From The Expert Feature Article
May 05, 2014

MSPs Must Grasp IT Lifecycle to Become True Partners

By TMCnet Special Guest
Travis Nisbett, , Product Management/Product Marketing at Hostway Corporation

Managed service providers (MSPs) are playing an increasingly vital role in the delivery of technology services across all industry sectors. Customers seek out MSP solutions for a variety of reasons, but when businesses select a vendor, the decision invariably hinges on the customer’s current business needs.

Currently, most MSPs segment the market by Standard Industrial Classification (SIC) code, target company size or geographical region. The use of databases in lead generation efforts makes relying on these default categories easy. But is it the most effective approach?

Another factor in MSP positioning is the competitive analysis each MSP company conducts to determine which development options to pursue. MSPs generally look at what they offer relative to their competition – cloud storage, uptime Service Level Agreement (SLA) standards, encryption and disaster recovery services – to evaluating their own marketplace appeal. But again, it’s worth asking: Is this the most effective approach?

By using traditional market segmentation tactics and a competitive positioning strategy that focuses on what other MSPs are offering, vendors are taking a “me too” approach, which results in a homogenous marketplace where no MSP really differentiates its services. A better approach would be to analyze customer requirements and build an offering around their needs. And that requires an understanding of the customer business lifecycle. Here’s an overview:

1.Startup: In the initial phase, these tight-budgeted customers’ technical challenges generally involve meeting basic requirements for their few initial customers so they can increase productivity and responsiveness. On the business side, they’re focused on keeping costs and maintenance requirements low and are looking for a quick implementation.

2.Rapid Growth: In the second phase, customers adjusting to increased revenue, demand, and expectations are looking for technology solutions that enable technical flexibility, improve capabilities and scalability, and deliver data security. Their business goals are to find a financially flexible, cost-effective solution that can be deployed with minimal hassle. In the rapid growth phase, companies are generally seeking increased productivity and support in customer acquisition efforts.

3.Established, Steadier Growth: Once a company becomes more established and begins to settle into a routine, its technical needs often center on scalability, customization, data management / analysis, storage management / expansion, compliance and standardization. On the business side, they’re primarily focused on efficiency, cost management, stability, technology management, business continuity and customer retention. Cost savings and greater flexibility are often the primary focus of companies in this stage of growth.

4.Expansion: In the expansion phase, businesses target new markets and distribution channels in search of more profit. They now tend to value access management, security, integration, global expansion, complexity management and compliance services from technology partners. Global expansion, cost containment and supply chain issues are common business goals. Expansion-minded companies are preoccupied with security and improving their competitive position. 

5.Maturity: Mature companies with stable year-over-year profits continue to look for more opportunities, and need a excess of capital on hand. They often need a technology partner to help them keep up with the latest technologies or to lead an overall technology refresh. On the business side, they focus on cost management, internal process evaluation and future planning. Mature businesses frequently look to partners to help improve innovation and achieve greater flexibility.

6.Transition: Companies that are transitioning via a merger, acquisition or sale have distinct technology support needs to address standardization, integration, migration and security concerns. Company leaders are often focused on continuity and cost management. Innovation improvement and sharpening competitive assets may be primary considerations.

These six business lifecycle phases won’t apply to every company. Almost all businesses experience phases one through three, and some continue to inhabit phases three or four indefinitely. But, the point is to maximize marketplace appeal; MSPs should determine where their target customers are in this lifecycle and develop expertise around the unique needs of that phase or phases.

Traditional market segmentation and competitive analysis can be useful tools, but overreliance may lead MSPs to reach the wrong conclusions about what customers want. If the MSP market around you is becoming bland and homogenous, it’s the ideal time to accentuate your own differentiators. MSPs that position their services to align with their customers’ business lifecycle needs are not only delivering what customers want – they’re becoming true IT partners. 

Edited by Maurice Nagle