Strategy & Best Practices

Going Beyond Microsoft: Verticals and Where MSPs Can Find Them

By Ideas @ AppDirect / June 27, 2018

In our post from last week, Redmond Channel Partner Magazine contributing editor Howard M. Cohen described the reality that’s facing today’s managed service providers (MSPs): “The reality is that everybody becoming an MSP, to the point where the acronym ‘MSP’ is as blurred as ‘cloud’ was when it first came out.” To succeed, MSPs must find ways to set their businesses apart.

This week, Cohen goes a level deeper to talk about a fundamental strategy for differentiation: vertical specialization. “I very much see our industry being modeled more and more along the lines that medicine has organized itself,” he said in a recent RCP webinar. “Yes, there are generalists, but I predict that there will be very few MSP generalists in the next several years. The generalist is going away. Specialists are becoming the rule.”

"The Verticals Pick You"

So how do MSPs decide which verticals to choose? According to Cohen, they don’t. “We don't go out and pick verticals. The verticals tend to pick you.” He continued: “In my own case, long ago in an IP practice far away, we turned around and realized that we had about 50 customers in a retail space. We didn't go out to do that. It's just that our sales people encountered one after another after another. We had a vertical already in house.”

Breaking down your existing customer base by vertical is only the first step. The next is learning about vertical challenges—and the technology solutions best suited to address them—inside and out. Cohen continued: “We went out and found the best possible systems that we could find. We vetted them thoroughly. We wanted to know everything there is to know so we could determine which ones we were comfortable representing,” Cohen said. “There were an amazing number of retail‑focused software products we could integrate into our business that we weren't selling. Well, we started selling them. We had 50 customers to start with that we had already sold something to.”

Breaking down your existing customer base by vertical is only the first step.

With a “built in” vertical customer base, Cohen’s team found that it was actually much easier to sell. “It was very easy to get them interested in at least one if not more of the products that we were now authorized to implement,” he said. “As we deployed them over and over again, we also got better at it and, because we kept our price where it was, we used a lot less time and a lot fewer resources, but still charged the same amount of money. We became more and more profitable.”

Other Ways to Specialize

There are other ways to specialize, including developing new applications for specific verticals. Cohen supports this approach, but he points out it may not be the best approach for every MSP. “Learning to code is no trivial matter. Why not use somebody else's code and be the implementer, be the support organization, be the deployment, be the support, and be the trainer?” he asked. “There are so many things you can do whatever market you want to be in.”

Cohen’s main takeaway: “Look at your own customer base and see what verticals are already important.”

Next week, we’ll feature the final post in this series, a checklist for making a living as an MSP. In the meantime, you can download our recent white paper “The Future of The MSP Market: Can Existing MSPs Make Money in the Cloud?”

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