The Partnering Payoff

Corporate alliances have come a long way since the early era of collaboration, when companies came together to simply fill a gap in their business strategies while keeping a vigilant watch on partners to guard sensitive company information.

According to Deloitte Research, the number of corporate alliances is growing by as much as 25 percent each year and now accounts for nearly a third of many companies’ revenues and value. Part of the reason for alliance growth may be that few companies are currently in a position to afford acquisitions.

“There’s an appropriate time for an acquisition but there are many more opportunities to do an alliance,” says Mike Leonetti, executive director, healthcare partnerships, at Boehringer Ingelheim, a pharmaceutical company based in Ingelheim, Germany. “Acquisition is dependent upon fiscal times, how much capital’s available, where financing can come from, how strong the company’s balance sheet is — there’s just a lot that goes into acquisition strategy. But if you can align with another company and create business objectives, you can just about guarantee that there’s not going to be as deep a cultural and financial cost.”

Meanwhile, some companies have the best of both worlds. Hewlett-Packard Co. announced in May that it would acquire EDS, whose multipartner Agility Alliance won a best practices award this year from the Association of Strategic Alliance Professionals (ASAP), a global professional association dedicated to the formation and practice of strategic alliances. The deal, valued at $13.9 billion, is scheduled to close before the end of the year. It will enable HP to ramp up its technology services and potentially be in a stronger position to compete on some of IBM’s turf. The transaction will significantly strengthen the Agility Alliance, according to an EDS spokesperson; EDS will benefit from additional hardware and software and other resources provided by HP.

While few companies can clinch $13.9 billion deals, you don’t have to be a tech powerhouse to form strategic alliances. Many midsize businesses in various industry sectors are moving toward deep collaborations in pursuit of growth and have equal prospects for success — because what separates alliance success from alliance failure is how companies strategize and manage their partnerships.

According to Deloitte, a whopping 60 to 70 percent of alliances fail, so implementing best practices is critical.