Measuring the Commercial Value of Alliances (And Why It Matters)

Some years ago (probably around 2007) I was talking to an executive in one of my clients (IBM) and he told me they were going to tackle the thorny subject of alliance metrics.

We've had enough of this double counting nonsense, once and for all we are going to find out how much actual hard cash we earn from our alliances. We are putting a team of 5 people on the project with absolute carte blanche to investigate any and all revenue and cost sources. At last we will be able to identify definitively how alliances contribute to our bottom line.

I was impressed and intrigued, if someone like IBM was going to put that effort into understanding the commercial realities of alliances then obviously they would get some great insights.
Six months later I happened to bump into the same exec and asked how the project was going. His answer was:

Oh we gave up on that it was just too hard! In the end we decided to create two categories 'On Ledger' and 'Off Ledger' and allocate costs and revenues to one of the categories as appropriate.

In other words they were running two separate 'books' to track sales. One that was internal to IBM and another that fed the accounting process?!
Most organisations that I have observed reach a similar conclusion. It is just too hard to identify exactly the additional or incremental revenue generated from a series of alliances. There are simply too many 'fingerprints' on the sale!
The problem then becomes that nobody believes the numbers produced and the alliance function and its officers are seen as an expensive overhead and inconvenience in sales that 'we would have got anyway'.
Another example of the same problem is a definition of 'influenced revenue'.
Organisations (particularly software organisations) regularly track what they call 'influenced revenue'. That is those sales of their products and services that were 'influenced' by a significant partner. The problem is that there is no common definition of influenced revenue and even when organisations go to the trouble of creating a series of criteria to define 'influence' (e.g. joint presentations to clients, developing R&D test beds, common completion of joint RFPs) they are still faced with the nay sayers who claim:

We'd have got that sale anyway! Of course the client was going to choose us, we didn't need any help from the partner!

Most organisations that I have come into contact with resort to some form of internal double counting. Meaning that they give credit for the same sale to the sales team involved and the alliance team involved. The danger here is what IBM found, which is that alliance people start 'Siebel Surfing' (meaning that they constantly scour the internal systems for any suspicion of a partner involved piece of business and then they claim credit for it as an alliance sale). Instead of doing their alliance job and getting out there talking to partners and developing new alliance offerings, they are staying by an internal CRM system looking for anything logged with any involvement from their partners (no matter how small).
Is it surprising then that the organisation questions the actual value of an alliance role and function?
However, times are now tougher and CEOs (and external auditors) are now more insistent on this problem being solved without recourse to 'double bubble' dual accounting, where the same piece of business is counted twice.
One interesting approach is that taken by Qlik Software who are using their own tools to produce a partner dashboard which takes feeds from multiple data sources to create an integrated and coherent overall view. The data sources are typically:

  • In house sales logging systems
  • External CRM systems (like Salesforce and Dynamics)
  • Account management systems
  • HR payroll systems
  • Cost of sales model
  • Internal balance sheet and ledger entries
  • And finally and most surprisingly partner costs and value add data sources

Qlik actually allow selected partners access to this dashboard and encourage them to maintain it with entries. This means that the partner gets a totally transparent view of the costs and the benefits to him of partnering with Qlik.
The other problem that this solves is the idea of who owns the lead within Qlik? The answer is - the partner who logged it in the first place!
It's too early to say whether this approach will catch on but there is no doubt that the pressure to produce accurate alliance sales figures (without double counting) is growing by the day.
If you have a different approach or an insight into this area, Alliance Best Practice Ltd would love to hear it! You can respond by posting comments to this blog or you can contact us direct at:

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