Why a Partner Ecosystem Results in Superior Value

Abstract

The paper carries out a historical analysis of business conducted over 25 years by two enterprise resource planning (ERP) software vendors in Denmark-Maconomy and Navision-each employing its own business model. Maconomy adopted a business model where the company itself would develop, sell, and implement ERP packages directly to its customers; whereas, Navision adopted a business model which relied on an ecosystem of partners consisting of value added resellers (VAR) and independent software vendors (ISV). Using the Resource Based View (RBV), the paper compared and contrasted the capabilities and resources of the two companies. The key finding is that Navision provided superior customer value and, consequently, collected superior rent, as shown by its selling price of as much as 16 times the selling price of Maconomy. The analysis shows that the main reason for this huge difference is the value of Navision’s ecosystem, which had enabled the company to achieve substantial economies of scale. This finding has implications far beyond the ERP field. The results of the study point to this direction: Technology will lead to more intermediation and the inclusion of more economic units in the traditional value chain or value network due to lower transaction costs and increased focus on core competences.