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Sales verticals and how MSPs can target them

Selling to vertical markets can seem like a daunting prospect for managed service providers. Read on for six tips to get you started on a vertical sales journey.

Selling to vertical markets is an obvious, practically inescapable, move for some managed service providers.

Stuart Crawford once ran an MSP in Calgary, Alta., a city in the heart of Canada's energy industry. The vast majority of the businesses in Calgary are in the oil and gas sector or support companies squarely in that field.

"It was natural for us to go in that direction," he said.

Stuart Crawford, managing partner at UlisticStuart Crawford

A service provider may or may not be soaking in a plain-as-day sales vertical, however. Crawford, who sold his MSP a decade ago, now advises other MSPs on marketing as managing partner at Ulistic, a company based in Sebring, Fla. "Every MSP is going to be a little different," he said of the vertical marketing journey.

Interviews with MSP marketing experts and service provider executives revealed several practices for targeting specific customer verticals. Here are six tips to get you started.

1. Look inside yourself

One of the most important things an MSP can do is look within itself for any latent vertical market capabilities.

Terry Hedden, CEO at MarketopiaTerry Hedden

"Lots of times, MSPs will have deep industry knowledge," said Terry Hedden, CEO at Marketopia, a Pinellas Park, Fla., marketing and lead generation agency for IT channel companies.

He said an MSP should look for vertical patterns in its customer base and the applications it supports. A service provider can also determine whether its technicians have any particular industry insight.

Jennifer Anaya, vice president of marketing at Ingram Micro, based in Irvine, Calif., also cited the importance of MSP introspection when exploring vertical markets, noting that companies may be pleasantly surprised at what they find.

"Really look at your customer base to understand what kind of businesses you are serving, and [find out] who in your organization has started to create expertise in the way those companies do business," she said.

Jennifer Anaya, vice president of marketing at Ingram MicroJennifer Anaya

Go Concepts Inc., an MSP based in Lebanon, Ohio, had been a generalist since its founding in 1997, but found it had considerable experience in working with local government agencies. Against that backdrop, the company in 2013 bid for an outsourced IT contract with the Warren County Board of Developmental Disabilities. Go Concepts won the contract and, from there, decided to focus on organizations and businesses serving people with disabilities.

"We started with [Warren County] and found that we really enjoyed it," said John Gambill Jr., president and CEO at Go Concepts. "It was incredibly rewarding ... and we found we could make a difference."

2. Follow your passion

Committing to a vertical market can be a frightening prospect, especially for companies accustomed to taking on all comers. So, it helps if the MSP can take the leap with enthusiasm.

Crawford said passion with respect to a particular customer vertical can help a service provider determine its direction. When working with Go Concepts, he encouraged the company to pursue what it enjoyed doing.

Gambill now offers that same advice to other MSPs eyeing vertical markets.

"Really take a holistic look at your business," he said. "Is there one area of it you are more passionate about? Is there one group of customers you feel you and your team are better at serving?"

If that's the case, the MSP should start exploring that sector as a potential vertical market opportunity.

3. Do your homework

Passion can help you zero in on an industry segment, but then comes the research stage. Gambill said MSPs have to consider the size of the market space to determine whether there's business potential. He said he had initial concerns when considering the developmental disabilities services market.

"I thought the pie was pretty small," he said.

The Ohio market, at first glance, appeared to be limited to the 88 county developmental disabilities boards. But Go Concepts discovered a much larger ecosystem surrounding the county boards: private service providers, transportation services companies, Medicaid billing assistance specialists, document management vendors and audit firms, to name a few participants.

Carolyn April, senior director of industry analysis at CompTIACarolyn April

"There are so many people who are working on supporting that space," Gambill said. "It was a lot larger opportunity than what we had first considered."

Carolyn April, senior director of industry analysis at CompTIA, based in Downers Grove, Ill., cited the need for conducting due diligence before going after a vertical market. That's especially the case for MSPs targeting a subset of a vertical market. Developing expertise in a niche may help a company capture deals, but that focus needs to be weighed against the number of potential customers in a vertical subset, she noted.

4. Cultivate your verticals

The vertical journey follows a few stages once an MSP decides to go that route.

Crawford said the first step for an MSP is to pick a handful of verticals it wants to carve out as specializations. A company, he said, could start with a few locally prominent verticals -- accounting, healthcare and legal, for example.

MSPs, at this point, should still maintain customers outside of its selected sales verticals.

"Don't forsake others," Crawford advised. "You are still working on a wide paint brush of opportunities, but start honing your skills on two or three or four different industries."

Really take a holistic look at your business. Is there one area of it you are more passionate about?
John Gambill Jr.President and CEO at Go Concepts Inc.

Along with cultivating industry-specific skills, MSPs should become familiar with, and develop connections to, other businesses operating in its chosen verticals, Crawford noted. Those businesses could include key vertical software players and various types of noncompetitive service providers.

Crawford said when he ran the oil and gas MSP, "we became colleagues with every other type of company that served the same industry. We knew all the software people ... right through to the trucking companies trucking mud from one well site to another."

Maintaining networks of vertical-specific companies helps MSPs uncover opportunities.

After working in a hybrid way -- an MSP generalist, with a few vertical specialties -- the service provider may eventually commit to one or more verticals. At this point, the MSP has been accepted by customers as an industry expert, and it may be time to start turning away business in other customer verticals.

Companies arriving at this deeply focused stage can expect higher margins and to win a higher percentage of deals, Hedden said. But MSPs must make sure they go as deep as they go narrow, he added. Thorough knowledge of the business and key supporting applications are critical in this phase.

"There is a lot of benefit to being dedicated," Hedden said. "There is so much regulation in banking and so much fear around security; banks, frankly, almost insist on a specialized MSP."

But patience is the operative virtue in building a vertical market focus. The process takes years and requires much effort. Crawford said MSPs must prepare for a "long journey" to go from the initial specialization stage to accepted-expert status.

"It takes a while to get to that stage," he said. "A lot of [MSPs] don't have the resources or the time."

Preliminary results from CompTIA's eighth annual "State of the Channel" report bear this out. Only 28% of the channel company respondents said they are mostly vertically focused, while 45% said they were mostly horizontal, and 24% said they were split between horizontal and vertical business models, according to April.

"It can be a difficult space to get into for a lot of companies," she said.

5. Look into strategic hires, retraining staff

Crawford said MSPs may look for strategic hires as their vertical specializations begin to mature. A healthcare-oriented MSP could onboard a chief medical officer, for instance. Hiring people steeped in the business and vernacular of the targeted vertical can boost an MSP's credibility.

When InterVision Systems, an IT service provider, sought to bolster its business in the media and entertainment vertical, it hired from the video game industry. The company in August brought on board Ray Panahon, who led technical operations at Riot Games, developer of the popular League of Legends online multiplayer game and a pioneer of the e-sports business.

Panahon now is head of technology for media and entertainment at InterVision. The company has regional headquarters in Santa Clara, Calif., and St. Louis, and it also operates a Southern California office to support media and entertainment clients. InterVision has been working in that space for more than a decade.

Panahon said InterVision approached him, noting the company "hasn't been able to talk to these clients in the manner" he could.

But Panahon noted the essence of innovation and creating solutions is not one person, but the overall team. He cited the depth of InterVision's engineering bench, noting that half of the company's staff is engineering-based. The combination of vertical expertise and engineering talent will boost InterVision's services in the media and entertainment space, he noted.

April said hiring people already well versed in a particular vertical is important for MSPs hoping to break into an industry sector. In general, a service provider needs business development, marketing and salespeople who are up to speed on a particular industry. The in-house technical staff also needs to know how to work with vertical solutions, she added.

"Get the front of the house in line and the back of the house," April said.

Vertical market chart
MSPs become more specialized as they transition from horizontal offerings to vertical sales niches.

6. Verticalize everything, from branding to sales

MSPs, from the start of the vertical journey, need to get the word out and build their brand as a vertical specialist.

Marketing collateral, websites and customer case studies should emphasize an MSP's work in vertical markets. On the sales side, sales proposals, pitch decks and talk tracks should all be customized for the industry segment an MSP is targeting, Hedden said.

"Their pitch should be 100% on the person they are talking to and the company they are talking to and the industry they are talking to," he said. "Most MSPs show up and talk about themselves -- they talk about their products or services. They don't tailor what they say to the person they are talking to."

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