adventures in alliances land.? https://www.amazon.co.uk/Strategic-Alliances-Fieldbook-Art-Agile/dp/103212900X/ref=sr_1_1?keywords=strategic+alliances+fieldbook&qid=1691319592&sr=8-1
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There are a number of examples in the public domain of CEO’s and senior management of both technology and consulting/integration companies with turnover ranging from $60B to $9B declaring they have single alliances where the consultancy/integration business is either already worth $1B or more, or designed to get to that size.? A billion dollar alliance across that range of turnovers would be an alliance contributing between 2% and 11% of total company revenue.
The other dimension is how big the total market is.? There are a number of estimates that the top end of the ratio between technology spend and consulting & integration spend is around 1:6, which means a $10B turnover technology firm will have an associated addressable market for consulting and integration services of $60B or so at the top of the range.? There is an example of a $30B turnover technology company with 150,000 partnerships, and another $200B tech company with 400,000 partnerships.? If we took that ratio of 1:6 that gives us a partner TAM for the first company of $180B and partner TAM of the second of $1.2T.? That makes the average revenue contribution per partner in the range $1.2M and $3M.? If we take a billion dollar alliance as an example that would imply the range would start around 0.5% market share and drop to a rounding error for the $1.2T market.
Companies don’t tend to publish financial breakdowns of the revenues they enjoy from their alliances but if you see anything on the topic in the public domain please do share it!
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