5.2 CAN WE LEVERAGE PLATFORMS AND PRESERVE OUR INDEPENDENCE?
PLATFORM PROGRAMS
The purpose of inside-out platform programs is to spur complementary external innovation by allowing and stimulating the use by startups and scaleups of the corporate’s technology platform and resources, to build new products or customize existing products which are complementary to the corporate’s business and technology.
Startups and scaleups can leverage their business through the participation to platform programs of corporates.
The startup will have the following objectives while participating in a platform program:
• Increase the market reach for the products and services of the startup by leveraging the platform of the corporate and its clients.
• Increase the revenue stream through fees (subscription, license, maintenance and support) generated through the platform.
• Retain intellectual property rights on both standard products, as well as the products custom developed for the platform.
The platform owner will have the following objectives while establishing and running a platform program:
• Enhance the market position and strength of the platform by leveraging the products and services of application providers.
• Increase the innovation cycle and offer new solutions to the platform clients, while mitigating innovation development risks.
• Increase the revenue stream through commissions on fees generated by the application provider on the platform.
Platform Program Best Practices
Free Use of Corporate Resources
Nearly all platform programs include the ability to use for free certain assets of the corporate. The startups and scaleups may be entitled to the temporary use of free software licenses, cloud capacity up to a certain volume, tutoring, tech or other support, as well as sales assistance, through tradeshow participation together with the corporate and try-out sessions with potential customers.
It should be clear upfront which fee arrangements apply between the corporate and startup or scaleup. A fee sharing arrangement may be applicable with apps offered on the platform resulting in a commission due to the corporate (e.g. Apple Appstore), a reseller commission being due, or conversely, with a reseller fee being due to the startup or scaleup in the event it sells the use of the platform along with its own specific application. The range of models is virtually unlimited.
It was Netscape co-founder Marc Andreessen who famously said that software is eating the world. Almost a decade after Andreessen’s blogpost, we have to acknowledge that every company is turning into a software company.
But it’s not apps or websites that are going to consume old business models. Platforms will. A platform program connects and distributes a multitude of data streams. It can bring together start-ups, corporates and governments, creating value for all whom connect with the platform.
It takes a clear vision, radical commitment and a long-term investment strategy, but a company that is able to successfully launch a platform program, can become a powerful force in any given market.
Startups and scaleups should be smart and fearless about joining platform ecosystems, building platform applications and sharing their data. It will create opportunities and accelerate their growth.
Jeroen Lemaire, CEO In The Pocket
IP ownership of the applications developed by the startup or scaleup on the platform of the corporate would normally remain with the startup or scaleup. IP rights are valuable assets that enable the startup to pursue significant revenue streams and leverage reliable, proven deliverables for customers in a timely and cost-efficient manner.
Any startup or scaleup would be hesitant to use free licenses and other resources offered by the corporate, if such usage would imply for IP ownership to be transferred to the corporate or be jointly owned with the corporate. Retaining IP ownership allows the startup or scaleup to offer its products and services for sale to users of the technology platform of the corporate.
Usage rights of the corporate should be carefully defined and not be structured as a de facto ownership transfer, creating a competitor in the process. Usage should be limited to internal use by the corporate without commercialization rights for the corporate, through sub-licensing arrangements or otherwise.
User License Agreement and Usage Restrictions
Each client of the corporate is to be bound by an End User License Agreement providing a contractual framework for the corporate to commercialize the products and services of the startup or scaleup on its platform.
In the event of resale by the corporate, it is crucial for the usage rights granted by the corporate to its clients to be no less restrictive than the usage rights granted by the startup or scaleup to the corporate.
Startup or Scaleup Roles and Responsibilities
It should be clearly determined which roles and responsibilities the startup has in the provision of technology, maintenance and support services to the users of the platform.
Depending on the depth of the platform program, it may be recommended for the platform and application provider to establish a joint relationship management committee to oversee the relationship, and to meet regularly to review progress of ongoing performance, continuous improvement and other matters of mutual interest. Each party should delegate an executive with primary responsibility for management of the relationship. If the relationship deepens, partners should devote significant time to develop a detailed governance model to manage the relationship from a technological, commercial and overall business perspective.
Service level discussions should start from a realistic perspective on the ability of the startup or scaleup to provide 24/7 support. Using the standard SLA expectations as if one is working with a large technology vendor is likely to pose significant issues for the startup or scaleup and are likely to lead to disappointment.