Segmenting the Market Traditional Channel vs. Managed Service Provider

Segmenting the MarketTraditional Channel vs. Managed Service Provider

About MeSteve O’Donnell

Author of What Every CIO WantsSpeaker, Analyst & CommentatorFiduciary & Advisory Board MemberBusiness Adventurer in IT Security, Wireless, Big Data, Managed Services, StorageSocial Media Addict

BackgroundGlobal Head of Operations BTCEO MEEZA – QatarSenior Analyst ESG

Copyright © S1NED Limited 2012 All Rights Reserved

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The Mid-Market Defined

Companies with fewer that 1000 staff

Annual Global IT Spend $250B

Served almost exclusively (80%) by you - The Channel Independent Software Vendors

(ISV) Managed Service Providers

(MSP) Systems Integrators (SI) Resellers (IBM, HP, Dell,

Microsoft, SAP)Source IBM Analytics and Research 2012

The Channel is made up of hundreds of thousands of companies globally (IBM has 120k – 80% of deals over $100k)

No single company has even 1% of the TAM

85% of buying decisions are made via search and social media - key metrics are Location Specializations & Skills Branding and Reputation


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Mid-Market Forecast

20%

37%10%2%

30%

Global Mid-Market TAM (2012)

DIY (no channel) Product SalesManaged Services HostingServices

20%

29%15%5%

31%

Global Mid-Market TAM (2013)

DIY (no channel) Product SalesManaged Services HostingServices

Source IBM Analytics and Research 2012Forester market forecast


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The good, the bad and the ugly

The mid-market is migrating to service based delivery

Margins are better in the MSP space

How do I get there?

Hardware Software Managed Services

05

1015202530354045

Average Gross Margin %

Source IBM Analytics and Research 2012


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Markets, Messages and Segments

Segmentation is the process of identifying markets that have similar enough problems, characteristics and behaviors so that the same messages and solution offerings will resonate

Sometimes we do Product Discovery – green field approach, what products might I create for segments I influence?

Often we do Segment Discovery – who might want my product or service and why?


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Characteristics & Behaviors

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style

Importance of IT

Organizations buy solutions to their perceived problems

An organization's perception of their problems and the suitability of any solution are formed by their own unique constraints and drivers

Segmentation drops out of understanding this

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style

Competitive Pressures

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The ARCTM behavior drivers

Improve Agility to deliver innovation and kill the competition

Avoid or reduce Risk to business activities

Reduce Cost – often the least important but key to funding innovation

A smart business will be prepared to trade one off for another

Agility

RiskCost

• The three fundamental drivers of customer behavior that must be harnessed in all messaging

• Multiple drivers are combined to create a balanced message


ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style



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Message Construction

Our cloud-based retail analytics platform will arm you with the data you need to make optimal supply chain decisions and ensure that, just like the majors, you have the right products on display and it can all be delivered in a flexible pay for what you consume model Can you pick out the three

balanced message threads?

What problems are we solving?

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style


Agility

RiskCost

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Business StageBusiness Stage Type Priorities

Special Forces StartupsNew business unitsNew Products

AgilityCostRisk

Army Established businessEstablished productNot #1 in market

AgilityRiskCost

Police Force Market leaderLarge EnterpriseGovernment

RiskAgilityCost

StartupVC Backed

Usurper

Mid MarketGrowth Stage

Contender

EnterprisePublic Company

Government

• Enterprise messaging won’t work for a startup

• Get the behavior driver priority right and messaging becomes easy and effective

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style


The Four Types of Leader

Paratrooper Old Timer

Consultant Family

Knowledge of IT

Type Interests

Paratroop(professional change agent)

Fixing stuff that is broken – fast – loves agilityWilling to take calculated risksWelcomes external helpSpends to fix stuff

Consultant(management consultant interim hire)

Analyze everything in detailSlow to make decisionsDriven by numbers & processRisk averse

Old Timer (been in position for years)

Understands his own business and IT. Slow to change, slow to trustCost sensitive

Family(group of family members who decide in committee)

Business focusedProbably risk averseDriven by cashSometimes emotional

Knowledge of the Business

Senior level change can signal an opportunity to invest in a prospective client

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style



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Is IT Always Important?

Invest

CRM

MRP

Logistics

Operate

Email

Telephony & Communications

Storage & Backup

Contain

Legacy Accounts System

Shop Floor Automation

EPOS

Kill

Contain platforms that

impact business

Invest Applications that are not

agile

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style


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The Four Types of IT System

Invest Operate

Kill Contain

Application Categories

• Messaging that does not align with this micro-segmentation will miss the mark and fail

• e.g. Cost savings messages for mission critical invest category systems rarely work

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style




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Location & Delivery Constraints

Combine the segment characteristics & behaviors to determine the appetite for risk, the importance of agility and sensitivity to cost

On Premise

Hosted Managed Cloud

Local ✔ ✔ ✔ ✔

Regional ✖ ✔ ✔ ✔

National ✖ ✖ ✔ ✔

Global ✖ ✖ ✖ ✔

ARCTM

Metric

Business Stage

Private Public

Government Charity

Geographic Location

Leadership Style


Agility Risk Total Cost Cost Flexibility

On-premises / Reseller Hosting Managed Services Cloud Service

The Opportunity Value ChainYour customers customer has a

problem and your customer recognises

an opportunity

• Customer CEO or BDM discovers business opportunity

Customer CEO and BOD decide to deliver solution

• Customer business case developed, market sized, opportunity assessed

Customer CMO starts to define product set

and segments - solutioning begins

• CMO engages research analysts and derives market segment size and detailed requirements for the product

CMO engages COO to continue solutioning

and business mobilization

• COO starts to create detailed shopping list of products and services required to deliver on defined service

CMO hands over to IT team to develop IT

part of solution

• By now the product is defined and their is little opportunity to influence in a meaningful way

IT engages with reseller with fully

defined product and a request to just get

the hardware

• At the bottom of the pipe, the reseller team have no freedom of action and are not part of the conversation

Marketing activity that engages too late misses the most important customer change and spending initiatives

Then it is all about cost not value

• Marketing programs that focus on business rather that technology change resonate with businesspeople

• IBM – Smarter Planet


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Thank you

http://about.me/stephenodonnelltwitter @stephenodonnellhttp://www.thehotaisle.com


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Segmenting the Market Traditional Channel vs. Managed Service Provider