Monday, January 04, 2016

Building Your Own Versus Buying

Often I get asked about why someone should use a white-label provider or even a strategic partner to provide services like Hosted PBX or storage or security. I have been having this conversation for over ten years. It comes down to one thing: are you a technology company or are you a sales company.

The best example I can give you is 8x8. After burning through millions in investment money, 8x8 had a video phone, some consumer customers and a portfolio of patents, but no real financial success. The board brought in a new CEO who transformed the company over 5 years from a technology company to a sales organization. BAM! Success. 20% growth each year. After making the investment in marketing and in creating a sales machine - ecommerce and sales channels.

There are other examples, of course. I can't expend any more time explaining to tech companies why just because you have one techie superstar doesn't mean you should build it all yourself. The company usually doesn't understand the value of his time.

The company doesn't comprehend the the red bus scenario (and why we have key man insurance in the US.) If the Tech Superstar gets ill or dies, what happens to your business?

How much does the company prize sales or marketing? Thinking that the tech will win isn't accurate. Explain when the tech has ever won? Microsoft was not a tech company; they were a marketing company. Gates bought the tech. So did Apple (from Xerox PARC.) Someone has to go out to sell the services.

I get that techies like to play with technology - that is what gets them out of bed in the morning. Unfortunately, we live in a world that doesn't want tech. They want results, benefits and outcomes. And the best technology doesn't win - the best marketing does.

Why white-label? Speed to market. Leverage a partner's tech and skills and expertise. You can buy it and bring it in-house later, but in the meantime you can make money without the huge investment.

The learning curve is shorter when you white-label. Resulting in few mistakes and less time spent on a project.

That being said, the family owned business will tend to build their own over buying. They will lean towards open source instead of carrier grade. And you know what? That is okay because it will never hit scale. (I have seen it time and again in 15 years of working with service providers of all stripes - ISPs, WISPs, cablecos, CLECs, MSPs and ITSPs.) Because the business that builds it themselves is thinking TECH and do-it-yourself. They are not thinking: How do we package it? Can our sales department sell it? Do our customers want it? And without a sales and marketing function, you can't grow sales fast enough to scale.

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