“Seismic” Events in IT Services

The Copernican Theory of Fragmented Markets by Justin Crotty
June 23, 2009, 7:59 am
Filed under: IT Services, Managed Services

The managed services market is never without its intrigue. Vendors, application developers, tool providers, platform aggregators, managed service providers, solution providers, and end customers all swimming about in the fragmented, highly competitive, primordial soup that is a growing market.

However, there are many companies among us who are vying for the managed service provider or solution provider business, that prescribe to a vision that is hindering the explosion of opportunity in this market. Vendors, application providers, peer group organizers, and service providers are among this group.  We, the above mentioned suspects, are not the center of the solar system or universe.  The Sun does not rotate around us, nor do solution providers, managed service providers, or end customers.  So why do we keep acting like they do?

This may come as a shock to some of you.  Possibly even bruise egos.  Some of you may accuse me of heresy.  Perhaps you should sit down, maybe take some water. 

Fragmented markets must eventually organize.  They cannot, by nature, remain fragmented if there is a legitimate growth opportunity to be had or if scale is required to obtain that growth.  Why?  Because singularly focused applications or companies, or specific tools that deliver a specific value, are in-of-themselves unable to deliver the growing ease-of-use and broader applicability that the scaling market will require of them. 

If I’m an ice cream shop and I make the best vanilla ice cream in the world, how long will it be until a customer asks for chocolate or strawberry?  What do I do then? 

  • Do I learn how to make chocolate or strawberry ice cream? 
  • Do I send them to a partner who makes and sells those flavors? 
  • Do I buy and integrate a partner who makes those flavors? 
  • What do I do if the customer starts to ask for adjacent products like milk shakes and sundaes?
  • What if they ask for a gluten free, dairy free, soy free chocolate malt? Then what?

The point is the universe doesn’t revolve around my vanilla ice cream shop.  It doesn’t matter if I make the best vanilla ice cream in the world. Customers will eventually demand I diversify my offering into additional flavors or confections.  My customer will start to demand more “functionality” from my company in the form of product breadth, an elegant customer experience, and the convenience of getting all of those things in one place.

What are you doing about offering different flavors?  What is your plan for milk shakes and sundaes?  Can you grow without offering those things?  Can you stay singularly focused and niche forever?  Do you see strong growth opportunity or are you already at war in a market share fight?

Beware – market share battles in nascent, fragmented markets should be a clear wake-up call – it’s time to revisit the long-term strategic plan.

“Geocentric Companies” – those organizations that believe they are the center of the universe and their customers revolve around them – are everywhere in this fragmented managed services market. Can you spot them?  Once you convince yourself that your customers are beholden to you, expect trouble.

Heliocentric Companies” – those that believe the universe revolves around their customers – are the ones that emerge from the fragmentation and assume leadership positions, sometimes for the long-term.  They separate from the pack by offering the breadth and customer experience required to sustain growth and long-term value to their customers. 

What kind of company are you?  More importantly, what are you doing about it?


1 Comment so far
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thanks for such a useful post

Comment by Business Innovation technologies

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