Growing Successfully Using Strategic Business Alliances

Traditionally businesses have grown through hiring employees, building and acquiring assets, establishing branches and subsidiaries, etc. but with this comes high overhead, segregation of duties, and employees who only know about their own department , their responsibilities and the small picture. I am partial to the small/medium business culture and like being close to the end product and making a direct contribution to the company success. I prefer the flexibility and the speed that a smaller company can move. However, what a small business working alone can do is limited. I have been contemplating growing and expanding through affiliations.

Here is a sample scenario. Our company would market and sell a SAAS product to a specific industry. We would resell a SAAS from Company A, and outsource/resell the IT work to customize the SAAS with Company B and possibly Company C. Our company would have agreements with other individuals/companies with expertise in other industries to market and sell the product. We could sell training directly for the SAAS and/ or outsource/resell the training to Company B and C.

I am interested in experiences, opinions and advice about growing a business through strategic alliances in general from the answers.onstartups.com community. What experiences have you had with this approach? What are examples of successful companies that have used this method to grow? Any advice or points of caution?

I would say it depends on the complexity of the solution, business domain, and customisations that the end customer needs to make.

The 'system integrator' model is a well trodden one - e.g. big consultancy co managing rollout of SAP, including installation, customisations, deployment, hardware, training.

However, the big benefit of SAAS is that people get to avoid much of this. In return for subscriptions, they get low implementation cost, fast deployment of an arguably more commoditised software.

There will undoubtedly be niches there, but I think you could be more valuable helping companies who want/need tailored solutions, rather than those who are opting for SAAS partly because they don't need one.

You may also find it difficult to customise a SAAS. Many are in the complete control of their vendors and you may find any APIs or hooks may be limited or immature.

(On both of these points, I may make an exception for one company here - SalesForce.com, who have open APIs and a strong integrator ecosystem emerging.... )

Systems customization and integration is bread-and-butter for lots of consulting companies, so if that's the business model than you have lots of models to copy.

One thing you need to be especially wary of: Make sure you have something unique, otherwise it's easy to cut out or replace the middle-man. That is, if you're "just another consulting shop," they could hire another for cheaper. If you don't own any software, anyone else can write the same code.

Of course there's many ways to establish value, for example:

1. Be a true expert: Blog about it, write whitepapers, write a book (self-publish if necessary), give speeches.
2. Have your own in-house variant of the software in question.
3. Have your own in-house library of tools for customization.
4. Develop an amazing portfolio of success stories that no other consulting shop can match.
5. Have on-staff an ex-developer of the software in question or some other "unfair advantage" that a random consulting shop would never have.