Today we’re going to dive into Colocation and Wholesale Data Center Growth Strategy.
If you've been following the colocation industry for quite some time, you'll probably recognize that the pace of Industry consolidation just keeps accelerating.
Industry Consolidation Like Crazy Within Colocation Part of the Data Center Industry
It seems like every week, every month there's another player or two that decide to merge.
A couple of months later, the transaction is closed. Now you have one bigger colocation or wholesale data center company, instead of two smaller- or medium-size, or two medium- or large-sized companies.
So this industry consolidation is going on like crazy within the colocation part of the data center industry, as well as wholesale to a certain degree.
This ends up putting the acquiring company and the acquiree on very different growth trajectories, generally intended to be positive. And it usually is mostly good with scale, but there can sometimes be friction with the acquisition -- because of integration issues, cultural integration issues across the team across and different management styles -- across facilities, operations, engineering, IT, sales, and marketing.
Silo-Breaking Needs To Be Happen Too
So regardless of whether your colocation company remains independent, or if it gets acquired, or maybe it ends up being the company that's doing the acquiring, there are typically nine growth-related challenges that need to be addressed by your CEO, sales director, and marketing director.
By the way, if there are silos in your company right now, that silo-breaking needs to happen pretty much at the same time.
Sales and marketing really need to have a single C-level, executive-level leader to report to -- especially if your company is simply too big for sales and marketing to both report to the CEO.
In smaller colocation providers where there are a couple of dozen employees, it's very common for the head of marketing and head of sales to both report to the CEO. But if you're in a colocation provider or wholesale data center provider where there are hundreds of employees (or more), that may not always be practical.
So we see a lot more emergence of these newer roles:
- Chief Commercial Officer
- Chief Revenue Officer
- Chief Digital Officer
- Executive Vice President of Sales and Marketing
However the big takeaway from this:
If your CEO just has too much going on, or if the company is too large for your CEO to be that hands-on involved in the leadership of sales and marketing, there needs to be a true C-level management, leadership team person that can have both marketing and sales coming into him or her.
This is so critical to make sure that this alignment is in place.
In most colocation or wholesale data center companies, this alignment should be addressed, yesterday- before you even get to these nine challenges.
Let's go through these nine challenges one by one and see how this can help your colocation or wholesale data center reach its growth objectives.
1. Expansion to New Markets and New Markets
One of the biggest challenges is expansion into new markets.
In most cases, your colocation company is either growing or if it's staying the same, it's really not staying the same -- in terms of number of locations.
It's effectively shrinking. While it may not feel like shrinking, but if you look around the world as it’s passing your company by, every single colocation provider is either adding locations or thinking about adding locations.
If you're standing pat with your number of locations, your company is really shrinking whether you know it or not.
Your customers and investors are all demanding multi-locations if for no other reason than disaster recovery (DR) and business continuity (BC).
2. Creating New Opportunities: New Service Offerings for New Client Needs
Second, one of the biggest challenges that we see across the board with colocation providers is creating new opportunities.
There are a lot of market conditions that are constantly changing. The competitive landscape is constantly changing. That's a big deal: making sure that you stay on top of that competitive landscape.
Cloud service providers (CSPs) and managed service providers (MSPs) are blurring the line.
MSPs want to be cloud service providers; cloud service providers want to be MSPs.
Colocation providers have CSP and MSP envy.
Then at the same time this is all going on, the hyperscale cloud providers keep getting bigger and bigger.
And we're getting very close to a situation where it's critical that you have a really good handle on who your buyer personas are: your primary buyer persona and your secondary buyer persona.
In case that term is unfamiliar to you, a buyer persona is a semi-fictional representation of one of your ideal customers based on actual research and some educated speculation.
And when we understand our buyer personas better than the competition, we can outsmart the competition -- because we are closer to what our first and second most important customers are actually demanding.
And not just what they're demanding now, but what they're going to demand in the future.
For many smaller colocation providers, they're concentrating on too many different buyer personas at once, and they're having a really hard time ranking their first and their second, their primary and their secondary, to know where they should really focus their efforts.
But if you stay really close to your primary buyer persona and your secondary buyer persona, it's a lot easier to uncover their unserved and underserved challenges.
Speaking of challenges, the third big challenge that a lot of colocation providers are facing has to do with positioning their companies.
Regardless of whether you position your company as a colocation data center, as a wholesale data center, perhaps both colocation and wholesale, it's critical for your company to be seen as trusted advisors, subject-matter experts, educational resources, and thought leaders.
This is part of the reason why you see so many executives in colocation companies chasing after speaking opportunities at industry conferences; chasing after the analysts; really being highly motivated to see positive press attention.
Because they want to be perceived as trusted advisers and they want third-party validation of that. And there definitely still is a place for that.
But if you look at where we are, in terms of how much the buyer's journey has changed and how many buyers journeys start with a simple search engine query or asking a question on social media, it's easier than ever for your company to publish its own thought leadership to advance its own positioning -- in addition to relying on these third parties.
So don't allow the third party gatekeepers to hold you back from also being in a position of your company being its own publisher.
You certainly don't need permission to start a blog, to start a podcast, or to create videos, or to publish eBooks and white papers -- and all that good stuff.
It's absolutely critical if you want to be seen as a trusted advisor, a subject matter expert, an educational resource, and a thought leader -- and not just a vendor.
Because when you're just seen as a vendor, your colocation company essentially becomes a commodity provider, a commodity broker, and gets stuck bidding on RFQs (requests for quotes) and RFPs (requests for proposals).
And with that largely reactive approach, you end up largely in brutal competition.
Because in the eyes of your potential clients, you all look alike right?
One of the most important ways to address that is to really be proactive about your positioning.
The buyer's journey for colocation has really changed dramatically in recent years.
We find now that people are doing so much research on search engines and social media before they’re ready for a conversation with your sales team.
In many cases, 70% or more of their decision may already be made before they talk to anyone from your company.
Google calls this ZMOT (Zero Moment of Truth); it's no longer about what you say about your company. It's about the collective wisdom of what other say about your company on search engines and what shows up on social media.
So again, it's not just a matter of chasing after this third-party social proof. It's a matter of publishing your own thought leadership, improving your positioning in that respect as well.
The key thing: you need a way to differentiate with strangers before they even begin to look for colocation providers. It's critical to intercept them as early as possible.
All too often, colocation providers think that they're differentiated their cost of power, their cooling, their people, their locations, their local tax incentives, their density, or their support.
The reality is yes, potential clients care about that when they’re 70%, 80%, or 90$ of the way through the journey and selection process.
But early on, in that first 70%, in the first six or seven Innings of the game, it's super-critical that you have a way to get to them before they even know that your company exists -- before they even know that your category of company exists.
So in order to do that, you need to be able to position your company to compete on value and problem-solving, not on being the low-cost provider.
You don't want to win based on being the low-cost provider all the time. Sometimes it's a necessity. But if that's one of your biggest cards that you pull out, it's not the best card to have.
4. Business Development
Another big challenge that we see with colocation growth and wholesale data center growth has to do with business development.
The reason why business development tends to be a huge struggle, for so many in the colocation space now, is that your potential clients do not want to interact with sales until they're at least 70% of the way through -- when 60%, 70%, or 80% of their mind is already made up.
So in that scenario, what actually is the role of cold calling? What actually is the role of prospecting? What actually is the role of the business development rep (BDR) or sales development rep (SDR)?
It’s very different than it was as recently as three to five years ago.
And you really have to think about this:
If you're trying to improve the positioning of your company, to be seen more as subject matter experts and thought leaders, is interrupting people, annoying people, and harassing your way onto their radar screen -- is that really the best way to improve your brand perception?
In order to really do this effectively, for the people in the organization that are working in that BDR or SDR role, think more about social selling.
Think more about how to use problem-solving, persona-focused content as conversation starters to ensure that you are hyper-relevant to what's already going on in their minds -- not what you want to be going on in their minds. But what actually is going on in their minds.
Remember now more than ever, it’s all about them, their problems, their goals, their challenges, and their struggles -- not your problems, their problems.
And the more your sales organization, your marketing organization, and the rest of your company can get dialed into their problems -- not what you want their problems to be -- the easier it is to grow effectively and grow profitably.
So again, this brings us back to having a relentless focus on your buyer personas.
And don't get distracted into chasing after five or ten buyer personas.
You can't have ten equally-weighted, front-burner priorities. They have to be ranked in some way, shape, or form.
For most companies that are relatively new to this, it's totally crazy to focus on more than a primary and a secondary buyer persona your first six months to a year out of the gate.
Once you understand who these folks are, it's critical that you have a really effective segmentation strategy -- so you're talking to them in language that really resonates.
And part of resonating with them isn't just understanding who they are and what buyer persona they are. It's understanding where they are in the buyer's journey/
With somebody that's never heard of your company before, that's a complete stranger, it's premature to badger them to come in and take a tour.
Yes, you can kind of put it out there casually as a secondary offer. But early on, they have symptoms, pain, challenges, and goals. They’re just looking for information and doing research.
Nagging them with saying, you know, “How is next Tuesday at 3:15? I need 15 minutes of your time to convince you that I have the solution to every problem that you have ever faced in your life.”
Chasing after that phone call or tour can be really off-putting.
So make sure that your sales team and your marketing team are all focused on being relevant not only to who they are, but where they are in this whole process.
When it comes marketing, a lot of CEOs and sales directors at colocation providers and wholesale data centers have a very obsolete understanding of the role of marketing today.
And a lot of that comes from leaning on a definition or understanding of digital marketing and internet marketing that frankly has seen its better days, from five or six years ago.
In order to be thinking about the right issues with marketing and how to support your growth going forward, in a digital-first world, think about what percentage of projected revenue growth is getting invested in marketing. If you're not even having that kind of conversation, this is a huge problem.
Think about how thorough your buyer personas are.
Again if you're not having that conversation, if it's something that just siloed in marketing, this is a huge problem. Because buyer personas are one of the fastest ways to make your sales team more productive and more effective. So they don't waste time chasing long shots and bad fit clients -- which brings us to the next question:
Do you actually have negative buyer personas? Do you understand what selections on a drop-down list or what behaviors should almost instantly disqualify someone, based on being a really bad fit for your company?
This again brings us to a whole separate conversation about the importance of product/market fit (PMF), knowing
- Exactly who your ideal customers are
- The price points that they purchase at be able to satisfy strong demand
- Purchase quantities
- Purchase durations
How confident do you feel in your segmentation strategy? How solid is your segmentation both by buyer persona and lifecycle stage?
Is this apparent in your CRM system? Is this apparent in your marketing automation platform?
Is this apparent in everything that you do that you're always thinking about with every campaign, with every program you put up there?
Who's the buyer persona that this is intended for? And where are they in the lifecycle of a being a customer of ours?
Does marketing get involved with closed-loop reporting in your CRM? Do they know exactly when a closed customer happens? Are they able to work backward and see all of the interactions that led to an ideal fit closed client? And conversely, do they understand all the things that they're doing that are just basically spinning their wheels?
This involves a lot of conversations about product/market fit.
If your marketing team it just basically chasing after trade shows and sponsorships, hosting events, and posting to social media -- those campaigns definitely have a role. But if they're dominating your resources, there could be problems.
Your colocation company may be a lot more behind the growth curve than it realizes; likely living in the past and maybe not being so competitive if your entire marketing plan depends on shows, sponsorships, golf tournaments, hosting lunch-and-learns and cocktail parties, and just playing around on social media without really being able to document results.
The traditional marketing playbook has been completely disrupted by the rise of search engines, social media ironically, mobile devices, cloud, and now artificial intelligence.
6. Brand Awareness
The sixth big challenge that a lot of colocation providers are getting thrown a curveball with has to do with brand awareness.
Sales no longer controls the funnel. It's very hard for sales leaders to accept the fact that they no longer control the funnel.
During the past five years, there's been a massive shift in power from seller to buyer.
If your company is still fighting this, there could be problems -- because we have a very different buyer’s journey today -- again, the time between when somebody first learns about your company and when they become up a paying client
It's critical to have content and resources that educate and build trust with strangers. It's just too expensive to do it manually on a one-off basis when there are assets that look at your most important and second most important economic buyers.
You know exactly what they ask and what they need to know. So you need a way to get in front of them proactively to speed things up.
If you don't do it and the competition does, you’re not going to win very often.
So it's critical that you have a way to be relevant and begin to educate and build trust before somebody even knows that your company or brand exists.
If your company is spending very significant resources on branding, chances are you may be arriving way too late in the decision-making process. And you're not going to be able to intercept early enough to be relevant to the way that modern buyers research and make purchase decisions for colocation and wholesale data center services.
7. Lead Generation
When it comes to lead generation, most colocation websites or just plain a trainwreck with this, completely asleep at the wheel, virtually no educational content for lead generation.
Every time we do research on this, it's mind-boggling how this is still an issue. And what this comes down to is making a really bad assumption that every single website visitors is immediately ready for a sales conversation.
In order to succeed with lead generation, you need to have premium content offers, educational content, for each buyer persona and each buyer’s journey or lifecycle stage.
Otherwise, you will miss lead-gen opportunities that your competitors will capture.
You need to be able to promise answers to their biggest questions and their biggest problems -- not yours. The only way to get good at this is to have an obsessive focus on buyer personas and product/market fit.
By the way, when you think of competitors don't just think of the direct competitors that your sales team bumps into at the end of the sales cycle, at the bottom of the the funnel, in the buyer’s journey. Think about your indirect competitors -- companies that are an order of magnitude bigger or smaller. Or indirect competitors that aren't typically in your geographic market.
Also, think about non-business model competition. These are companies that don't sell colocation of wholesale data center services. They may not even be CSPs or MSPs. But they're trying to reach the same audience, and because of that, they create and promote content on very similar topics that you need to.
For example, this could be publishers, associations, channel programs -- any entity or organization that has a vested interest in reaching the same audience as you are fighting for those ten prized slots on page 1 of search. They’re fighting for those three or four prized slots with paid search, With sponsored social, it’s a similar kind of thing with getting reach.
In order to be effective, you need to be aware that there's a lot of competition. And just sitting on your hands and pretending like it’s five years ago isn't going to win the battle.
Another big challenge that comes up with colocation providers has to do with sales.
There are a lot of sales organizations that are struggling to connect the dots between how traffic is generated on their website and how leads are generated for the website.
In most cases, sales is completely out of the loop and has very little control over those two things -- which is an enormous problem because they should be working hand-in-hand with marketing to make sure that everything that they’re learning from potential clients gets reflected and iterated back into what's being done to attract the right visitors and generate the right kind of leads.
It's critical that colocation providers in wholesale data center providers get much better at being able to connect the dots between traffic generation, lead generation, lead nurturing, opportunity generation, and ultimately closed sales.
Closed loop reporting is absolutely critical to that. This usually involves the need to integrate your CRM (customer relationship management system) or perhaps an e-commerce platform.
Even more important, if your company's culture is resting on its laurels from five or ten years ago, it's critical to invest in training to modernize your sales playbook.
Every single member of your sales organization needs to be well-versed and well-supported in using social selling effectively to educate and build trust.
When I look at what's going on with their social media feeds -- on Twitter, Facebook, LinkedIn, YouTube, and SlideShare -- 90% of sales reps at colocation providers and wholesale data center providers are essentially using social media to spam their prospects.
This is so stomach-turning, disgusting. They’re working really hard to build these connections, and they're completely repulsing these prospects by spamming them -- f they're reaching these prospects at all.
These companies are so off the mark with how their future clients are going to evaluate the colocation companies. They are still essentially selling like it's 2007. They’re so behind the curve, so behind the times.
And a lot of this starts by educating and training to make sure that your sales team knows how to actually add value, as opposed to spamming, interrupting people, and inappropriately demanding value.
9. Building Bottom Line Results
The ninth challenge, the final challenge, I want to talk about is building bottom line results.
A lot of colocation providers are confusing top-line revenue versus bottom line profitability.
So be super careful to make sure that you're tracking the right metrics, that you're tracking your average cost of client acquisition (COCA), sometimes called client acquisition cost (CAC).
It’s also critical to track your average client lifetime value (LTV). For very small colocation providers, that are kind of blurring the line between colocation provider and hosting company, most of the time they're completely oblivious to these metrics.
And their low lifetime value really boxes them into very limited options for being able to scale and grow their client base.
Think a lot about product/market fit. If your company is spending a lot of effort trying to compete on price, you will almost certainly be shooting yourself in the foot when it comes to this stuff.
If you're posting prices on your website, that usually indicates a very low level of enterprise IT sophistication where website hosting companies are blurring the line with colocation data centers.
The problem is this: Even if you're successful in getting the right person in the door to tour your facility, the moment they tour your facility now that's also going to come apart because they're either going to see
That you are renting wholesale space in another company's data center
Your outdated, understaffed IT, equipment, operations, and facilities and kind of roll their eyes and say, “Why did I waste my time coming out to see this?”
To effectively grow your colocation and wholesale data center revenue, do some serious soul-searching about strategy -- about your primary or secondary buyer personas, your facilities, and your services.
It is all related. Marketing can't live in a vacuum. Sales can't live in a vacuum.
This all has to be brought together.
The Bottom Line on Colocation and Wholesale Data Center Growth Strategy
So let’s recap these nine make-or-breaks for powering your colocation and wholesale data center growth:
New locations and expansion -- If you're not thinking about new locations, the competition is, and you're shrinking whether you realize it or not.
New marketing opps, new service offerings, and new client needs -- We looked at the importance of thinking about new opportunities for new service offerings, new client needs, and staying really close to your buyer personas.
Positioning of experts vs. vendors -- We talked about positioning and how your company can be seen as experts, as opposed to just commodity brokers and vendors.
Business development -- We talked about why it's so critical that you get a handle on business development because so many in the sales development rep role (SDR) or business development rep role (BDR) are using really obsolete practices that just annoy, harass, and basically spam people.
Obsolete marketing -- We talked about how critical it is for marketing to modernize its skill set as well. Most CEOs and sales directors in the colocation and wholesale data center space cling to a very obsolete definition, at least five years old, of what they think digital, internet marketing, content marketing, and inbound marketing looks like. And this gap is really inadequate today compared to the competition.
Brand awareness overinvesting -- We talked about how so many companies are obsessed with and over-invested in branding, completely overweighted in branding at the expense of the opportunity cost of getting found by the right people, in the right places, at the right time, and in the right context. In a lot of ways, if too much of your budget and resources are going to branding, you're probably getting found too late
Lead generation -- We talked about why it's so critical to get better at lead generation. With most companies on their websites, in their digital presence, lead generation is just plain an afterthought and doesn't reflect today's buyer’s journey. There tends to be massive gaps with what's going on the website versus what's actually needed. Often times, this is just being done totally completely wrong. So if you're not getting the right kinds of leads to your sales teams, that progress to sales opportunities, go back to the drawing board and think about who you're doing this for and why, for and what stages your current content is geared for. The content and the context.
Sales -- We see a lot of times with sales organizations that there’s a lot more harassment than helping. It's critical that your sales team be seen as more consultative experts in using social selling effectively. So they don't end up doing social spamming.
Focus on the bottom line -- The final challenge we talked about was focusing on your bottom line and making sure you spend a lot of time talking about your strategy, talent, and technology; how that all connects. Most colocation companies and wholesale data center companies just aren't pulling all of this together. And because of that, their growth is being held back. We call this a toxic combination of ignorance and arrogance. It's really dangerous. Invest the time to learn and keep up before your company becomes disrupted, invisible, and irrelevant compared to where the competition is.
At the end of the day, if you're focused on growth, you need to get rid of obsolete resources and distractions that fail to focus on positive return on investment.
We've been talking all about colocation and wholesale data center growth strategy.
I'm so glad to have had you with us for this episode of the ColoCast Podcast.
I'm Joshua Feinberg, and we look forward to seeing you back again next time.