The Emergence of Partnership Networks in the Enterprise Application Software Industry - An SME Perspective

The enterprise application development industry is currently undergoing profound changes. The well established, large system developers (hubs) take the lead in establishing partner networks with much smaller, often young companies (spokes). This paper takes the perspective of these spokes and seeks to understand their motivations for entering into such partner networks. Drawing on research on strategic alliances and product complementarities, a theoretical framework on the determinants of partnering is developed. It is argued that partnering is especially attractive for smaller organizations when it allows them to access capabilities that would otherwise be difficult to obtain. Three broad categories of dynamic capabilities of hub organizations are assumed to act in this role: the capability to innovate architectures, the capability to provide an integrated enterprise application system, and the capability to address broad markets. These are analyzed in eight case studies. The cases represent small and medium sized enterprises (SMEs) that are participating in the partner network of a leading provider of enterprise application systems. The study reveals that while access to market capabilities is a key motivator for all spokes, the other two capabilities do not play an identical role in all cases. Rather, their impact on partnering motivation is contingent upon the type of solution offered by the partner in relation to the large system developer.