MSP Peer Groups: Will They Go Vertical?

I’m going out on a limb just a bit with this blog entry (surprise, surprise). It’s based on insights from only two managed services providers. But both MSPs strongly believe the peer group networking model will someday shift from (A) non-competing geographies to (B) non-competing verticals. Here’s what I mean.

First, a little background: Hundreds of VARs and MSPs participate in peer groups run by HTG, True Profits (anyone have a new URL for them?) and other well-known organizations. The peer groups allow VARs and MSPs to share business and financial information behind closed doors. Participants can measure their success against one another in a confidential manner. And all of the peer group members represent different geographies — ensuring no competitive overlap.

Evolving Market

Now for the twist: A small number of MSPs — I suspect fewer than 5 percent of them — are going purely vertical.

• Alpha MSP may focus only on the legal vertical.
• Beta MSP might focus only on the K-12 vertical.
• Gamma MSP may focus only on the health care vertical.
• And along the way, cloud computing may push each of those MSPs into bigger and bigger geographies.

The potential result: Vertical market focus — rather than geographic local — could ultimately determine whether or not MSPs compete with one another. And as a result, I wonder if we’ll see peer groups that are vertical in nature.

• If you’re a financial services MSP, you may only want to sit down with peer MSPs outside of your vertical — in order to ensure you don’t give away your own company secrets to rivals.
• Also, if you’re a financial services MSP, you may be willing to sit down with local MSPs from your same geography — as long as they compete outside of your vertical and aren’t pushing into your vertical.

Reality Check

I concede: I’m getting a bit ahead of myself. Most MSPs only dabble in vertical markets. Moreover, most vertical market MSPs dabble in multiple verticals. As a result, I don’t think vertical market peer groups will surface in 2010. And I doubt they’ll surface in 2011. But at some point, as vertical market MSPs gain critical mass, I suspect those vertical market peer groups will surface.

Still, I’m an outsider looking in. Only two MSPs have mentioned the potential vertical market peer group trend to me. When I asked HTG Founder Arlin Sorensen if vertical market peer groups would emerge, he offered the following insights:

“I would never claim to know what partners are going to ask for next.  The key to success is non-competing members — so I could see why some might think this makes sense.  However the purpose is to share ideas to implement which would quickly put these folks into potential competitive situations which is never a good thing for a peer group.  So while it seems good on paper — I would worry that it might create some long term issues.  I don’t see HTG moving down that path for those reasons.”

Added Sorensen:

“We try to start with as much space as possible between business models, geo and any other things we can use to differentiate members so we avoid the conflicts as long as possible.  With M&A, the wire, cloud and all the other changes — the IT landscape is shrinking quickly so we are working to figure out how to create groups that don’t cause conflict.”

We’ll be watching.

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