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As the cloud matures, some partners find it advantageous to verticalize their offerings to specific industries.
The verticalization trend is also being driven by cloud companies like Salesforce and ServiceNow, which seek out specialized partners that can drive their generic capabilities into vertical markets, said Jeff Kaplan, managing director at THINKstrategies.
"Value-added resellers of software platforms first focused on horizontal capabilities. … Then they realized there was more money to be made by delving into specific industries and adding expertise to solve specific industry problems," Kaplan said. Industry problems include "automating byzantine processes that required several manual processes that now need to be digitalized so they can be done more efficiently."
When a cloud provider specializes in a vertical, "you can convey that to prospects and charge a premium because of the perceived value that you understand their business model and regulatory requirements," added Terry Hedden, CEO of Cloud Guru and its sister company, Marketopia.
The vast majority of cloud providers are industry-agnostic because most cloud offerings are viable for all industries, Hedden noted. However, he noted there are providers that specialize in industries that have to meet regulatory requirements such as keeping data in a particular country or maintaining different redundancy and resiliency conditions. Verticalization has grown in the banking and legal industries, in which companies have to retain records for a certain amount of time, he said. Cloud providers are also specializing in the government services and military verticals.
While Hedden said most cloud providers don't specialize in a particular industry, a study from IDC and Microsoft suggests partners are aware of the value of verticalization. The study, which was published as part of the e-book, Differentiate to Stand Out, pointed to verticalization as a prevalent growth strategy. According to their survey data, 82% of partners indicated a vertical focus was important or very important for their growth strategies.
How to pursue a vertical market strategy
It is critical for partners to ensure that the vertical market they pursue is going to have longevity and that there are real opportunities there, observed Jen Sieger, senior business strategy analyst, Worldwide Partner Group, at Microsoft. "One recommendation I make to partners is deeply research that target and learn about the customer, talk to them, [and] understand what their true needs are and how you can digitally transform their business," she said. The research should include an understanding of industry trends and the competition.
As partners build offerings, Sieger said she always encourages them to think about what portion of that offering they can provide and whether there are other solution providers they could partner with to bolster their go-to-market strategy.
Once it identifies a particular vertical, Kaplan said, a cloud partner may need to add expertise to its staff so it better understands the problems facing the specific industry and the language of that industry. The terminology, technologies, business processes and regulatory issues need to be clearly understood so the partner can refine or add software skills and offerings, applying specific technical and regulatory requirements.
Jen Siegersenior business strategy analyst, Worldwide Partner Group, Microsoft
The partner's internal sales and marketing groups are typically impacted by verticalization. Salespeople need to "speak the language" of a vertical market, since there are different concerns when focusing on healthcare versus manufacturing or retail industries, Kaplan said. Customer-support teams must be in place that can assist customers proactively, help deploy offerings and reactively respond to questions.
Partners need to revamp their websites to convey their capabilities in a particular industry, Hedden stressed. Echoing Kaplan, he said they also need to have "talking points" on that industry's unique requirements that they can convey to customers. "The reality is solutions are very similar [in] different industries, but being able to talk cloud-based backup is critically important in banking, so you want to be able to talk about how your solutions address the compliance issues they have. So talk the talk."
Sieger agreed that it is critical for partners to optimize their websites to pull in traffic. Offering up content is also important, and it is common for partners to create blogs focused on that vertical speaking to how they address the unique needs of those customers, she said. "Even if it's a controversial topic within an industry, they may share opinions and publicly participate in the dialogue,'' she said. "Being relevant in that industry is a very common practice we've seen."
Kaplan suggested a cloud provider have someone in product development "who understands how to design products and solutions that are probably geared toward those vertical market requirements and the nature of the end user in a specific industry that may be different than elsewhere."
Verticalization: A four-step process
Cloud service provider Appirio develops its vertical market strategies methodically, starting with a "baseline purpose" and applying an industry lens to home in on unique problems and a particular customer, said Latane Conant, senior vice president of marketing. Some of the core industries that Appirio has targeted are retail, education, media, financial services and human resources.
Appirio uses the following verticalization process:
- Identify past experience: The first step is to look at previous work done in a particular industry and, more importantly, sub-industry. "We invest heavily in our methodology around delivery to ensure that we have rich analytics during and after projects," Conant said. "For example, this allows us to look at a collection of projects for an industry to understand what unique capabilities a financial services firm might need versus a retailer when it comes to CRM for customer service."
- Study the market trends and needs: Appirio has a few channels it draws from to bring its people to the conversation around an industry, Conant said. "We have an industry focus in our product management team, industry-focused sales leaders and a robust database to manage all of our consultants' project and career experience." This lets the company filter industry research and customer experiences to help determine trends and offerings.
- Pinpoint relevancy: Conant calls this area "the Appirio secret sauce" and said the company is not limited by the traditional industry-based practices. The company has industry focuses but doesn't limit certain critical roles like its strategy team and architects to a particular industry.
- Be a cloud broker: Understand the key technologies for an industry so customers can evaluate the best products to solve their unique challenges. For example, she said, there are thousands of independent software vendor partners in the Salesforce ecosystem alone. Some are highly verticalized and can add significant value. Understanding when and who to bring into a customer experience transformation is key, she said.
As partners consider verticalization, Sieger cautioned against trying to become all things to all people. "There is a tendency for partners to not want to walk away from business," she said. "It will be difficult for them to keep that target in mind and not just go after any piece of business that comes their way, so it's important that partners establish almost the rules of engagement going in."
She suggested they form a "task force" to conduct the research, vet the industry and build content. "We've seen partners have success with that and still keep the lights on with their regular business," Sieger said. Taking the time to do this can be rewarding. "Success in one vertical often leads to success in another," she said.
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