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Tech companies see the importance of collaboration
January 11, 2001 03:00 AM ET
by John F. Ince


From the February 2001 issue of UPSIDE magazine

At the core of the Internet's development is a fundamental shift in thinking that will ultimately transcend the frothy excitement about fortunes made, efficiencies created, enterprises grown and IPOs hyped.



SPECIAL REPORT:
Partner or die
See more stories>>
It is a shift in thinking that first attracted attention years ago when the Berlin Wall came down. As the former Soviet Union disintegrated and the Cold War dissipated, something far more important was taking shape within the world's economic psyche: We began to recognize that the affairs of individual nations and enterprises are deeply interconnected.


Today, startup and legacy firms alike are looking ever more aggressively for partners to gain competitive advantage.
Today, astounding technologies that surround and support the development of the Internet are shifting our collective consciousness. Simply put, we are forming one extended enterprise, and the Internet is evolving as our global nervous system.

This has fundamental implications for not only the way business is conducted, but also how nations and cultures interact. Indeed, as globalization transforms companies and economic systems, it has become difficult, if not impossible, to distinguish enemy from ally. In a truly global economy, who is not a potential partner?

William Greider takes this a step further in his path-breaking book, "One World, Ready or Not." In a chapter titled "Cooperative Capitalism," he writes: "Manly rhetoric notwithstanding, most of the world's leading multinational corporations have entered into pragmatic partnerships with competitors or are actively exploring the potential for cooperative alliances. ... The idea is to find at least temporary relief from their mutual vulnerabilities."

Greider wrote those words almost four years ago, before the Internet had come into its own as a major force.

If those words made sense in a world largely dominated by brick-and-mortar multinational corporations, imagine their relevance to an Internet-based, clicks-and-mortar environment, especially as contracting financial markets force dotcoms into survival mode. Today, startup and legacy firms alike are looking ever more aggressively for partners -- often, ironically, to gain competitive advantage.

Where would Amazon.com (AMZN) be without its affiliates or its collaborative-filtering technologies? What would Yahoo (YHOO) be without its content partners or complex nexus of strategic partners? What would any Internet firm be without its infrastructure, content, sales and marketing partners?

John Ware, senior director at SpencerStuart, says, "In the technology sector, alliances and partnerships are more prevalent now than they were in the past. That's a function both of the speed and hyper-competition of today. There's a recognition that if you don't tie up relationships quickly, somebody else will get to them before you. But it sometimes creates a kind of 'vaporware' -- giving the false appearance of progress and traction."

Lessons in partnering

It is virtually impossible to discuss business models with any Internet CEO without a reflex recitation of his or her company's key strategic alliances. Indeed, announcements of blockbuster partnerships have become so commonplace, how does one learn to distinguish pre-emptory announcements and "management by press release" from genuinely functional relationships?

Searchbutton's CEO, Nick Halsey, offers two rules of thumb: "I am very leery of partnerships that do not have either a technology-integration or a revenue-sharing component. I tend to view other kinds of partnerships as pure marketing fluff." (For a full interview, see: "Q&A with Nick Halsey.")

But genuine partnerships are mission-critical to the execution of a company's Internet strategy, especially its ability to secure financing. Jon Callaghan, managing partner at CMGI (CMGI), says, "It's gotten a lot harder to start an independent company. The types of investments we're doing now ... are out-of-the-box solutions. They have a large part of the equation solved already with strategic relationships established with powerful industry players."


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