It may be 50 years old, but the Ansoff Growth matrix is still an “oldie but a goodie” when it comes to partners and/or vendors deciding on the best strategy for sales growth.
Developed by Igor Ansoff - a Russian immigrant who went on to become known as the father of strategic management - the model is a 2 x 2 matrix that analyses growth in terms of products and markets (customers). Therefore, there are only four possible combinations: existing products to existing customers; new products to existing customers; existing products to new customers; or new products to new customers.
We use three colours to highlight cost, complexity and time to execute. Green or market penetration is easiest and least expensive (but limited strategy) with costs of approximately 10-15 per cent of revenue; yellow more difficult at about 20-40 per cent of revenue; and red for the hardest, most time consuming and expensive strategy at 60-80 per cent plus of revenue. The diversification strategy is also known as “the black hole” strategy, as you can just keep pouring money into it with no immediate return.
Vendors are usually driven by growth which means they need to move out of the bottom left quadrant and either introduce new products (some times via acquisition) or find new customers/resellers. While this may be a great strategy for the vendor, the reseller needs to decide if the vendor strategy is also aligned to their business strategy.
For example, look at the cloud and datacentre space. One of the reasons why there are so many vendor alliances forming is that the end customer solution is in fact a diversification strategy for most vendors if they went in alone.
A datacentre build requires a range of skills across multiple technologies and disciplines including servers, storage, security, networking, power and cooling, virtualisation, data management, equipment optimisation, project management etc.
While there is undeniable growth around these opportunities, building and running a datacentre for nearly all but the very largest system integrators or some MSP is a diversification strategy.
A lower risk product development strategy for a reseller wanting to be in this space would be to evaluate the range of hosting or datacentres as if they were another vendor, rather than trying to build and run it directly.
We are now starting to see a range of hosting companies with established operations now starting to “productise and channelise” their offerings: virtual servers with licenses, storage, and backup as a SKU. For the hosting companies, this is (in Ansoff terms) a market development strategy.
The reseller still has to ensure this is a product development strategy and not a diversification strategy. Therefore, check that the hosting vendor is aligned to the vendors, technology platforms that you are already certified with (for example, HP or IBM servers, VMware, Citrix or Microsoft as hypervisors and the list goes on). Most importantly, however, is to ensure their billing and systems management options align with the current vendors, systems and skills.
Lastly, check to see how they will support you as a partner, whether you can white label or co-brand the offering, what their service levels are, pricing polices, training and enablement as you would for any other vendor.
The end game should always be about evaluating risk, reward and returns. So use this simple tool when considering cloud and datacentre to find a strategy that best matches your resources and targeted client needs.
Cam Wayland is a director at channel consultancy firm, Channel Dynamics. firstname.lastname@example.org