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January 24, 2004

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NEWS
Crossing Borders With Co-Opetition

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By Paula Rooney, CRN
Hannover, Germany
4:11 PM EST Fri., Mar. 28, 2003
Despite global tensions, co-opetition among solution providers is on the rise.
The economic malaise and increased co-opetition among hardware vendors and ISVs are encouraging solution providers to form co-opetive ecosystems in their own backyard and with their counterparts overseas,even while cultural and, in some cases, political differences remain. While these allies may compete outside the realm of their specific agreements, elsewhere they are helping each other break into new markets.

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>> FOREIGN SOLUTION PROVIDERSSEEK U.S. PRESENCE THROUGH TIES WITH LOCAL VARs, INTEGRATORS.

At CeBIT 2003 in Germany recently, and at Microsoft's Executive Partner Summit in Seattle two weeks ago, solution providers from a wide range of geographies including Germany, Taiwan, Korea, Egypt, Chile and the United Kingdom hunted for engagements with U.S. solution providers. Not only do they hope to extend their own reach, but they said the benefits to U.S. solution providers include lower-cost solutions development, increased margins, reduced operating costs, potential tax breaks and an expansion of their services business to less-saturated markets during tough economic times.
On the show floor in Hannover, executives from Brain Consult, a Microsoft Certified Partner in K%F6ln, Germany, said the time is ripe for cross-border deals. "We must play more in the international space," said Stefan Dopp, a Brain Consult account manager, pointing to the increased margins that U.S. solution providers can enjoy by reselling foreign-developed solutions. "It's better for partners to play together."
Brain Consult began partnering for the first time in the United States a little more than a year ago with an Anaheim, Calif.-based solution provider that serves as a contractor for the U.S. Army. The results have been positive for both, Dopp said.
Executives from Cosmo Consult, another Microsoft partner in Germany that sells Navision solutions, said it expects to develop more relationships with U.S. partners due to the fact that Microsoft plans to integrate its three business applications groups under one umbrella.
"We have one partner in Dallas, and we serve the same customer," said Sabine Krueger, a sales representative at Cosmo Consult, based in Berlin. "It's increasing because companies in Germany will want to expand their [Navision] base to the U.S."
At another booth during CeBIT, executives from solution provider Excelsys, Santiago, Chile, said while it was once virtually impossible to establish relationships with U.S. partners, the climate has improved as the U.S. economy has soured. "We're trying to attract partnerships with U.S. partners because we need their local presence," said Christian Paccot, president of Excelsys.

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POSSIBLE BENEFITS OF FOREIGN AID
>> Incremental business from from new solutions.
>> Expansion of services to less-saturated markets.
>> Lower operating costs and potential tax breaks.

One member of the International Association of Microsoft Partners said international partnering has risen along with the increased co-opetition among ISVs.
"The globalization of IT is the big watchword for the next couple of years," said George LaVenture, president of Trinity Consulting, Boston, noting that in the past alliances were constructed more on an ad hoc basis. "I see relationships increasing with outside partners, yet it's more of a matrix relationship now. In the past, it wasn't nearly that deep."
In an interview at CeBIT, one Forrester Research analyst said global ecosystems are forming due to market pressures and increased outsourcing activities.
"We see the emergence of service networks in the North American market," said Andrew Parker, senior analyst of strategy at Forrester Research in the Netherlands. "It's happening more quickly in the European market because only 25 percent of IT revenues in Europe are from outsourcing, while in North America it represents 50 percent of IT revenues."
Itelligence, a reseller and solution provider in Germany, recently started partnering with one of its archcompetitors in the German market, SAP SI, for the first time. Itelligence executives said they expect to enter into similar arrangements with U.S. partners as its key ISV partners, SAP and SuSE Linux AG, expand their own operations in the United States.
"It's quite a new model to partner with a systems integrator," said Oliver Schreiber, director of outsourcing and services at Itelligence, based in Bielefeld, Germany. "But I think it will increasingly happen and happen more often as corporations connect in e-business transactions."

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