2015 Winner: Uptime Does Verticalization Right
- By Gladys Rama
- October 14, 2015
The common refrain among services providers is that specialization is critical to success. In a lot of ways, Eden Prairie, Minn.-based Uptime Legal Systems -- which started out as simply Uptime Systems -- is a poster child of that idea. But that doesn't mean the transition was an easy one.
CEO Dennis Dimka founded Uptime in 2005. For the next seven years, Uptime was a "pretty quintessential" managed services provider (MSP), according to Dimka, providing IT consulting and networking services to small companies in the area. The company was successful enough, in the sense that its revenue was growing, but it was slow progress. Uptime was hobbled by "the same challenge that every MSP generalist deals with," Dimka says. "It's always three steps forward, two steps back."
In 2012, Uptime switched to a cloud services provider (CSP) model, developing cloud-based services and expanding its prospective customer base nationally. However, still lacking a niche industry to market to, Dimka encountered the same problems as he did when Uptime was an MSP: "It was very difficult to stand out. Therefore, difficult to sell. Therefore, difficult to grow."
Uptime's transformation from a general MSP into a CSP that focused solely on the legal industry happened in stages. First, the company tried a two-menu model: one menu of services aimed at just law firms and another menu of services for everyone else. The law-focused menu consisted, in part, of existing Uptime services that had been repackaged for the legal sector, while other services had been created specifically for law firms. But that two-menu approach failed to set Uptime apart from other CSPs, Dimka says. He notes that there are plenty of CSPs that advertise themselves as legal-focused while simultaneously marketing to other verticals on their Web sites. "Everybody does that," Dimka says. "In that way, you're not a specialist at all. You're just another generalist that knows how to list industries."
"Specialization and verticalization don't just help you grow -- it helps everything snap into focus."
Dennis Dimka, CEO, Uptime Legal Systems
Dimka eventually made the decision to fully commit Uptime to the legal industry, killing the non-legal menu and -- to make sure there's absolutely no confusion -- adding "Legal" to the company's name.
To differentiate itself, Uptime focused on developing its intellectual property. Its core offering is Uptime Practice, a private cloud platform for law firms. Besides being a differentiator, Uptime's self-described "Law Practice-as-a-Service" offering also gives the company a foothold for the future; Dimka notes that while a lot of legal practice-management applications are premises-based, the law industry is steadily shifting to the cloud.
The result of the rebrand has been 194 percent top-line revenue growth since 2012, with a projected $4 million in revenue for 2015. Uptime's client base has grown in proportion with its revenue since the rebrand, according to Dimka; its platform now has well more than 2,000 users and is used by 400-plus law firms. The company also recently launched the Uptime Authorized Partner program for legal technology consultants.
Such a fundamental shift in a company's identity certainly carries a degree of risk. Success in a newly chosen niche isn't guaranteed, while the loss of at least a few long-standing customers that fall outside that niche is inevitable. However, Dimka says that some of Uptime's legacy customers have decided to keep doing business with Uptime despite the rebrand. Moreover, while he expects to lose some non-legal clients in the future, "the growth from specializing and becoming a thought leader in the legal technology space outpaces that [loss] by 100-to-1."
As a side-effect of the verticalization, Uptime has also made some fundamental changes to its business processes. First, the company established an internal development program dubbed "Uptime University" to educate employees on the culture, software and workflow of law firms. Existing staff and new hires were required to go through the program, which Dimka describes as "essentially a boot camp for IT guys who maybe don't have any experience in the legal world."
Second, Uptime went from a company that, as Dimka says, "had little or nothing in the way of formal business plans, save a half-baked Word document that was usually written then stuffed into a drawer," to a company that conducted regular strategy meetings and had periodic performance goals. At first, Dimka says, the new structure "felt a little unnatural." However, he knew that it was necessary to sustain the kind of growth that comes from specialization.
"Every small business tends to be able to get away with a lack of formal structure," he says. "But we knew as we grew that we would outpace that kind of ma-and-pa style of management."
As Uptime's journey has shown, going vertical is a risky and multistep process that, if done right, can yield significant rewards. For firms looking to make the jump, Dimka says the key is to do nothing by halves. "Go all in," he says. "Specialization and verticalization don't just help you grow -- it helps everything snap into focus."
Read the full 2015 RCP Rocket Award winners feature here.
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Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.