Is Specialization the Key to Success for MSPs?
Once upon a time, generalization was the best way to catch all the customers and grow a business as quickly as possible. In today’s complex world, specialization is the name of the game. This has become true in most industries and occupations. Those in the medical and legal professions who focus on and become experts in a narrow area of the field are generally the most highly compensated and most likely to achieve widespread recognition. Likewise, as an MSP you may find that a narrow focus will allow you to establish your company as a leader in a particular niche, rather than vying for attention among a big crowd of competitors in a broader field.
There are two different ways to specialize: horizontals and verticals. Specifically, look at horizontals in terms of solutions, and at verticals in terms of markets. Horizontal solutions might include network management, VoIP, managed security services, communications, hosting and storage, and many more. Vertical markets could include health care, financial services, education, retail, government and so forth. You’ve undoubtedly heard the old axiom, “You can’t be all things to all people.” Rather than try to offer all possible IT solutions for all markets, dive deeply into a specific set of solutions and/or a specific market or related group of markets. It’s easier to become the premiere provider of managed security services in the health care industry, for example, than to try to provide a broad range of services across all industries.
Another advantage of the specialization approach is that it can require a smaller startup cost and less (or at least more widely spaced) monetary investment in equipment, training, etc. If you provide VoIP services to some clients, hosting and storage to others and network monitoring and management services to still others, you’ll have large capital layouts for the equipment to operate all those different services and you’ll need to train personnel (or hire trained personnel) in all those different skills.
If you specialize, you may be able to use the same equipment (or at least benefit from volume discounts) and when you take on a new customer, your personnel will already have the necessary skills and won’t need further training. As they build more and more expertise in one or two skill sets, they will become better at what they do than if they were spreading themselves thin as “jacks of all trades and masters of none.” That increased competence leads to better customer satisfaction and helps you to build a reputation via the best and least expensive form of advertising: word of mouth. And because you reduce your own costs by specializing, you can offer a better pricing structure to your customers. This is important because surveys have shown that the number one reason for considering the adoption of managed services is to cut costs. The lower the price you can reasonably offer (while still hitting your desired revenue numbers), the more attractive your services will be to customers who are concerned with their bottom lines in a still-uncertain economic climate.
Specialization also allows you to become an “insider” in the industry of choice. You can join associations devoted to that industry and learn the lingo. This aids you in establishing rapport and winning the trust of potential customers, who are more comfortable working with people who understand the unique challenges of their business. Because trust is such a vital component in the decision to outsource any services, anything that gives you an edge on the competition in that way is a big business advantage.
Don’t make the mistake of thinking that specialization will lock you forever into a “box” and limit your opportunities for future growth. It actually gives you two different directions in which to grow. You can either scale up (by adding more customers within the specialty area) or you can scale out (by adding other specialty areas). If business really picks up, there is also the possibility of merging with or acquiring one or more other MSPs that specialize in other areas. While this could eventually bring you full circle, to offering a broad range of different services to a diverse group of customers, you will be coming to that position in a stronger, smarter manner that gives you a greater chance for continued success.
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