IT and technology companies are facing significant pressure. While they play a leading role in the global digital transformation affecting every industry, businesses rely on them for assistance. This opens up numerous opportunities for revenue growth. But on the other side of the coin, this global digital transformation means that many well-established IT and technology companies face disruption from digital business models that blur the distinction between our physical and digital worlds.
Managing dwindling revenues and workforce reductions, these companies, like their clients, must revamp their technology and business models. They must offer innovative ways for consuming their services and more compelling solutions to evolving customer needs.
Partner ecosystems and their network effects play a crucial role for IT and technology firms as they transform their business models. Increased importance must be given to innovation. ICT companies must develop products and services that provide greater value to customers. Simultaneously, these innovations should be challenging for competitors to duplicate. Having a partner ecosystem, and the enhanced services that come along with it, will give these companies a competitive edge.
Few innovations (improvements, products and services alike) are created entirely in-house; therefore, the right partner ecosystem is paramount to success. While tech giants like Facebook, Amazon and Google, invest heavily in R&D, they also use lean start-up approaches to “launch new services fast – and fail even faster”.
The co-innovation and development of these services mean that these companies launch prototype services and then use continuous customer feedback to perfect it. This new, digital approach to doing business means a higher hit rate when it comes to launching new, innovative products and services. Just like the tech giants, IT & Technology companies need a collaborative and experimental mindset if they are to capitalize on today’s opportunities and stay relevant to their customers. Through a complementary partner ecosystem, IT & Technology companies can create much more compelling and sophisticated products and services for customers that are harder for competitors to simply copy.
Beyond Now conducted research into the potential of partner ecosystems and our findings indicate that the most promising avenues exist in the space between traditional industry verticals such as automotive, banking and the telco space.
Our research underscores that the opportunities extend beyond merely facilitating digital transformation; they involve the creation of sector-specific products and services harnessing novel digital technologies. These industries are in need of disruptive thinking. They should capitalize on the transformative capabilities of emerging digital tools to reinvent themselves and venture into adjacent markets.
As technology is the key enabler of digital transformation, it stands to reason that IT & Technology companies are currently the preferred partners for those sectors experiencing mass disruption such as telecoms (62%). These sectors are struggling to bridge the technology gap that they are experiencing as a result of digital. This presents a huge opportunity for the IT & Technology sector to capitalize on this trend by expanding their role and participation in building partner ecosystems over the next few years.
Today, only 18% of IT & Technology companies partner with companies in other sectors. Instead, 60% are partnering with established IT companies, 53% with technology providers and only 26% with Internet of Things (IoT) players. These results suggest that many IT & Technology companies are channelling investment into sustaining innovation by adding features to existing products, a very typical way to run a business in a highly competitive market.
This is in contrast to disruptive innovation: embracing new digital technologies and business models to create a new market and value network or displace established market-leading companies by offering something radically better. Sustaining innovation ignores trends like Anything as a Service (XaaS) and follows old linear industry models, but more importantly, risks investing in features the market doesn’t value and allowing disruptors to undercut with a focused product, offering drastic improvement, at a lower price point.
It is clear that IT & Technology companies understand the dilemma but are failing to be more radical in embracing change. When asked how partnerships will alter over the next two years, IT & Technology companies plan to considerably increase partnerships with other sectors – including logistics (19% to 25%), telecoms, retail, banking and automotive (12% to 19%).
Interestingly, over the same period, these sectors expressed a declining interest or need to partner with IT & Technology companies as they believe they will have gained the confidence, skills and expertise in the new digital technologies. The result: it is essential for IT & Technology companies to forge ahead with partnerships now, as down the road they will be squeezed out by traditional sectors adopting IT & Technology capabilities as a key part of what they need to be in a digital age.
For more insight into partner ecosystems, and our advice to CSPs that are looking to build a successful partner ecosystem, download our full report here:
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