18 Aug Why is GoToEcosystem Necessary for B2B SaaS?
August 18, 2022
The Cloud Changed Everything
In order to understand GoToEcosystem (GoToEco), we need to look at why we started this crazy, exciting movement in the first place. We grew up in the distribution channels era of the ’90s, before anyone knew what cloud computing was. In the late ’90s and early 2000s, everything changed. New companies like Google, Salesforce, and Amazon helped usher in new business models (platforms), new organizational models (product integrations), and new channel models (tech partners as a GoToMarket driver).
In those early days, IT channels were just another Route-to-Market that lived in sales and helped out with outsourced professional services, period. Tech partners didn’t matter because software from Oracle, SAP, and Microsoft were single-branded suites that did not require integrations to create an end-to-end solution. Vendor switching costs were high and software was sold across perpetual licenses.
By 2010, the groundwork was laid for a B2B SaaS explosion: the market grew from 10,000 SaaS companies to 200,000 in 12 years. This number is projected by Forrester to grow to 1 million by the end of the decade. That’s 10,000 to 1 million growth in 20 years! IDC puts the pace of change in even starker contrast: “Cloud software will go from less than a third of all software sold in 2019 to 70% in 2025.”
Despite the success of SaaS, today’s loosely coupled and poorly integrated SaaS products require a new go-to-market approach. Churn across all segments, enterprise, mid-market and SMB, is at 30% per year, and the average organization utilizes only 60% of its provisioned licenses. This churn is the direct result of the plethora of isolated, poorly or not integrated SaaS products that don’t deliver on customer expectations or end-to-end requirements. (Source: Zylo, Blissfully 2021-2022).
Emerging Models Depend on the Ecosystem
We knew something was up when we discovered a few really interesting things about how B2B SaaS companies currently partner that are very different from how partnering used to work in the pre-cloud days:
- Tech partners matter a lot more. Back in the day, tech partners were nice-to-have marketing alliances that never paid the bills. In B2B SaaS, Tech Partners are the most important partner type because, without them, software products are tech stack orphans that churn out if they ever get in.
- Product organizations care about partners. In the year 2000, virtually all partner organizations reported up through the sales organization. In 2022, per Crossbeam’s State of the Partner Ecosystem Report, that number has decreased to less than 50%. And even though only 4% of partner organizations report to the product org, product now cares a lot more about tech partners because, with an integration, the tech partner becomes part of the whole solution.
- The whole organization must ‘Co-X’. To get partnering right in 2022, Product has to co-innovate, Marketing has to co-market, Sales has to co-sell, and Customer Success has to co-retain. Partners are not an island. They have to be fully embedded across the organization.
- Ecosystem business models outperform. Platform companies like Salesforce, Hubspot, Atlassian, ServiceNow, and Twilio dramatically outperform product-oriented SaaS companies on all dimensions of growth, profitability, and valuation because they embed partnering throughout their organizations and create network effects around other companies (tech partners in B2B) who Co-X on their platforms.
- GoToMarket motions are failing. GDPR, the loss of cookies, the high cost of CAC, low customer switching costs, and lack of trust in direct sales are making it more and more difficult to execute direct-to-customer motions that lack partner assistance. Software growth and go-to-market need a new way forward.
A New Way Forward, beyond just GoToMarket
GoToEcosystem and its associated frameworks – Ecosystem Business Models, the GoToEco Maturity Model, and EcoOpsdisciplines give B2B SaaS companies a new way forward, allowing them to build and re-imagine business models, organizational models, partnering models, and operating models.
Next week we’ll explore how the GoToEco approach opens the door to transforming not just the way we go-to-market but the way we run a modern B2B SaaS Company. Stay tuned for a drill down on the new way forward as we apply the GoToEco approach to four new models:
-New Business Models
-New Organizational Models
-New Partnering Models
-New Operating Models