Why IT Solution Providers Should SpecializeBy Beth Vanni | Print
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You keep hearing about specialization, but how do you decide whether or not to make the investment and which specialization to choose?
You are entering med school and trying to decide your area of specialization. Do you go dermatology, hematology, oncology, orthopedics, pediatrics…or do you get on the track to become a family practitioner or internist? We all know that the specialist can charge more. But the internist is probably going to have a greater following and be able to charge more too.
So why specialize?
As the IT market continues to mature, the idea of access to technology "specialists" is becoming more attractive to both solution providers and IT vendors. Partners want to differentiate and drive higher-margin sales and services. Vendors want to drive end-user satisfaction through deeper partner competency and use partner-led selling to penetrate new markets.
In Amazon Consulting’s recent channel study, "How Special are Specializations?" 400 solution providers and 40 IT vendors were surveyed to gain insights around why channel specialization programs matter. Today nearly half of the solution provider survey participants already hold between 3-5 specializations with their top four strategic IT vendors. Most solution providers we talked to did perceive specializations as an effective way to differentiate their business. The question is, how do you assess if a specialization is worth your investment?
When it comes to desired value from specializations, there’s some alignment between vendor and solution provider needs. Vendors have a higher priority around building partner skills and loyalty, followed third by higher profitability. Of course, partners want higher profits first, then they’re interested in deeper training and better sales teaming with vendors’ direct teams. It was interesting to see that the benefits of marketing support including vendor leads were ranked much lower by solution providers, and they seem to care least about overall program benefits and tiers.
Specializations’ promise of profitability and market differentiation are there, but the investment appetite and risk levels of today’s solution provider is not what it was in years past. More than half of the solution providers we interviewed said they had at one point considered getting a specialization but decided not to. For partners with less than $5 million in annual revenues that abandonment rate was even higher at 63 percent.
Outside of the two most common reasons: too expensive and too much time commitment, we hear from smaller partners that there is too large a commitment in terms of number of staff for training. Oftentimes, this cost issue relates to technical training, which cannot be done online and may include lab work and/or live presentations. Despite these barriers, partners seem to be getting sufficient differentiation when they do invest since increased market differentiation was ranked as the lowest barrier.
So why get specialized?
Solution providers who specialize become strategic partners for vendors who need to expand into new markets or accelerate their selling activity in some way. Through specialization, partners establish their focus and credibility in the minds of the vendor’s direct salespeople which fosters more trust and better sales teaming. It’s a great way to boost mindshare with the vendor and gain the teaming support needed to close deals with the vendor at your side. When vendors need to lean on partners during new market expansions, having a core team of solution providers to do important pre-sales work or help provide professional skills delivery is extremely valuable. This is especially true when the vendor is trying to reserve their own direct Professional Services teams for their largest, most strategic accounts.
For solution providers, specialization makes sense when their key vendors’ product portfolio gets too big to have basic product training and certification alone. Specializations give solution providers the differentiation to propel through tough economic times by helping drive revenue, profit and net new customers. In addition, when channel conflict among partner segments becomes a problem, specialization helps to boost partners into a higher level, attracting more vendor marketing support and funding and providing better sales teaming.
So, whether investing in a program to gain vertical market expertise, service delivery proficiency or technology solution skills, solution providers need to get the most out of their specialization status. Here are some tips:
Track all your specialization investments and ROI carefully
Be clear about program requirements and benefits well before sending that first person to training
Ensure specializations fits into your longer-term marketing and competitive strategy
Demand special treatment from vendor partners in the field. Fight for your unfair share of their attention and support.
Crank up the marketing to get the full leverage out of your investment.
To learn more about Amazon Consulting’s "How Special are Specializations?" research study, click here.