Vendor ecosystems: less than meets the eye

ERP vendors like to present their partnerships with complementary product vendors as ecosystems--an array of niche functionality and services that fill gaps in the ERP vendor's world. When a prospect's RFP calls for features not offered by the ERP vendor, the partner's product will be presented as the solution. The phrase "seamless integration" is often used in these presentations.

Vinnie Mirchandani has some good insights on these partner applications.

For many industries, the partner applications are not "the last mile" - they represent core processing capability. As I wrote recently about Oracle's Insurance offering, most big vendors have not delivered vertical functionality for most non-manufacturing industries. So, another decision point is whose ecosystem? If I was a hospital CIO I would let my clinical application's ecosystem drive my financial or HR application choices, not the other way around.

He also points out that, "while the bigger vendors boast thousands of partners in their ecosystems...they often represent agreements signed eons ago and atrophied partnering practices." In other words, the vendors may have a relationship on paper, but how real and current is the relationship? How many deals have they done together, and how successful were they?

Vinnie also argues that you may, in fact, be better off in choosing a complementary product that is NOT in the vendor's ecosystem. The reason? Pricing is likely to be better, as ecosystem vendors often have to pay referral fees to the primary vendor, and the non-ecosystem vendor will likely provide better support.

I would also add that, you're likely going to have to do more integration than you think, even if stay in the vendor's ecosystem. According to my observation, the integration of ecosystem partners is usually anything but "seamless." In many cases, the two organizations will have only done a handful of deals together and the integration would have been treated as a custom development project in each case.

So, in cases where complementary product functionality is unavoidable, check references thoroughly. Err on the side of overestimating the integration effort. And, if at all possible, get an implementation partner that has successfully done the same integration in the past.

Update, Oct. 2: In the comments section, Ray Wang calls attention to work he's done at Forrester to come up with a framework for evaluating vendor ecosystems. Ray's full report is on Forrester's website, and he also wrote a good overview on Sandhill.com. The framework includes a partner solutions maturity model. I like his definition of level zero (the lowest level of partner integration): "Barney deals" (i.e. "I love you, you love me"). In other words, "Solutions represent as-is offerings that have not been integrated or even repackaged. These deals emphasize marketing aspects including joint press announcements, minor go-to-market coordination, and some price coordination." Ray also points out the value for prospects in using a third-party consultant to evaluate the robustness of the partner relationship/integration.

Related posts
What is an IT ecosystem?