In this article, we’ll cover:
- Why providers are diversifying their portfolios.
- The types of diversification.
- How SME-focused cyber security generates value.
When markets become saturated, or commoditised in some cases, providers need to find new revenue streams. A trend is emerging where service providers are looking towards areas such as customer experience (CX) and cyber security to fortify margins. Diversifying portfolios has now become a strategical necessity.
The methods of diversifying vary from provider to provider. For partners, it’s crucial to work alongside a supplier with both the knowledge and portfolio depth to create real added value. Their understanding of the market, and the products positioned to serve specific sectors and industries, are the foundations for long-term revenue.
Rationalisation behind diversification
In a highly competitive market, product delivery is the basic requirement. There’s a greater need to uncover new opportunities and provide a service that stretches beyond product delivery. If businesses choose to stand still in rapidly changing markets, their competitors will start gaining ground.
Diversification is one such strategy to defend market position. The rationale behind taking this decision is being driven by:
- Market pressures: Commoditised markets drive down margin and encourage price wars, meaning providers lose their unique selling points.
- Customer expectations: Businesses that fail to adapt to customer needs risk losing their relevance, and in turn, their revenue streams.
- Growth goals: When portfolios are diversified, providers can appeal to new customer segments and enter previously inaccessible markets.
- Competitive thinking: Competitors may only focus on one product or sector; a broader portfolio can grant a competitive edge, while building customer trust.
When providers start to diversify their offerings, it helps to foster innovation and encourage them to think creatively. When adopting this kind of mindset, providers continually introduce new, vastly improved solutions that keep pace with customer needs. That’s when they think of value-added services and niche markets to expand in to.
Diversified choices
Approximately 40% of CEOs state that, in the last 5 years, their companies have started to compete in new sectors. Again, it’s all down to finding new sources of revenue, while attracting new customers and bringing more value to existing ones.
Spreading offerings across a wider spectrum of solutions and markets reduces risk. If a solution or market segment underperforms, there’s other revenue streams that can stabilise margins. It’s all about uncovering these emerging opportunities and diversifying appropriately.
Diversification can come in different forms, including:
- Horizontal, where providers offer new, unrelated products to their customer base that fit with existing offerings (e.g. mobile carriers offering broadband networks).
- Concentric, which sees providers adding new, but related, services that leverage the existing technology and customer base (e.g. telcos providing cyber security services).
- Vertical, as providers shape existing offerings into the needs and requirements of a more niche sector (e.g. networks in healthcare).
- Conglomerate, with providers entering a new, unrelated industry through the means of acquisition (e.g. network carriers moving into financial services).
Providers, however, shouldn’t diversify for the sake of it. The decisions taken must be rational, backed by adequate resources and precise execution. They need to select a market where a particular solution fits perfectly.
Cyber security and SMEs
When it comes to value-added services, cyber security is top priority. Cavell’s UC Market Evolution Report highlights how, in the space of a year, the number of enterprises seeking cyber security services has increased from 36% to 45%. From a provider’s point of view, there’s a clear need to accommodate that growing desire.
In the past 12 months, 59% of SMEs have been a victim of a cyber attack. Compared to larger enterprises, they lack the more sophisticated defences needed to handle crippling cyber security breaches. The fines these breaches incur can be absorbed by larger companies, but for smaller businesses, they can prove to be fatal.
Solutions like SafeWeb are designed with SMEs in mind. Cyber security solutions tend to be built for the enterprise market, and smaller businesses can’t afford to take on these feature-rich platforms. The SafeWeb proposition provides a multi-layered approach in a simple, cost-effective manner.
From dark web monitoring and phishing simulation, through to cyber insurance, SafeWeb offers security and peace of mind to SMEs. Gamma partners that choose to adopt SafeWeb into their portfolios can now offer a differentiated, high-margin service. With additional security assurance, providers can build long-term customer loyalty and guarantee resilience to their end customers.
The need for cyber security within the SME market is one that SafeWeb was built to accommodate.
The diversified portfolio
To thrive in margin-constrained markets, diversification is key. Creating a broader offering covers greater market segments, generating revenue and allowing services to be bundled with ease. Providers can look beyond connectivity and see where new revenue streams lie.
It’s worth remembering that diversification always comes with risks. Market incumbents will have a headstart, and existing resource might not be enough to seize a larger market share. New business models can also start to cannibalise existing ones, negatively impacting those established, consistent sources of revenue.
That’s why providers need to partner with organisations that understand the market. Solutions like SafeWeb were specifically developed for smaller businesses, who need enterprise-grade cyber security now more than ever. Providers that choose to expand their portfolios to include SafeWeb can seize the opportunity to serve these security-conscious businesses.
Providers that diversify will be the ones who lead the market. They’ll be the ones who find, and create, that extra value.