Platform Partnerships Matter


hires

Platform ecosystems offer an interesting setting for analyzing the dynamics of interorganizational collaboration, cocreation and competition. Extensive ecosystems have been an influential contributor to the success and ultimately the survival of IT platforms.

In the article ‘Cocreation of Value in a Platform Ecosystem’ Ceccagnoli et al. (2012) investigated small, complementary solution providers within the SAP enterprise software platform ecosystem. The research study analyzed 1,210 independent software vendors (ISVs) with a broad collection of different software offerings to examine whether participation in an ecosystem partnership increases business performance and how appropriability mechanisms (like patents) can shape this partnership.

Instead of looking at the dynamics of actual cocreation, the authors seek to identify the necessary prerequisites to enable cocreation in an enterprise software platform ecosystem. In order to facilitate interaction among platform owners and platform participants previous research has identified two important factors in software platform ecosystems, namely standardization and modularity. The most important prerequisite to foster cocreation is the partnership programs which many of the large enterprise software providers (e.g. SAP, IBM, Oracle) offer. Through these partnerships independent software vendors can cocreate business value from the platform ecosystem by promoting complementary inventions and exploiting indirect network effects.

The researchers find that joining a major platform ecosystem increases business performance in terms of 26% increased sales and provides higher prospects of an initial public offering by 5.9%. In addition, these impacts are greater when ISVs have intellectual property rights or stronger (costly-to-build) downstream capabilities such as marketing or service capabilities. In the case of high patent stocks the likelihood of making an IPO increases to 15.1%.

The fundamental benefit of partnering in a platform ecosystem is to signal software compatibility with the platform and lower the cost of selling by exploiting the platform installed base. Thereby ISV’s can pool resources and prevent the duplication of costly complementary assets to integrate software systems.

The key takeaways for companies are threefold. Firstly, platform owner and potential participants have to understand the value of partnership programs. Secondly, independent software vendors whose innovations are not protected by intellectual property rights (IPRs) or simply are lacking downstream capabilities should be cautious to engage in such partnership programs. Thirdly, value cocreation and appropriation are not mutually exclusive approaches in interorganizational collaboration.

 

Reference List:

Ceccagnoli, M., Forman, C., Huang, P., & Wu, D. J. (2012). Cocreation of Value in a Platform Ecosystem: The Case of Enterprise Software. MIS Quarterly, 36(1), 263–290.

 

One thought on “Platform Partnerships Matter”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s