In-Depth

P2P Power

Without official vendor backing, 100-plus partner companies have formed lively homegrown peer groups to support each other and kick-start their businesses.

• By Anne Stuart
• April 01, 2008

Like the rest of the information-technology industry, SCCI was feeling the pinch as Y2K-related business dried up and the dot-com boom turned into the dot-com bust. "The economy had gotten pretty soft," says Sorensen, who had founded the IT solutions and services company on his family's farm in Harlan, Iowa, in 1985. "By the summer of 2001, I was trying to figure out how we were going to stay in business. One of my employees said we needed to talk to some other people and see how they were handling the downturn."

Sorensen reached out to executives at four other partner companies in Iowa, and later that year, they gathered for a candid roundtable discussion on business survival tactics for the 21st century. "Everybody at that first meeting agreed: 'This is so valuable -- we gotta keep doing this,'" recalls Sorensen, whose now-healthy company, a Gold Certified Partner, has been renamed Heartland Technology Solutions Inc. "That was the beginning."

What started as a gathering of those five companies in southwestern Iowa quickly swelled to a peer group populated by members from a dozen or so companies, some from surrounding states. So Sorensen started another peer group. Then another. Then another.

Today, Sorensen runs nine highly active peer groups populated by decision makers from more than 100 partner companies in the United States and Canada. The groups -- collectively known as HTGs, for "Heartland Tech Groups" -- are typically at their 12-company capacity. At press time 40 more companies are wait-listed for vacancies, which Sorensen says are rare: The annual member turnover rate is only about 5 percent.

As that kind of demand indicates, Sorensen has tapped into one of the hottest channel trends: partner-to-partner networking -- an umbrella term for collaborative activities in which participants not only suggest solutions to shared woes, but actively help others grow their businesses as well.

Such networking -- better known by its shorthand acronym, P2P -- isn't exactly new. The Microsoft Partner Program has promoted P2P hobnobbing for years, chiefly through the annual Worldwide Partner Conference. Many partners are active in well-established independent organizations such as the International Association of Microsoft Certified Partners (IAMCP), SMB Nation and local or regional grassroots groups (see "From the Ground Up," February 2007).

What's different about Sorensen's particular breed of P2P activity is the unusually demanding set of requirements for participation. HTG's two-day quarterly meetings are anything but leisurely: Members are expected to spend two or three days beforehand on heavy-duty prep work and arrive prepared to discuss a half-dozen topics in-depth. And their interactions are anything but arms-length: Participants are expected to share best practices, submit to frank feedback about business strategies and decisions, and even open their books for peer-group scrutiny. (Each group includes only non-competing companies; all participants sign confidentiality agreements.)

But members say the groups, which continue meeting indefinitely, are also distinguished by the depth and value of the resulting relationships. "They become communities," says Sorensen. "They get very invested in each other." For many, the overall program tagline "Together, we're better" is more than an empty slogan. Longtime participant Brad Schow, general manager of Compudyne, a systems integrator and Certified Partner based in Duluth, Minn., says his peers in HTG3 are the first people he turns to for answers and advice. "There's something about a common understanding of concerns and triumphs that makes for fast friendships," Schow says. Zachary Schuler, CEO of Gold Certified Partner Cal Net Technology Group, an IT management and consulting company based in Northridge, Calif., says it's hard to overestimate what he's learned from his peers in HTG2: "Because everyone is in non-competing territories, they go deep into some of their business practices," he says. "You can get massive amounts of ideas from them."

Backed by Research -- and Redmond
Few question the potential payoff from partner relationships. Analyst company IDC surveyed 429 IAMCP members in 14 countries last year; results indicated that P2P actions within that group generated more than $6.8 billion in revenues in 2006. Researchers found that small and midsize partners -- like those making up the bulk of HTG peer-group participants -- attributed an average of 47 percent of their incomes to P2P deals.

Those results have prompted Microsoft to take a hard look at beefing up its existing P2P offerings, says Robert Deshaies, vice president for Microsoft's U.S. Partner Group (see "Redmond's P2P Resources," this page). Meanwhile, he notes that Microsoft maintains a broad range of relationships with partner organizations that, like the HTGs, are founded and run outside its walls. "Some of them want us to play a lead role, some a supporting role. And some want to stay completely disconnected from vendors," Deshaies says. But he says Redmond supports any such effort that helps partners improve their skills and grow their businesses. "Partners are our lifeblood," he says. "Ultimately, when they provide a better experience to customers, everybody wins."

Sorensen says Microsoft has been "helpful and supportive" in getting his peer groups off the ground. Among other contributions, the company has sent speakers to peer-group sessions, provided meeting space on its Redmond, Wash., campus and helped with the technology for online collaboration. But the peer organizations remain strictly independent; when Microsoft representatives attend sessions, they're guests, not group members.

A 'Partner University'
What's driving demand for P2P activity? A thirst for knowledge, Sorensen says. "There was a time in the industry that we could get by just selling technology, not being great businesspeople. Those days are quickly going away," he says (for more on Sorensen's view on that transition, see "Change Agent," November 2007). With the rise of a younger generation well-versed in both areas, existing partners risk becoming stagnant or making costly mistakes if they don't beef up their business skills. "But there's not really a partner university where they can learn that information," he says.

So his peer groups are focused on doing the next best thing: having executives from non-competing companies of various types and sizes help each other with everything from hammering out business plans to hiring the best employees to handling mergers and acquisitions.

For instance, at one recent HTG gathering in Raleigh, N.C., members did two-year financial reviews for each company, benchmarking their performances against their peers. Members came ready to discuss their strategies for issues such as after-hours customer support, engineer compensation and certifications. "We also spent some time talking about how each member engages with different managed services providers [MSPs] -- a lot of people are struggling with their relationships with MSPs as they grow," Sorensen says. Finally, participants took a "deep dive" into a local peer-group member's company, interviewing three visiting management team members about the organization's strategies and operations.

About 90 percent of participating companies are small to midsize resellers, with the rest divided mostly between ISVs and consultants; the majority are Certified or Gold Certified Partners. The one trait they all share: the desire to move up. "We're not looking for people who are content to stay where they are," Sorensen says. "We want folks that want to grow," whether their goals are boosting revenues, increasing the numbers or types of solutions and services they offer or even just adding competencies.

Membership is free, but companies pay their own travel and lodging expenses for quarterly meetings and split program expenses such as room rental, meals and the cost of having one of Sorensen's executives facilitate the session. Sometimes vendors offset program costs in exchange for being able to make lunchtime presentations to partners.

Group memberships remain highly stable. Of more than 100 companies involved in HTG peer groups in the past year, only six dropped out, either because they were having trouble keeping up with membership requirements or because they've changed hands in an acquisition. Generally, though, both companies and individual members remain active for years, building relationships with a curious side effect: "You know how married couples sometimes start to look like each other over time? That's how it is in these groups," Sorensen says. "Over time, the companies involved begin to act like each other and sell like each other."

Competitors can't join the same HTG -- but they can belong to different ones. So each peer organization operates independently, with virtually no crossover. "They're silos, basically," Sorensen says. Each develops its own collaborative style and personality, with members trusting each other to honor their confidentiality agreements. To date, Sorensen says, what happens in each group stays in each group.

Culture of Accountability
Stuart R. Crawford, manager of business development for IT Matters Inc., a network-solutions company and Gold Certified Partner based in Calgary, Alberta, Canada, can sum up the value of his P2P networking in a single word: accountability.

"We have somebody out there, besides ourselves, holding us accountable," he says of his involvement in HTG3. "We have 10 or 11 peer companies saying, 'I don't think your goal is challenging enough,' or, 'Why didn't you meet that goal?'"

That kind of, well, peer pressure is critical for success, he and other HTG participants say. "People have to perform. They get voted off the island if they don't do what they're supposed to do," Sorensen says. "Vision without execution is hallucination. If we don't execute on the vision, it doesn't count."

At the same time, members call the peer groups highly supportive -- and not necessarily just from a business perspective. "Last year, I was having some work/life-balance challenges," says Crawford, a self-described "workaholic" who says his overbooked schedule was causing stress at home. "The group was able to help me put things in perspective," he says. The lesson he learned from his peers: "Business is important, but having a fulfilling life is equally important. A year later, I'm happy to say that my relationship with my family has never been better. That's the power of what we do."

But those relationships often pay off in terms of business, too. Crawford describes a case in which his company wasn't certified to assist a client with a specific issue, so an HTG3 colleague stepped in to help out. But for most, growth remains both the main goal and the biggest benefit. Membership "forces you to get out and think about your business and how you're going to grow it," says Cal Net Technology Group's Schuler. "Everyone in our group, just about, has grown their company since they started." His own employee roster has doubled, to about 50 people, over the past two years -- which he attributes largely to ideas and feedback he's gained from other group members.

Longtime members lavish praise on the groups' founder. "Arlin is the glue behind our group," says Schuler. "He knows a lot of people and has a significant amount of influence in the channel and has a heart bigger than anybody I know." Crawford offers a slightly different take: "Arlin isn't afraid to kick our butts if we need our butts kicked," he says with a laugh.

Sorensen himself attended or sent other company executives to every HTG session even as his own company bounced back from the downturn of a few years back, growing rapidly through a series of mergers and acquisitions. He admits it's been challenging to balance the peer groups' growth and his own company's needs, but he doesn't want to step back from networking. "I've been in business for 23 years. I personally get a lot of joy out of helping other folks learn the things that I wish I'd had people teach me along the way," says Sorensen, who also maintains a "Peer Power" blog covering partner issues and practices. "It's a way to give back at some level."

At the same time, he readily acknowledges that his company continues to profit from its involvement in P2P activities. "We're making changes in our own business every month based on what we hear. We're exposed to information that we couldn't afford to buy. It gives us a strategic advantage," he says.

Ultimately, he'd like to expand to about 20 peer groups serving about 250 partners.

"That's a critical mass that's big enough to give us significant clout. If you get 250 partners that are all executing simultaneously along the same lines, we'll be making a difference in the industry -- in a very positive and proactive way," he says. But he adds that getting there still requires reaching the right people at the right partner companies, one by one: "If you can affect the top person in each company, you can eventually affect an awful lot of people."