Transforming the Channel into Ecosystems: Interview with Allan Adler

Allan Adler has been involved in SaaS partnerships since their inception. He shares how the traditional channel is being transformed by the SaaS explosion, the rise of influence in the B2B buying process, and why ecosystems are rendering the traditional revenue funnel obsolete.

What is your experience in partnerships?

My career was born with the channel and transformed by the ecosystem. I started the leading channel consultancy (MSI Consulting Group) in the 1990s so I have been operating in the space for 30 years. 

Now, I run Digital Bridge Partners, which was born to help legacy companies (on-premise, channel-focused) cross the digital divide as well as transforming the ecosystems of born-in-the-cloud SaaS companies.

How have tech partnerships changed in the last decade?

Legacy partnerships models (“the channel") in software and hardware was based on a hierarchical stove pipe. Vendors would make the product and then hand it off to the channel to take it to market.

The inflection point on the other side of the digital bridge is the massive explosion of B2B SaaS ISVs; there were 10k SaaS in 2010, 185k now, and there are projected to be 1 million in 2030.

When you see this type of expansion, you know a significant transition is occurring and that it is going to have an impact on business models. Fundamentally, this is the biggest driver of the birth of ecosystems and the flywheel GTM model that has replaced the channel stovepipe.

Enterprises are still struggling mightily with SaaS. Twenty percent of their workload is on SaaS and 80 percent is still on prem. But software is gradually eating into the on-prem world and it is changing the rules of the game for partnerships. 

The on-prem channel world has a different language and mentality than SaaS ecosystems. They operate from different principles.

In the old days, software and hardware had four walls syndrome where you make a product and then you ship it off. That mentality doesn’t work in SaaS.

From the get-go, you have to ask who else sells to my ICP and could integrate with my solution? A best-in-breed feature set is just not enough for customer advocacy in the long run. The only way you achieve that is to integrate with products that complement and extend your own product.

The channel is getting reconstituted in this new milieu.

How do you see the SaaS ecosystem continuing to evolve?  

I visualize the SaaS space as thousands of different planets in space. In this solar system, there are stars that exercise huge gravitational pull. These are the systems of record, the CRMs, the ERPs - the platform companies - and constellations of planets are forming around these suns. 

The future of ecosystems is a series of constellations, each with their own marketplaces, that talk to other constellations, creating even greater ecosystem effects.  

Related Content: How To Build an Ecosystem First Product Organization

What is your advice for SaaS leaders looking to leverage this shift?

Every single product leader has to go through a metamorphosis from building product roadmaps to building ecosystem roadmaps. 

Product led growth is a reaction to how businesses want to buy now. It is based around utilizing product innovation to accelerate customer engagement in a flywheel, from awareness to advocacy. 

Ecosystem led growth and product led growth are kissing cousins. You now need ecosystem led growth to operationalize product led growth. There is nothing better than ecosystems to accelerate that flywheel, supporting not only influence and engagement but the product experience at every customer stage from awareness to advocacy.

This omnistage impact highlights another key difference between the old channel world and ecosystems.

Ecosystems understand the importance of partner influence. The old model is focused solely on sourced revenue. Influence is the future of revenue generation.

What does it mean to source a deal? Prospects are bombarded with ad impressions and cold pitches. They can’t be sourced anymore. They can only be influenced.

To be successful in today and tomorrow’s business world, you have to find people who are already in the tent with your ICP so they can invite you inside the tent. Partner with the insiders and they bring you inside.

How can ecosystem leaders track this influence and demonstrate its efficacy?

No doubt the single greatest inhibitor in embracing this change is the absence of trusted metrics that measure what I call micro-attribution; all the points of influence that a partner contributes across the customer lifecycle.

Tracking influence is a multivariate channel. It is not going to be one tool and we are at least 24 months away from having the technical capabilities to engage in micro attribution on a comprehensive scale.

And, keep in mind, that even when the technology is there, you will always have people who are resistant to change and will cling to the way things have been done in the past.

Multivariate tracking requires understanding multiple vectors that are operating at the same time. We need a complete influence model for how customers adopt and then become advocates for SaaS technology.

One vector, for example, would be studying macro influence. How will a group of partners lift my influence currency or quotient over a particular time period? You can also audit particular customer transactions to show influence on a micro level. 

Influence has an impact across the entire funnel but we need to understand what we are measuring and how we show it. This will be profoundly transformative in how we do business. 

Leaders need to think about how these vectors come together so businesses can prognosticate on how ecosystem investments will translate to influence and how that influence will translate to ARR, LTV, CAC, NPS, etc. 

Related Content: Lessons Learned from the Leaders of Larger Ecosystems

How will ecosystems impact how organizations understand the revenue funnel?

Every revenue leader is aware of the S&M funnel that runs their day to day life. There is the top, middle, and bottom of the funnel, and a prospect is passed from marketing to sales to customer success. 

Unfortunately, this is a very incomplete view. Influence is actually the top of the top of the funnel. Sixty eight percent of a buying decision occurs before you ever speak to a prospect. Ecosystems are key to driving this influence, and eventually revenue leaders will incorporate this into the top of the revenue funnel.  Thank you to Crossbeam and others for introducing the market to EQL (Ecosystem Qualified Leads); these will replace or at least produce a lot of what are now MQLs.

Traditional marketing and sales channels are oversaturated as modes of influence. Customers and prospects are shutting off the noise from ads, events, and cold outreach. Direct marketing spend’s ROI is on a downward trend, and organizations are going to realize they should be redirecting that investment into ecosystems.

Investing in ecosystems is how you can effectively exert influence before you have even encountered a prospect directly.

And this influence is not just exerted to acquire customers. Its influence is continuous. SaaS organizations can never stop selling as recurring revenue means customers have to be sold to and services continuously over the customer lifecycle.