The growing popularity of cloud computing means your competition is heating up, so now's the time to step up your game by delivering unique specialized services within a particular industry. We've seen that building intellectual property (IP) is the single most profitable way to differentiate your business.

While most of our partners see the potential of packaged IP (with average gross margins of 70 percent on a recurring revenue basis, according to MDC Research in the June 2017 Cloud Practice Development Study), some feel they're not quite ready to invest. However, the opportunity is so strong that I recommend giving it serious consideration. Other partners are providing IP they may not even realize they have, and aren't breaking it out as a premium service.

Building IP allows you to provide more complete offerings, and generate the "stickiness" of true customer lifetime value, that makes you irreplaceable to your clients. For a business owner, it also dramatically increases business valuations. According to recent, partners monetizing material amounts of their own IP are valued 5-10 times higher than those who don't.

So, how do you get started?

Discover your IP

The first step is to find any hidden IP you already have and continue innovating on it. Audit your customer asks and determine which solutions are commonly requested, then consider packaging that functionality. Identify those repeatable elements that you can turn into specialized products.

To do this, you need to proactively look for opportunities to productize your solutions. Turn one or two focus areas into trial projects, then create a target customer profile for the focus areas that make your solution unique.

Don't be afraid to think small. Your IP can be just a few lines of code that automates a function in a way that has specific value to your market.

Think about how you can verticalize your offerings and go-to-market approach to really differentiate your solution.

Don't ignore an opportunity just because it presents itself outside your core competencies. Consider partnering or outsourcing the development of your IP if your resources are limited. It can make a big difference for your customers and your company.

RedPixie's approach

One partner that has two great examples of successful IP solutions is London-based RedPixie. Their most recent example involves wearable technology for healthcare, tracking heart rate and body temperature data from IoT devices. The scalable Azure IoT health service, called Project WellWatch, then extracts the streaming analytics into a data warehouse for calculation, machine learning, and insight. This information can also be used to signal if something goes wrong. In a life-and-death situation, the device will even send information directly to a hospital.

In its second example, RedPixie noticed some of its customers used Microsoft Excel to run critical line-of-business processes in a risky, unmonitored desktop environment. That revealed an opportunity to build a background processing engine that calculated Excel workbooks from code without using Excel itself. The company built a scalable Azure-based architecture, called the Azure Calculation Engine, to process the workbooks and allow customers to focus on running their operations.

By working with line-of-business executives in customer organizations, RedPixie implemented a packaged solution that felt customized. RedPixie customers find the solution less expensive and easier to manage than running a PC-based Excel compute grid, and Azure's scalability delivers up to 88 percent reductions in execution times for key business processes.

Delivering unique value

Once you've defined your IP, you need to turn it into repeatable methods and processes. But don't let up on innovation. In the new world of cloud computing, solutions become commoditized quickly or disrupted by new solutions.

RedPixie Chief Digital Officer Mitchell Feldman calls it "digital warfare." He said, "It's like flying an airplane. If you keep your foot on the gas, you'll keep going forward. And if you take it off, you'll go down." The key is to focus on customer lifetime value, share success stories, and constantly plant ideas of how to help customers and do business in ways they haven't considered.

Continue to extend your reach by looking for ways to expand your IP-focused solutions into similar use cases in other verticals. In Part 2 of IDC's Modern Microsoft Partner Series e-book, we talk about evolving your competency in one vertical market to uncover opportunities in another. Sometimes the strategy, organizational structure, development and sales processes, and underlying code may easily translate to another vertical market.

Likewise, your IP can also open opportunities to sell your solution through channel partners. Look to your network for incremental solutions that can be bundled to round out and complete your own.

Tell us how you've unleashed the power of intellectual property to differentiate your business and increase profitability below!