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
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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
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ARCTM
Metric
Business Stage
Private Public
Government Charity
Geographic Location
Leadership Style
Competitive Pressures
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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
Competitive Pressures
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
Competitive Pressures
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
Competitive Pressures
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Is IT Always Important?
Invest
CRM
MRP
Logistics
Operate
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
Competitive Pressures
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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
Competitive Pressures
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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
Competitive Pressures
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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