An intriguing question came up in a discussion this week. Why do specialist IT management companies fare relatively poorly as compared to generalist solution providers? This is counterintuitive but is mostly true with some exceptions. Economic logic should dictate that specialist companies garner a higher premium because of the sophistication of what they do. But that logic does not hold unless other economic and business process factors are favorable as we shall see below.
 
A Product marketer / manager in a specialist company has to contend with a multi-dimensional puzzle of the market, technology and go to market environment. The following are some of the dimensions (not an exhaustive list) -

What customer markets have the greatest identified pain that our solution helps solve?

• Enterprise (What verticals?).
• Service Providers (Fixed or Mobile? And if Fixed - Residential Broadband or Business Services?)
• And in either case, what Geographies? And, what sizes? Large/Tier1? Medium/Tier 2? Small/Tier3?

In what IT management domains?

• Application software
• Systems  (like server and storage) – software and hardware
• Networks (like routers and switches) – software and hardware
• Cross-silo Services (like ecommerce, VoIP, or IPTV) - software and hardware
• IT management processes that are cross-silo

For what types of technologies?

• Application diversity is vast and measurement techniques also vary – from active to passive, agent to agentless, software to appliance and hybrid forms as well
• Systems could range from managing physical hardware, and/or software virtualization stacks
• Networks include myriad equipment – routers, switches, gateways, aggregators .. each with many sizes and scale
• Services and processes are cross-silo with possibly hundreds of component infrastructures
• And the list goes on for each domain and sub-domain

For which Vendors?

For each technology category there are typically 20+ vendors or more with the top 5 garnering a lion’s share. Some integration is needed with each vendor’s offering and then that has to be managed over time through version revs and so on…

Doing what?

A simpler choice if we were to stick to high level disciplines as FCAPS (Fault, Configuration, Assets, Performance and Security) – but clearly each discipline has its own specialty in method, protocol support, data volumes and so on.

If IT Management had no standards every vendor would die of a thousand cuts managing each microsegment with a specific set of capabilities. Generalist providers don’t dig deep and provide good enough functionality for most customers based on standard protocols and data formats. Specialists on the other hand provide the next level of visibility per dimension and have a hard time scaling up.

In fact fragmented markets such as this one, provide the opportunity for some long-tail ‘like’ plays at least in the SMB space – where there is a larger volume of customers. At the other end of the spectrum for large customers, the broad based suites have grown revenue by selling more product (garnered through acquisition) to the same customer. Specialist players with high-touch sales channels selling into this segment on the other hand, indeed suffer through a thousand cuts from the needs of micro segmentation at a development, marketing, training, sales and support level.

The lesson? Deeper functionality is good for differentiation but harder to make money off unless as Chris Anderson explains in the Long Tail phenomenon - the distribution cost is lower (read channel, telesales or Internet driven). Hence IT marketers and product managers with direct touch sales channels should pause and think of the long term repercussions of adding yet another product to the arsenal if the characteristics of the micro segment vary too much. Beyond a point, micro segmentation becomes a drag on the business and not a differentiation that grows profits.

Whether cloud based SaaS management tools can change this equation remains to be seen. What do you think?

- Ronnie