Tech Partnerships and Consortiums: Why Most of Them Suck

Rob Enderle
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Five Trends Shaping the Future of IT

This week, we saw yet another big partnership announcement, and I got what is a common question. How do you tell if the partnership or consortium is worth anything? Most seem to experience their full value when the announcement is made and don’t go anyplace after that. The problem for you is that you may get pulled into a consortium or be sold on a partnership that has no value, leaving you with lots of wasted time and effort. Worse, you could become the company rep in the consortium or your project may depend on the outcome of the partnership, and their failure then becomes yours, setting your career back years or even decades.

First, accept that most consortiums fall short of their objectives and many fail outright. Virtually every partnership will eventually fail; the question isn’t if, it is when. So it is best to enter the review with a lot of skepticism. Let me explain.

Consortiums

What is interesting about broad consortiums is that they are often designed to fail from the outset. The creation process focuses on the number of firms in the consortium, not the quality or alignment of the firms. This last is particularly important because if you get a diverse group of competitors or just two strong competitors, they will typically spend their time focused on making sure their rival doesn’t get the upper hand. Effectively, their primary goal isn’t to make progress, it is to prevent their competitor, who may have better technology, from gaining an advantage.


In my own briefings, back when I worked for a large tech firm, it was explained to me like this: “We didn’t enter this to actually create a common standard. We have products in the market today that do much of what the consortium wants to do, and we entered this to assure no competitor can level the playing field or gain an advantage. So our most powerful tool isn’t our technology, it is our ability to object.”

We can see a difference if a powerful player stands above the others and wants to get the job done. I’ve seen Intel do this several times; it gets frustrated with the progress and drops an ultimatum: Either the working group actually comes to agreement or Intel will do it on its own and everyone else can eat its dusts. Pretty much every time Intel has done that, we got a standard in a reasonable period of time.

So in a consortium you are looking for one player who is both powerful enough and willing to snap the whip to get progress, otherwise odds are that the effort will be a lot of folks looking busy but very little actual progress.

Partnerships

I got my best briefing on partnerships while working with IBM legal on contracts. I actually learned a lot about contracts as well during those years. But the rule is that partnerships work best when the parties are aligned, and don’t work when they aren’t. Long-term risk for partnerships, and the reason they eventually always fail between companies, is that company strategy and leadership change over time. So the firms may have been aligned at the time of the partnership, but an executive change or strategic shift may result in a breakup. We saw this around HP in spades over the last decade. CEO after CEO changed and big strategic partnerships like the ones with Oracle and Cisco self-destructed.

You can’t really anticipate that beyond the change, but what you can do is see the partnerships that don’t have a chance in hell of going anyplace.

My best example of this was the partnership between Sun and Microsoft, or Steve Ballmer and Scott McNealy. I attended the announcement and actually ran into both men, who greeted me cordially, though they clearly weren’t that comfortable with each other. In fact, throughout the entire press event (with the exception of some nicely scripted on-stage banter), while McNealy was chatting up Ballmer like a cheerleader chasing a quarterback, Ballmer had a look on his face that you’d get if you sat next to someone who had an odor problem. He really, really, didn’t like McNealy (likely because McNealy had spent decades bad-mouthing and telling hurtful jokes about both Microsoft and Bill Gates, Ballmer’s closest friend at the time).

The announcement, which came with a huge check from Microsoft, was supposedly about joint development, but all it really had to do with was Microsoft buying out of some litigation. Both companies hated each other and there was little chance of anything more.

For a partnership to work, the firms have to be aligned, they have to be relatively similar in size and power, and they can’t be natural competitors. When Microsoft and IBM started out, it was clear that eventually they would come apart because IBM software and Microsoft were natural competitors. The partnerships between IBM and Apple (Taligent, Kaleida Labs) failed for much the same reason (competition on PCs), and because Steve Jobs hated IBM (PowerPC).

So if the partnership is between two companies that are natural partners (don’t compete), it is synergistic (the firms are stronger together than apart), and the executive teams (particularly the CEOs) like each other, it will likely hold. If they are competitors, aren’t natural partners, and don’t work well together or like each other, it is a partnership on paper only and it probably will be in breach even before the event announcing the partnership. Also, like people and marriages, there are companies that have a history of being loyal partners and those that really suck at it. This reminds me of a friend I had who dated a married woman; she left her husband to marry him, only to leave him to marry somebody else. The only surprise should have been that he was surprised.

Wrapping Up: Beware the Partnership

My general advice on partnerships big and small is to only bet on what has actually been done and to stay away from owning or working on one personally. There are simply too many variables in play that you can’t see, and can’t control even if you could see them. Even if the firms are aligned today and like each other, one executive change, acquisition, product expansion or unplanned additional partnership can blow it up, and the more firms that are involved in the effort the more chance there is for it to go south.

When it comes to consortiums, focus on what they’ve done, not what they have promised. Look at actual progress, and particularly look at whether they focused on quality over quantity of players and whether there is one player who has the power and willingness to crack a whip if it stagnates. I’ve been involved in a number of efforts where the only thing that got done was that expenses were reimbursed. There is one upside: I’ve seen folks get job opportunities at other firms, rather lucrative ones, by participating and having that as a goal but if you aren’t willing to change firms or jobs, these are largely a waste of personal time.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+



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