Business for Stephen Webster was going well, but not well enough. The president and CEO of IT consulting and data center services firm, StratITsphere, needed something extra to give his company more business.
The company, which has more than 50-employees, had strictly been a consulting company since it started and was explicitly focused on the Fortune 500 market.
“Our focus was kind of providing technology, strategy, architecture design and security assistance for those clientele,” Webster says. “Although the consulting business is a good business with high margins, it comes in waves or cycles. We looked hard over a year and decided we had to do something to diversify ourselves.”
Webster and his team decided to enter into the data center services market. The big driver for diversifying the company’s offerings was to get some business that had monthly recurring value.
Smart Business spoke to Webster about how he made the leap from IT consulting to data center services to help diversify StratITsphere.
Diversify to your strengths. We did not enter into this business lightly. We did a lot of research and a lot of market research. We looked at what market segment we wanted to address and the pros and cons and the risks of entering this business very closely. It was probably an 18-month process for us to decide to do this. Make sure you do all of your homework.
Anybody who is going to diversify has to look at what you’re doing in your business today and make sure if you’re going to diversify, you’re going to diversify into a business that you have competencies in and are complementary to your core business. This data center managed services business is very complementary to what we were doing already. We had lots of experience in the business, so it was a very good fit. I’m a firm believer of you can’t be all things to all people. You need to have a business that’s got a strong focus — both a market focus and a product focus if you’re going to be successful. We’ve seen some companies out there that want to diversify or want to do something different and they enter into a business that they really don’t have a lot of experience with, it’s not complementary to their core business and it becomes an albatross quickly.
Avoid mistakes. In our technology business, cloud computing is all the rage. Everybody wants to be a cloud provider. We want to be a cloud provider, but that business is a very new business and people are just trying to understand it. The market is very immature and product sets are very immature. Too many other businesses jump in when they see the hype and they see the promise of additional revenue and they jump in without understanding what all the real market dynamics are, what the drivers are, what the real potential for opportunity is.
You look at the hype in the cloud computing market; it’s supposed to be a $150 billion business by 2015. You can easily get wooed into thinking, ‘Wow, I’ve got to get some of that right now.’ It’s a hard trap to avoid. Being an early entrant into that market space isn’t necessarily the right thing to do.
That’s the strategy we’ve taken, which is a much more conservative strategy. Let some other people rush in and let’s see how the market is shaping up and we’ll learn from their mistakes and get in afterwards. Too many folks get tempted into jumping into something that looks like it’s going to really impact their business.
Understand what you want to accomplish. Everybody has to look at their business and decide, ‘What’s the real problem we’re trying to solve? Is it part of our business strategy that we want to diversify into a different business? Is our core business just not operating properly?’ Maybe you’re better off trying to re-engineer your core business?
Make sure you’ve taken a very hard look at your core business and you know your numbers inside and out. That will help lead you to what are we trying to do. The second thing to do is go to your customers. That was part of what drove us to our expansion into this business. We talked to our customers and we asked them, ‘If we went into this line of business, is that something you’d be interested in?’ Your customers are your most powerful tool. You need to be close to your customers and you need to understand what they’re looking for and what they want.
It’s a CEO’s job to be as close to your customers as you can. Talk to your peers. Talk to your mentors. Talk to other people in the industry to get a sense for what they’re doing. Don’t try and do it in a vacuum. I think too many CEOs these days are out there and think they have to make this decision on their own or else they’re not an effective CEO. Nothing could be further from the truth.
HOW TO REACH: StratITsphere, (888) 316-4191 or www.stratitsphere.com