IBM Seeks to Reinvent Verticalization — Again

At Nucleus Research, we’ve been following the vertical solutions trend for enterprise software closely. In fact, I wrote a blog just a few weeks ago titled Verticalization is the New Cloud, discussing how industry-specific applications are emerging as a top differentiator for vendors. Several visionary challengers to the tech establishment have been leading that trend. Infor and Information Builders are two good examples.

Last week, verticalization took a quantum leap as the ultimate industry champion joined the ranks. IBM, which all but invented vertical marketing of tech products in the 1970s, launched 20 new industry-specific business analytics products. Predictive analytics tailored to banks; retailers; oil and gas and telcos, to name few.

Introducing industry-specific apps may feel like a natural move for IBM, which has maintained a strong focus on vertical industries. This is a significant step. Until last week’s announcement, IBM’s vertical muscle was centered in its consulting business. And an off-the-shelf app for a vertical business has the potential to dramatically reduce the need for customization and consulting.

In other words, vendors like Information Builders and Infor have raised the competitive stakes enough that IBM is willing to develop apps that could cannibalize its own consulting cash cow. And I have to say bravo to IBM for focusing on the customer need. It shows a willingness to drive a trend rather than follow it.

In actuality, this makes great business sense for Big Blue. IBM Watson and its strong portfolio of analytics products have become strategic to the company. As our Value Matrix for Business Analytics shows, IBM has a nice lead here, but it is an increasingly competitive space. And since IBM already has deep expertise in vertical industries, why not leverage it to develop applications. It’s a very different world from when Lou Gerstner rebuilt IBM’s consulting arm. Today’s businesses focus on time-to-value. Massive customization and heavy lifting by consultants only slow down projects and add to the overall costs.

With IBM now joining the race for verticalization, the big question is who’s next. Will IBM’s entry lure the other big established vendors to join? Your move SAP, Microsoft and Oracle.