Verticalization is the new Cloud
May 18, 2015![default image](https://nucleusresearch.com/wp-content/themes/nucleus/assets/images/blog-inside-featured.png)
Tipping point, paradigm shift, killer app or game changer. Whatever you call it, cloud computing has been its poster child for the past decade. In the aftermath of the dot.com bust, cloud computing demonstrated the real power of the Internet and fundamentally changed the industry. Vendors that embraced the cloud early started to outpace their competition and ‘disrupt’ the market. Salesforce.com is a classic example.
A look back at our Value Matrices over the years even charts the progress, showing vendors with the strongest cloud offerings making the biggest leaps into the leaders quadrants.
But as with all tipping points, mass adoption leads to mainstreaming. The cloud has become so pervasive, that it is no longer a game changer. In fact, it’s a necessity at this point. Even industry laggards, such as Enterprise Resource Planning and Human Capital Management are shifting to the cloud. So how are vendors differentiating their offerings now? Verticalization is the new frontier.
One-size-fits-all technologies have never been a good long-term solution. And as applications mature, vendors can build out new capabilities tailored to specific industries. Verticalization is a powerful way for hungry vendors to differentiate their offerings and carve out a market. Businesses are eager for vertical applications. Why customize a solution to fit your company needs if a vertical solution is already delivering the features specific to your industries. It comes down to the bottom line — which solution delivers the best value.
We recently noted that leading Business Analytics vendors were increasingly verticalizing their solutions. Corporate Performance Management (CPM) is not nearly as far along, but we already see signs that this is where the industry is headed. (For more on CPM, go to https://nucleusr.wpengine.com/research/single/technology-value-matrix-2015-cpm/)
Competing in the vertical space is highly challenging though. Vendors have to select which verticals to support, bringing competition to a whole new granular level. And we are already seeing the emergence of micro-verticals, with solutions focused on narrow areas within an industry. Supermarket chains, for example, have different requirements than say a clothing retailer or auto parts dealer. This portends how very competitive the vertical frontier is about to get.
There are some who say that verticalization has been around for decades, pioneered by the likes of IBM, SAP and Oracle. Indeed, cloud computing had been around for many years before hitting the tipping point as well. What’s different here is how vendors are optimizing their horizontal applications for vertical users, as opposed to creating vertical consulting teams. Large established vendors could have an advantage here if they leverage their vertical expertise. While many have made overtures to the vertical market, they still seem to rely on their consulting strength.
Instead we see a whole new level of competition from mid-tier vendors who have been early to focus on vertical markets. Vendors such as Infor and Information Builders are rising to challenge the establishment. And much as Salesforce.com leveraged cloud computing to emerge as a leading force, these Young Turks are punching above their weight class. If you thought cloud computing was competitive, fasten your seatbelts. It’s going to be an exciting ride.