When Atlassian announced in July 2018 that they were joining forces with Slack as part of a strategic alliance, the news rattled the SaaS world.
As part of the agreement, Slack would acquire the IP behind Atlassian's competing real-time communication tools, HipChat and Stride, while also providing a path for all Atlassian customers to migrate accounts into their chat tool seamlessly. In exchange, Atlassian would discontinue development on its two competing chat platforms and make a sizable equity investment in the fast-growing Slack.
On the surface, the partnership seemed like a clear win for Slack, and an admission of defeat from Atlassian. Wired declared "the office-messaging wars are over." After all, the two companies had been hosting a friendly rivalry for years—HipChat even sent the Slack team a cake on their first birthday.
Slack and Atlassian had hosted a friendly rivalry for years. Image via Slack on Twitter
The alliance proved surprisingly prescient. Atlassian freed up resources to improve their focus on their core apps, while Slack gained access to Atlassian’s user base to compete more effectively against Microsoft's messaging app, Teams. Less than a year later, Microsoft Teams surpassed Slack's daily active user count—even with the additional users gained by partnering with Atlassian.
With the traditional lines between partnerships and traditional sales and marketing blurring, product differentiation becoming strenuous, and competitors breathing down your necks, a carefully crafted strategic alliance might just be the next big thing for growing your SaaS company.
What is a strategic alliance?
Strategic alliances (also called "strategic partnerships") are broad agreements that align the strategic efforts of two or more companies with overlapping products or markets towards a common goal.
Strategic alliances are different from joint ventures. In the latter, both parties combine resources to create and grow a separate business entity, whereas in an alliance, both parties remain independent. Likewise, the independence of both parties sets strategic partnerships apart from mergers and acquisitions.
If that sounds squishy, it is. "In B2B SaaS, strategic partnerships often form when a bigger company links with a smaller startup that aligns with its product, market, platform, or long-term goals," explains Scott Maxwell, founder and partner at OpenView Partners, in a blog post.
"It means the company believes there is enough value to carve out some engineering and product resources in a repeatable, programmatic way and have committed to following on with go-to-market investment," says Billy Robins, Head of Strategic Partnerships at productboard.
For example, Nike has decades of developing products for athletes but little to no experience creating hardware and managing all the technicalities and supply chains required. Meanwhile, Apple is the world leader in hardware with no experience around athletics. The two have long been strategic partners, creating products that link users' physical Nike products to Apple’s digital ecosystem.
A few reasons why companies might consider forming a strategic alliance:
- Maximize value for customers. Building partnerships with complementary businesses can help close gaps in your product line and maximize your offering's value.
- Lower your risk. Beyond giving customers more value, broadening your offering helps de-risk your company against future market fluctuations.
- Open up new markets. Partnering with recognizable brands can open up new customer segments that otherwise might be cost-inefficient to reach through other means.
- Optimize your marketing spend. Leveraging existing audiences from larger, more well-known brands through co-marketing and other strategic efforts can help lower customer acquisition costs and improve profitability.
- Create a pathway to eventual acquisition. Since senior executives are often heavily involved in strategic partnerships—sometimes even the CEO directly—and often involve people in "corporate development," strategic alliances can be stepping stones for companies seeking an eventual acquisition.
The wide-ranging benefits of strategic alliances are why they remain a popular option for companies big and small.
Pulling off a successful partnership isn't easy. HBR puts the failure rate for strategic alliances lands somewhere between 60 and 70 percent. "Strategic partnerships only work if your SaaS startup is ready for them and if you’ve done the necessary homework to ensure they make sense (for both partners)," Scott Maxwell writes. Lack of shared vision, unbalanced partnerships, poor governance, and lack of trust can undermine the success of a strategic partnership.
Why strategic alliances make sense for SaaS companies
These days, as companies continue releasing new and improved partnership tools, strategic partnership options once only available to larger enterprises are trickling downmarket to smaller companies and new startups. Strategic alliances are an option for companies seeking cost-effective growth opportunities in a crowded market.
The best strategic alliances go beyond any single campaign or project, often combining both technology and channel partnerships, all while adding aspects of PR, product roadmapping, and even co-branding. Think of strategic partners as your wedding party and tech or channel partners as your Facebook friends—you've got to be a lot more important or put in a lot more work to earn that bridesmaid's dress.
But for those who manage to deliver successful strategic alliances, the rewards are plentiful.
Successful examples of strategic alliances
Since the days of early Dutch trading guilds, enterprises have been partnering with other companies—and as we've seen, the trend is only accelerating in recent years.
To help spur your imagination around the possibilities for your company, let's dig into a handful of successful strategic alliances in the software and technology space—and what sets them above the rest.
Uber and Checkr: Scaling up background checks for drivers
Gig economy companies like Uber, GrubHub, and Instacart don't rely on full-time employees, leaning instead on contractors to carry out their services. Companies must thoroughly vet each contractor during the hiring process, checking criminal involvement, employment history, and driving records for any warning signals. In the past, this check was performed only once—any infractions after being hired were not picked up.
To combat this, San Francisco-based Checkr partnered with Uber to co-develop Continuous Check. This software system dynamically detects any red flags during employment to make sure companies can quickly deal with any problematic contractors. While the tool itself has faced some difficulties, Checkr is now valued at $2.2 billion.
Yelp and Socrata: Streamlining consumer access to health inspection scores
The Seattle-based Socrata team bills their data platform as a tool for governments as the key to providing "more efficient programs and better decision making." Unfortunately, managing government data doesn't exactly make for a sexy business proposition.
Hoping to add a nationally recognized logo to their roster—and a great case study for their government clients—the company reached out to consumer review platform Yelp, pitching the company on a strategic alliance. Socrata would share their existing restaurant inspection scores with Yelp. In return, Socrata received more data to share with local municipalities—and more recognition for their brand. Consumers benefit from a more relevant and timely data-driven experience when searching for restaurants. Everybody wins.
Salesforce and Apple: Simplifying the user experience
Late in 2018, the two industry leaders announced at Salesforce's annual customer conference Dreamforce that they were forming a strategic alliance with a focus on mobile development. The alliance would run much deeper than a simple technical integration, explained Bret Taylor, president and chief product officer at Salesforce. The Salesforce mobile app would integrate core iOS features like Siri Shortcuts, while also developing a custom mobile SDK specifically for deploying Swift apps on Salesforce's Lightning platform.
A year later, the benefits of the alliance began to pay dividends. The direct access to iOS features set Salesforce apart from its competitors, and Apple gained a valuable foothold in the enterprise market.
Microsoft, SAP, and Adobe: Unlocking data portability between platforms
Speaking of Salesforce, Microsoft, SAP, and Adobe took a swing at the sales heavyweight around the same time in 2018 when they announced the Open Data Initiative. By creating a unified model for sharing customer data between different platforms, the three companies hoped to provide other software tools with more transparency and flexibility around their data—the exact opposite of the approach taken by Salesforce at the time.
The leaders of Adobe, Microsoft, and SAP announcing the Open Data Initiative in 2018. Image via Techcrunch / Microsoft
The partnership was an enormous collaborative effort, spanning engineering, sales, and product marketing teams across the three organizations. By joining forces to solve a common problem, the three companies negated one of Salesforce's main competitive advantages while providing a better and more cost-effective solution.
DJI and 3D Robotics: Lowering software entry costs for construction firms
After failing to launch their flagship consumer drone, the Solo, 3D Robotics struggled to find a foothold in the enterprise construction market. Their Site Scan 3D capturing software led the class for mapping and surveying sites—but without cost-efficient hardware on which to run it, firms weren't buying.
Enter DJI. The proven drone manufacturer partnered with 3D Robotics to run the Site Scan software on their drones. That way, site managers could use the flight hardware they already owned, and 3D Robotics could focus on what they do best—their software—while still reaching a broader market.
Shopify and Walmart: Expanding e-commerce distribution
In addition to their highly successful developer and agency partner program, Shopify recently teamed up with retail juggernaut Walmart. In a direct shot at Amazon, the partnership involves Walmart expanding their ecommerce marketplace to existing Shopify small businesses, bolstering distribution and promotion for participating brands while still maintaining the easy-to-use interface Shopify is known for.
One interesting note from this example is the potential long-term implications. While the partnership helps boost immediate revenue for both companies, Techcrunch reports the move could be an initial step towards an eventual acquisition of Shopify in the long term—another potential win for both parties.
Gusto and Xero: Unscrambling the small business back-office
Accounting platform Xero and small business payroll provider Gusto serve overlapping audiences. Gusto recounts that about one in 12 Gusto customers uses both platforms. It made sense, then, that the two companies partnered up in 2018 to simplify back-office management for entrepreneurs and small businesses everywhere.
The partnership included deep technical integrations—single sign-on, automatic accounting updates after running payroll and shared access for accountants and advisors eased the burden of running a small business back-office. Most importantly, though, the partnership gave New Zealand-based Xero a stronger foothold in the lucrative U.S. market, while also bypassing the necessary R&D expenses of delivering a dedicated payroll solution in-house.
Atlassian and InVision: Creating seamless workflows for designers
Once again, Atlassian leads the way with strategic alliances—this time with cloud-based design platform InVision. Expanding on their existing technical integrations, the two companies formed their strategic partnership to create "one seamless workflow for designing and developing digital experiences." In practice, InVision added functionality from Jira, Confluence, and Trello directly to their design suite, while also "exploring initiatives" to bring designers and developers closer together. In return, Atlassian invested in InVision, although both companies declined to share further details about the investment.
WBUR, Reddit, and Wistia: Demystifying the internet
For our last strategic alliance example, here's a partnership from way out in left field. Renowned Boston-based NPR news station WBUR teamed up with Reddit and video marketing platform Wistia in 2018 to launch a new podcast, Endless Thread.
The podcast dives deep into Reddit's vast network of communities, uncovering internet truths and exploring compelling stories that might otherwise remain buried. It's a fascinating partnership that Wistia shared more information about on their blog.
Are you ready for a strategic alliance? Here's how to know
Just like a relationship, strategic alliances are a significant investment in both time and resources. Before diving headlong into a strategic partnership you might not be prepared for, make sure you've answered a few important questions.
How will you measure the results of your partnership?
Setting clear and measurable goals for the partnership helps provide direction and a clear focus across both organizations. Before diving into a strategic alliance, you need to get clear on what you're hoping to get out of a partnership.
Example goals for strategic alliances include:
- Press coverage
- Reduced marketing spend
- Entering a new market
- Fill gaps in your product offering
- Build relationships that could lead to an acquisition
Once you've decided on a goal, be sure to tie the outcome of the partnership back to quantifiable results, like SQLs, trial starts, brand awareness, or retention.
Who's responsible for the success of the partnership?
Successful alliances are always a team effort. "The beauty of strategic partnerships is that the benefits tend to span across the entire company — from marketing to product to advocacy," explains Brian Peters.
Since strategic partnerships are often led by executives and the C-suite, they can command the attention and resources that span several (if not all) of your company’s departments. While the job titles might vary, buy-in for the alliance needs to come from the very top. For early-stage companies, the responsible individual will likely be the CEO—larger companies might delegate this to the executive team. Regardless of who holds the reins, it should be clear across the company—and across your partner's leadership team—who's conducting the orchestra.
The power of investing in strategic alliances
Strategic alliances are one of the most powerful (and most underrated) growth channels in software.
With the help of a carefully chosen strategic alliance, SaaS companies big and small can join forces to expand their product and service offerings, co-develop new products, enter new markets, share skills and expertise, and boost both partners' competitiveness.