deal architect

UNIT4’s expansive view of the “services” sector

As part of a corporate re-branding exercise, UNIT4 hosted an analyst call last week – see details here. While they have previously announced they would focus on the services sector, I thought that would mostly be around local government and professional services. I was pleased to hear the CEO José Duarte define the focus as including several more as this slide shows (click to enlarge).

Still given UNIT4’s small market shares, I was curious about the customer demographics and product footprints for each, especially in the real estate and wholesale sectors.

Ton Dobbe and Robin Schaffer of UNIT4 provided me some details for each and I have excerpted them below.  

Professional Services

7,000 customers such as INGEROP, a technical engineering group and Quartzelec, an electric engineering group.

Government

5,000 customers such as  Coventry City Council and Royal Borough of Windsor & Maidenhead.

Higher Education

750 Customers such as University of Bath,  University of Cambridge and University of Oxford. UNIT4 can support the following processes

•Faculty & Curriculum management

•Student Recruitment

•Grading & Graduation

•Pre-Award Research Management

•Post Award Management

Not for Profit

400 customers including The Salvation Army and  Anchor, a UK elderly care provider.

Real Estate

1,200 customers including Newsec Asset Management AB and Stena Fastigheter AB. UNIT4 can support  processes such as

•Lease Out

•Lease Administration

•Property Management

•Portfolio Management

Wholesale    

2,000 customers including Teesing BV which supplies fittings and valves and Veris Bouwmaterialengroep BV which focuses on building supplies. UNIT4 can support  processes such as

•Procure to Pay

•Value Added Services

•Storage to Distribution

•Service to Execution

•Lead to Cash

I was pleased UNIT4 did not stretch the list and also claim to target banking, brokerage, insurance and other financial services with very unique transactional systems. 

The six sectors give it plenty of runway and opportunities to develop/acquire deeper functionality. Most of the customers are in UK and Europe, but give newly announced N. American Managing Director, Scott Kamieneski, a base to build on.

Oracle’s Middle Earth

In a recent blog post I discussed canine expert Cesar Millan’s view of a pack of  dogs – alpha, those in the middle, those at the back. He talks about a role for each.

Interestingly, in the IT world, lots of focus is going to the back office – especially cloud trends in Workday, Fusion etc. My books tend to look at “alpha” – innovative, strategic advantage, mostly custom IT investments. The recent one, The Digital Enterprise looked at transformative products, services, customer focus, business models in over 20 industries. 

The middle – vertical, operational systems - does not get much play in media world. Many vendors are focused on horizontal analytical, social, mobile technologies. At Oracle OpenWorld last Fall, I expressed disappointment there was so little focus on industry applications. And I was told – come to the Industry Connect event. It’s all about verticals.

So, here I am at the event in Boston, where Oracle has brought together customers from 6 verticals – Primavera representing project, resource intensive industries.

My schedule here includes sessions led by executives from Neiman Marcus, Best Buy, UPMC, Cardinal Health, NE Utilities, Bill and Melinda Gates Foundation, National Australia Bank, Hughes Telematics. Rare you can get so many industry perspectives in a packed couple of days.

Mark Hurd, President in his keynote presented some key metrics of Oracle’s industry investments – 21,000 employees,  10% of total R&D, 26 industry specific acquisitions in the last 5 years. And the payback – in the past 3 1/2 years, Oracle’s industry specific revenues have tripled. 

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:)

The Changed Definition of Vertical Technology

It was 1997. Gartner used to publish an annual poster which rated systems integrators/outsourcers by industries, by geographies, by technologies, and other competencies. It was a large wall hanger with many rows and columns, and many analysts, including me, had a say in some of the cells.

One of the firms being rated submitted the same customer reference in their qualifications for the ERP, financial process competency and for the entertainment industry columns. I called the firm and asked them to pick one “view” for the scoring. They insisted they deserved to be given credit for that client on all 3 columns. We went round and round. I asked them Do you not have any royalty, studio accounting or DRM projects to share? They insisted their Oracle GL project for that entertainment client was proof of their industry expertise.

Fast forward 15 years and most vendors still show off their sales to specific industries as proof of their verticalization. There are some that can show specific industry functionality like retail merchandising or utility billing. Even fewer have functionality for newer biotech and countless other “new” industries. As a GE executive told me for The New Polymath

In sector after sector, we find that technology suppliers sometimes lack deep domain knowledge when it comes to vertical technology solutions. That has opened the door for GE Healthcare, GE Transportation and other units to become technology leaders in their markets. We are a multi - billion dollar software and technology company in our own right.

In comparison, it is interesting to read about Ron Johnson’s overhaul strategy at J.C. Penney. His track record – Apple’s wildly successful retail foray over the last decade. In my upcoming book I have repeated examples of how successful. Apple’s fingerprints are all over the Taubman Shopping Centers case study. In the ultimate compliment. Michael Gartenberg at Gartner says “I’ve called Apple the Nordstrom of technology in the past, but now it seems the student has become the master”. 

Apple has similarly reshaped music and mobile service. EBay, via Paypal, has reshaped banking. Amazon continues to revolutionize book publishing. Google and Facebook have reshaped the advertising world.

So, when vendors present to me about verticalization, I am not too impressed about that Oracle or SAP financials project in some industry. I was not impressed in 1997. Much less so in 2012 having seen what the Ron Johnsons can do. The definition of vertical expertise has come a long way.

The two most abused terms in tech..

are "global" and "vertical".

Many Indian vendors talk about "global delivery" when 90% of their resources are in India. Hardware vendors brag about their vertical expertise when their products are not even boxed differently by industry. And software vendors will harp on the fact that customers in certain industries use some of their horizontal capabilities as proof that they offer vertical functionality.

So, Oracle comes along with a double punch - a "Global Insurance" offering: "Serving more than 2,000 insurance customers worldwide, Oracle Insurance is an end-to-end software offering that manages the entire enterprise".

Oracle makes its case : 20 of the top 20 insurers use Oracle Applications. Just because they use ledger or payroll functionality does not mean Oracle can do their claims processing or policy management.

OK, well, Oracle did acquire an insurance focused vendor, Skywire in June. But Skywire had revenues of only $ 100 million last year in a very fragmented insurance software market (with other specialists you likely have not heard about  like Exstream, Duck Creek and INSTEC)

Here is the reality about why the insurance software market is fragmented:

a) There is little "global" about insurance. Each US state does its own regulation. Gets compounded around the world (and will only get even worse as regulators are wary of big bailouts like AIG)

b) There is no such thing as an "insurance industry". There is life, property, health, and many more types of insurance - each deserving its own NAICS codes

So, while it is good to see Oracle make industry investments (I have lamented the bigger vendors have been paying lip service to verticalization), I wish they would not overreach in what they can deliver in industry specific functional breadth or global nuances.

Whither SAP Verticals?

While several bloggers reported good progress from Sapphire last week in a number of SAP horizontals - Jason Busch on SRM,  Jason Corsello on HR, Brian Sommer on Business Objects and other analytics, and Paul Greenberg on CRM, I was disappointed to not see much coverage on non-manufacturing verticals such as banking, utilities, insurance, healthcare etc.

I asked 2 SAP executives - Jim Hagemann Snabe and Bob Stutz - at Sapphire about such verticals. Jim acknowledged legacy, typically custom developed vertical applications have been tough to displace particularly in the US.  In a few deals where I have seen SAP vertical proposals, I can tell you the "displacement" is tough because SAP's TCO (particularly those of its SI partners) has not been compelling - you could custom develop that functionality again for cheaper. Just maintaining the legacy apps is even cheaper.

Bob told us they were planning a CRM onslaught on several verticals. But overall, I did not see not much more on specific vertical functionality.

It would be nice to validate SAP' claim it is  is "strong" in 24 verticals when for the most part sells core ERP modules outside of its manufacturing base. Here's typical SAP-speak - Bill McDermott talking to AMR Research last month "The subject then turned to hot verticals. He immediately cited banking and retail. On the banking side, companies are starting with financials. The plan is to move them to more of the ERP suite and then on to core banking applications." 

That's horizontal functionality, my friends till (if) those customers get to implement those core banking apps.

Problems like those at Waste Management occur because of ambiguous definitions of "wall to wall" coverage in many non-manufacturing markets. If not SAP, its SI partners are pretty loose with definitions of vertical maturity.

Next time, I go to a Sapphire I hope to request Mike Prosceno to stack my schedule with non-manufacturing vertical sessions. I promise to also stay longer than a day :)

Update: Frank Scavo provides another POV

The Healthcare Opportunity and Mess

Former US Senate Majority Leader Bill Frist delivered a keynote at the HiMSS conference talking about the mess in US health care. Republicans are focused on costs and looming Medicare funds crisis, Democrats on individual coverage challenges.

Walking through the huge exposition hall here with almost a thousand technology vendors you see more signs of our inconsistent health care. Rocket science in some areas, laggard in others.

You walk through the GE Healthcare booth and you see all kinds of next-gen diagnostic imaging. You see Cisco's vision for tele-medicine.  You see what electronic medical records (EMR) should be like when you go to the Cerner booth. You see Motion's mobile clinical assistant which can scan bar codes and RFID tags on patients and nurses and prescriptions and communicate via Wi-Fi and Bluetooth to minimize errors.You see Vocera's  mobile and voice recognition capabilities to allow for more effective communications in high-intensity medical workplaces.

The you step back and see so many choices in each category. For every GE there is Siemens and Philips.  For every Cerner you have an Epic and a McKesson.  And as someone in the industry said - -and don't forget that "Patel EMR" custom developed and used by maybe 5 facilities. One healthcare CIO told me he had over 2,000 software licenses. You see that EMR adoption is mostly at stage 2 or 3 of a seven stage model developed by HiMSSAnalytics.  You see the babel of tower that a new breed of Health Information Exchanges are trying to rationalize. But doing so at local levels and causing their own consistency issues. You notice excitement about ERP solutions - something the manufacturing sector implemented a decade or two ago. You see basic business analytics.

Forget the political gridlock around health care. We also have technology gridlock.

It struck me that 4 years after President Bush announced his "moonshot" that by 2014 every American should have an electronic personal health record (PHR) to mirror or consolidate what their providers EMRs show, today less than 5 million do. As Google steps in to help, may be it should be Facebook which jumps in. People seem far more willing to share their deep dark secrets with them than they do their health details with employers and insurance companies.

Opportunity or mess? 

At HIMSS next week

As I prepare to spend a couple of days at the healthcare tech conference in Orlando next week, I notice Lawson is a sponsor. I also notice Lawson announced today it is acquiring VasTech, a healthcare focused workforce management vendor.

One of the people I am looking forward to meeting is Dave Watson, who used to be CTO at Kaiser Permanente and recently moved to Medefinance, which specializes in analytics for the healthcare vertical.

Plenty of other vendors to see there...healthcare is seeing an amazing range of new technologies as I have cataloged from time to time on innovation focused New Florence blog. 

Vertical Innovation

I look forward to Dan Farber's video interviews of CIOs at ZDNet. He brings out various vertical nuances whoever he interviews. And it usually reinforces that  is where some of the more creative, innovative work is being done in companies, partly because mainstream technology vendors deliver so little, even though they brag about being being vertically deep.

I have posted links to three on my New Florence innovation blog, and included along with them other posts I have for the industry.

Airports (and Aviation in general)
Public Utilities
Rental Cars (and travel broadly)

By the way, I also plan to be at HIMSS in Orlando later in the month - lots of innovation happening in health care. If readers are planning to be there, please let me know.

Intuit's SaaS move

No, this is not about QuickBooks Online - but an acquisition of Digital Insight which offers bill presentment and other SaaS  functionality to regional banks.  No, it is not moving away from its SME focus. While it may appear that BofA branches are sprouting everywhere, there are literally thousands of banks around. Over 7,500 in the US alone. And only about 200 of US banks show up in the world's largest 1,000. So, a vertical market where no single software vendor has made a huge dent and very much a SME market where Intuit can make an impact.