The Fall and Rise of Verticals

In the late 90s, Gartner used to grade outsourcers on a poster with scores for verticals, horizontals, geographies. Couple of those years, I was on the team which graded the offerings. A provider gave us the same reference client for the rows for the media and entertainment vertical, finance and accounting processes and for ERP expertise. I called the client partner and said pick one  row or we will split the score across the three rows. He was irate. I told him if he wanted credit for media and entertainment to come back with projects around royalty and studio accounting, digital rights management or some other vertically unique processes. We went round and round. He did not have any of those examples, but wanted the GL project at that client to be counted as “vertical expertise”.

A few years later, I was talking to a VC who told me “The Valley has come to be wary of vertical software companies. They are impossible to scale”.

In the last few years, for the most part vendors have learned to emphasize cloud, social, mobile, or some other hot, but cross-industry trend. Verticals seem even less visible in their thinking.

As I speak to clients in many industries and write about them, the sense I get was they had pretty much gone back to custom development for unique vertical processes.

That has made me even more cynical of vendor vertical pitches showing off a thin veneer of industry functionality.

That has been changing in the last few months.

• In November, as GE launched its Industrial Internet I was fascinated by a panel with executives from an airline, a railroad, a utility and a hospital discussing tech opportunities in their verticals. GE showcased how its aircraft engines, wind turbines, MRI scanner and other products  are now generating unique primary data for different industries it serves.
• Last week, I was invigorated by Cognizant and client presentations around smart auto insurance providers using telematics to reach out to owners when the car reports a mishap  and smart health care scenarios where sufferers of allergies get proactively alerted about predictions of high pollen days. Not just Cognizant, Xerox has been focusing on vertical services such as parking management for municipalities.
• A few weeks ago, I was impressed to learn that Infor is drilling into micro-verticals. So, instead of going in with more generalized food and beverage positioning, Infor can now present shelf life management features to bakeries, and sub-lot traceability to  breweries. Rather than just go with a Fashion offering, it can offer more unique features for sportswear versus uniform makers.  
• This past weekend,at the MIT Sloan Sports Analytics conference,  I was even more impressed by all the analytics in so many sports.  Some come from SAP’s apps for Sports and Entertainment to allow for better player scouting, fan experience and other functionality. If I had not gone to Boston this past  weekend, I would likely have gone to the HIMSS, the healthcare event in New Orleans this week.
• On New Florence and in my next book research I am noticing stunning payback from advanced analytics in everything from farming to water utilities. Beyond analytics, sensors and mobile devices are reshaping industries. So New Florence has posts on retail using depth sensors, facial recognition, scanners for fashion fits, digital signage on walls, next-gen POS and countless other technologies to advantage. There are several other innovation posts for insurance, utilities and many other industries.

Yes, I am still cynical when vendors talk to me about verticals. But at least I can probe better whether they are thinking of smart versions of their verticals or thinking of micro-verticals.  I am sure there are some who still think their GL project at a media company makes them an industry insider. My trick question has evolved to asking them about the Matthews Max Menace Arm and Mocha planar tracking:)