With a large portion of the channel ecosystem selling in the cloud, now is the time for some to begin thinking about the next phase of their evolution. For most partners, version 1.0 of their approach represented getting into the cloud only, and version 1.5 was all about figuring out the monetization model. Many are now evolving into the Managed Services Provider (MSP) space and beginning to understand the concept of capitalizing on a self-owned annuity. We’ve seen this proliferation really take off in many of our more mature markets.
What we have now is an increasingly competitive space with aggressive customer acquisition tactics being executed. This often comes in the form of reduction in price for services (both deployment and ongoing IT management) and an erosion of gross margin on this piece of the business.
Partners looking to insulate themselves and begin building for the future are starting to think about the element of differentiation. For most, the easiest way to do this is going vertical.
Doing so provides numerous benefits:
The ability to charge a higher price point: Subject matter expertise adds value to services and solution recommendation, justifying high cost.
Maximization of Average Revenue per User (ARPU): Domain expertise builds trust and enables additional offerings to be sold with greater ease.
The ability to use market influencers as advocates: Proven capabilities can establish a stamp of approval from others target customers trust.
An increase in marketing Return on Marketing Investment (ROMI): Increased focus in audience identification improves message strength and campaign results.
Reduction in Cost of Sale (COS): Repetition in process and pitch improves win rates, accelerates sales cycles, and requires lower cost resources.
Increase in services margin: Consistency increases efficiency and reduces the dependency on high-cost technical staff.
In most instances, I like to recommend that partners start with one vertical at a time, and as you begin to see success, replicate the formula. A common mistake is to try and build for too many verticals at once.
There are a number of ways to pick your areas of specialization. One of my favorite stories is that of Forceworks and their decision to focus on law firms. As they started to sell Office 365 to law firms, more and more began popping up. As a result, they began to see consistencies in their deployments and an opportunity to begin proactively going after this sub-segment, and they’ve done quite well at it.
In addition to law firms, Forceworks has also started to branch out into their second vertical of community banks. However, this was done based on their team seeking an opportunity. Through their own diligence and investigation, they saw not only a need for Office 365, but a willingness to invest in it and began tailoring their message and delivering to this audience, and they are starting to gain traction.
Here’s what I recommend every partner do: I suggest going through your client rosters from top to bottom. Look for densities in your install base and see which ones you and your staff may have a possibility to build something around. Once you identify a few of these, you’ll also likely find that some of your staff have already become domain experts, able to eloquently speak to prospects in the space, making it easy for you to begin building out your first area of specialization.
The bottom line is going vertical should be a heavy consideration for the next key phase for many of our partners. This opens up numerous opportunities to increase profitability as well as new revenue streams.
Ready to learn more? Watch Forceworks CEO Steve Mordue tell his story on Cloud SureStep and review the Market Focus Analysis Guide for more information.
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