Vertical Solutions Invade The Channel
At this year's AIIM ON DEMAND, the ECM (enterprise content management) industry's largest conference and exposition, I realized something — vendors aren't selling technology anymore. Well, they are, but they're packaging it differently. Rather than selling technology for broad categories, vendors are positioning their products as solutions to specific vertical market problems. This is not a new development by any means. In fact, Business Solutions has been promoting technology's impact on vertical market issues for years. However, it was interesting to see the extent to which the vertical approach has permeated the ECM industry at the show.
Software manufacturers no longer simply promote their latest forms processing, data capture, or content management capabilities. Instead, they promise relief from medical claims processing headaches, accelerated financial transactions, and the ability to securely retain legal records in a paperless environment. Hardware vendors are even getting into the act, touting new vertical-friendly features, such as hard-card scanning capabilities for photo IDs and health insurance cards.
Most vendors that don't target specific vertical markets focus on niche applications such as accounts payable and receivable processing, mailroom, and human resources management. These applications cross all markets, but they have a common set of specialized problems and requirements that must be fully understood and addressed in order to automate.
How Do Vertically Focused Vendors Affect Your Value?
The trend toward specialization by vendors can have both positive and negative effects on the VAR community. Most vendors, while building their brands among end users in vertical markets, still look to push their products through the channel. By providing the channel with vertically focused products, VARs no longer have to spend as much time customizing and integrating separate horizontal products into a vertical solution. This can make it easier and less expensive for VARs to implement these systems.
Vendors are also heavily recruiting VARs with experience developing vertical market solutions or departmental applications. Some vendors have even restructured their partner programs to cater to resellers with vertical expertise. The incentives vendors use to attract these partners could mean more business opportunities and a healthy boost in margins for VARs in this category.
The downside to vendor specialization is that there's a danger of manufacturers entering the VARs' world. Vertical specialization is one of the value-adds many VARs use to differentiate themselves. With vendors positioning themselves as vertical market specialists, this value-add can become diluted. As a result, VARs may face more account competition from vertical product manufacturers with a direct sales force. Furthermore, while prepackaged vertical solutions may make installing an application quicker and easier on a VAR, they can also cut into the margins a reseller makes on integration and implementation services.
Provide The Missing Piece Of The Puzzle
No matter how vertically specific manufacturers make their products, it is unlikely these solutions will ever be plug and play. For example, a product that targets the health insurance market may address the insurance vertical's most common problems, but it's not a one-size-fits-all proposition. Each insurance provider will have a slightly different way of doing business and have its own unique requirements. This holds true for all vertical markets. Integrators can further increase their value and differentiate themselves from competitors by identifying needs within verticals not addressed by vendor products and by developing their own software modules to meet these requirements.