The Pros and Cons of Specializing in Niche Markets for MSPs

Written by Michael Brown 1
September 30, 2015

In an increasingly competitive cloud marketplace, companies hoping to find a way in are looking towards niche markets to create a viable business. MSPs can choose to specialize for a market with growing data management needs, such as the finance or medical industries, or several smaller, emerging markets.

In an increasingly competitive cloud marketplace, companies hoping to find a way in are looking towards niche markets to create a viable business. Though the big players like Amazon Web Services are here to stay, what does this mean for managed service providers (MSPs) that want to stay relevant in the new cloud-based file-sharing climate?

The Changing Cloud Market

The cloud industry, which includes Platform-as-a-Service (PaaS), Software-as-a-Service (SaaS), and Infrastructure-as-a-Service (IaaS), is predicted to grow astronomically in the next year. Spending on cloud services will skyrocket to $118 billion, with more businesses competing to enter the market.

Choosing Niche Markets

One of the best ways that smaller, unknown, or start-up companies can gain a foothold is to cater to the needs of niche markets. MSPs can choose to specialize for a market with growing data management needs, such as the finance or medical industries, or several smaller, emerging markets. Tap into the opportunities of the future early, serving sectors that will eventually operate complex, automated machinery from the cloud, such as energy, utilities, transportation, security, retail services, aviation, and manufacturing.

Specializing to a Niche Market

In the new cloud climate, providers will need to partner with their clients to create platforms that accommodate the unique needs of their company. Cloud platforms can no longer simply provide a data management system. Clients are seeking out MSPs that can, according to Scott Swartz, VP, CTO Enterprise and Cloud Billing at Ericsson, “build, run, and integrate their products and services into the ecosystem.” In other words, the cloud should not be a separate entity isolated from the rest of the company’s systems—the cloud should flow to the company’s other systems. Clients will also be looking to team up with their cloud providers to develop programs and applications that are specific to their company on the cloud.

MSPs will be tasked with helping their clients to decide which specialized cloud is best for them. As their relationship becomes more collaborative, building and maintaining individual partnerships with clients and MSPs will be vital to an MSP’s success.

Risks of Specializing

While specializing is certain to gain MSPs more clients, it will also reduce the transferability of each cloud’s services and content. Unique platforms and cloud applications that match one client’s needs exactly will not meet those of another client. They might not always even be able to run on another cloud. Generic platforms and templates are easy to transfer between different clients, but the more customized each cloud, the less likely an MSP will be able to use it again.

MSPs must be cautious to manage lock-ins correctly so that they don’t leak into other areas, which can often be difficult. MSPs will have to weigh the benefits and risks of specializing, but as Swartz says, “If a cloud provider has added so much value that it’s worth being locked in for certain loads, then they’ve done their job.”

Catering to niche markets is an effective way to grow your brand and gain new clientele. Just ensure that the industry you target has staying power and will only continue to grow as it becomes more reliant on data management.