In the enterprise software application market, the biggest players have embraced a partnership model, while smaller, more focused companies often have not. Take the transportation management system (TMS) market, for example. In ARC’s last market study on the global transportation management market, Chris Cunnane, the study author, made estimates of system integration (SI) revenues as a percentage of total TMS revenues for all software companies in the market. The two largest suppliers of enterprise applications – SAP and Oracle – had SI revenues that were less than 15% of their total TMS revenues. Meanwhile, Blue Yonder, a company more narrowly focused on providing best-of-breed supply chain applications, had system integration revenues of over 35% of sales in TMS according to the ARC “Supply Chain Planning Global Market Research Study.”
Becoming Partner Centric is Not Easy
For the largest enterprise software companies, the ability to effectively leverage partners has been a key factor in achieving market leadership. Blue Yonder recognized the need to transform into a Partner First organization as part of its core growth strategy.
The transition is not easy. I talked with Umar Ausaf – Blue Yonder’s General Manager for North America Partner Success and Bill Beecher – VP for Global Alliances at Blue Yonder – about this change to their strategy. Mr. Ausaf admitted that “It is a transformational journey for any organization to pivot. It has to start from the leadership level. We quickly learned that we must let go of some control, learn to trust our partners, and treat them as an extension of our own ecosystem.”
This drive to build a better partner ecosystem is a recent development; it has been going on for about a year and a half. Mr. Beecher pointed out that his direct manager, Mr. Ausaf, was formerly the Vice President of North American Service Sales. Mr. Beecher said. “Moving him to head the partner team in North America was a way to build trust and force the change in how we did business.”
In the past, Blue Yonder used to have relationship managers that worked with the partners. Now, they have also slotted in industry experts that are driving the change and approach to focus on solving complex customer challenges in conjunction with the partners and their expertise. This is resulting in joint wins for both Blue Yonder and its partners, as well as a more seamless customer buying experience.
How Do You Give Up Service Revenues and Hit Your Growth Target?
In the enterprise application market, the margin on software is about 60%, while service margins are about 20%. So, does this mean Blue Yonder will accept lower total sales but enjoy a higher profit margin? The answer is no. Due to strong growth in software, Blue Yonder expects service revenues to be higher next year but decline as a percentage of overall revenues.
Last September, Panasonic paid over $7 billion to acquire Blue Yonder. In Blue Yonder’s last fiscal year, which ended Dec. 31, 2021, revenues were $1.1 billion. Panasonic expects growth; for the time being, service revenues need to be part of the equation.
Improving Partner’s Skills is Critical
The partnership plan also involves improving partners’ skills with better, more extensive training for their consultants and solution architects. Blue Yonder has put in a comprehensive learning and accreditation program. “Accreditation is not easy to come by,” Mr. Beecher stated. “It can be a month-long process per product depending on trainee experience.” Consultants who complete the accreditation get badges they can display on LinkedIn or similar sites.
In ensuring that Blue Yonder customers will have successful implementations, the software vendor, as part of the partner strategy, talks to the partners – application by application, region by region – and constantly tracks how many certified consultants they have and will train in the coming year. This “ecosystem” strategy helps evaluate the skilled capacity in the marketplace versus their internal capacity to ensure the right demand and supply balance based on their long-range model.
Which Partner Gets the Deal?
Another issue that needs to be addressed in an effective partner program is when the software supplier does not take the lead in an implementation, who is the right partner for the customer? Blue Yonder breaks their SI partnerships into two categories – global SIs and regional SIs.
Global SIs include the largest consultants and integrators in the world. These include companies like Accenture, Deloitte, EY, PwC, Tata Consultancy Services, and several others.
Regional system integrators for TMS in the North American market include companies like Open Sky Group, Ascension Logistics, enVista, netLogistik, and others. The “boutiques” – a term I was told regional SIs don’t like – are smaller and more focused consultants. For example, Open Sky Group is focused on providing implementations only for Blue Yonder, and only in the areas of warehouse management and transportation management. In contrast, global SI’s do consulting and implementation across many software vendors, applications, and lines of consulting.
Historically, Blue Yonder is seeking to change this, the regional systems integrators traditionally had better expertise at the application level. They would have consultants who had only been focused on Blue Yonder TMS implementations for several years.
In contrast, the global integrators had better transformational consulting but whose consultants were more apt to be generalists, consultants who might implement several different applications from several software vendors. Global system integrators, in some cases, had sought to improve their expertise in a particular vendor application by augmenting their implementation team with Blue Yonder or even boutique consultants for a particular deal. In the past few years some global system integrators have built, and continue to grow, Blue Yonder practices.
There is also a quality check involved in implementations. Global integrators collaborate with Blue Yonder’s own services teams on validating that the right combination of resources, regardless of how they are “badged”, can be assembled to ensure a quality implementation.
I did not understand why global consulting practices were involved in transformation surrounding transportation. I see the implementation process for TMS is highly standardized across industries. With that being the case, why is a transformation needed? Mr. Beecher explained, “the transformation includes more than TMS and can even include more than the Blue Yonder supply chain portfolio. If a company wants to cut delivery times to customers down by a day, or develop significant new last-mile capabilities, or even insource what historically might have been outsourced, those things can involve a lot of process change; more thought leadership is required.”
Regional integrators tend to win on smaller mid-market deals. Global consultants won’t touch deals that they consider too small. Further, if a company already has significant TMS expertise, are involved in a platform upgrade, if they are focused solely on improving their capabilities in transportation, or if they are budget conscious, then regional consultants will often be chosen.
Show Me the Money!
If you really want proof that Blue Yonder is more partner-centric, you need to talk to the partners. Because I’m doing a global market study on the TMS system integrator market, I have been reaching out to consulting companies in this market. One of the first companies to talk to me was netLogistik.
netLogistik is a private company headquartered in Mexico City but with offices in the US, Colombia and Barcelona. They implement the Blue Yonder warehouse management system (WMS) and SAP EWM. They also implement Blue Yonder TMS and their own less functionally rich TMS solution (TEP), which does not compete with Blue Yonder. Finally, they implement transportation solutions from FarEye and Omnitracs RoadNet.
Their Managing Director, Juan Jose Salas Valencia, told me that the partnership with Blue Yonder has improved. “It is not perfect, but there have been great improvements. Training has significantly improved, there is more and more information around training. The accreditation program, specifically the accreditation for TMS, is very good.”
Further, “in the past, Blue Yonder wanted to do all of a project and keep all the services. Now they are more open, they call their partners when they have opportunities in WMS and TMS.”
There are also better lines of communication between Blue Yonder and their partners. Recently there was a meeting in Dallas where executives from Blue Yonder were sharing their strategies around WMS and TMS with the partners. “We were involved much earlier in these strategy discussions,” Mr. Valencia said. Historically, Blue Yonder would just tell the partners what the strategy was.
In addition to partners endorsing the new strategy, Blue Yonder has other evidence the program is working. Blue Yonder’s partner revenues have increased by close to triple digits, significantly faster than the company is growing.