For now, the vertical service provider appears to be largely a domestic US phenomenon, but I'm hoping the popularity of the model will spread to other markets.
What Is A Vertical Service Provider?
Simply put, someone who takes some corner of the industry, and absolutely nails it. Every vertical -- healthcare, insurance, retail, education, construction, etc. -- has a few core applications that define their industry.
The VSP's proposition is simple: get those critical applications from us, as a service. Not only will it be cheaper/better/faster/easier, you'll have access to our industry expertise as well.
This model doesn't work everywhere, but -- where it does -- it's a comparatively strong model.
Why is that?
Know Thy Customer
Being a service provider who focuses on a narrow vertical -- and its core applications -- brings some inherent advantages.
First, it's really easy to know who your customer is, and who they're not.
For example, if you provide end-to-end K-12 services, qualifying a lead is pretty straightforward. And, let's not forget, knowing who your customer is makes it far easier to reach them from a marketing and engagement perspective.
Second, when you do find your potential customer, the conversation tends to move along nicely ...
You, the VSP, know the industry and what your prospective client is trying to get done. You immediately bring credibility and authority to the discussion.
Third, there's what I call the "evergreen upsell".
Once you've got a few core applications being delivered as a service (and the customer is happy!), you're free to offer up either more enhancements to your vertical proposition, or -- more interestingly -- go after all the other horizontal stuff they've likely got: email, collaboration environments, productivity, basic back office apps, etc.
After all, these people trust you with their core applications -- they're likely to trust you with the other stuff as well.
And There's Plenty Of Opportunity
A while back, I did a quick study of many of the interesting verticals, and their associated "core applications".
Very few were being offered "as a service". Sure, you could go to some hosting provider and stand up a pre-packaged piece of software if you were a customer, but that's really not what's being discussed here.
These are the applications that power just about every industry on the planet. And many of them are ripe for "cloudification" -- using virtualized infrastructure and changing the model to a pay-per-use one.
Indeed, I'm starting to see some interesting hook-ups between established vertical solution providers and more horizontal infrastructure-as-a-service players. Each brings something useful to the table. And, of course, we as EMC are trying to position our capabilities -- alongside VCE and Vblocks as a platform - behind these newer verticalized models.
What About Outside the US?
There's some vertical activity, but it's not as pronounced. I think one of the reasons is that the US presents a large and relatively homogenous market to sell verticalized offerings. Bake up a good solution for a selected vertical or two, and there are plenty of people to go sell to who speak your language, inherently trust you, etc.
Cross a border or two, and the picture changes dramatically. People tend to want to do business with people they know and trust, and there's no escaping the fact that geography and country borders play a factor in this.
That being said, there are some promising vertical offers going up in places like the UK, for example.
What Will The Future Bring?
Personally, among all SP models that I encounter, the ones with a strong vertical flavor seem to be the easy early favorite. Their market and their value proposition is crystal clear and very compelling.
The real question for me is market expansion -- will these verticalized service providers go more horizontal, and make a play for the other IT services within their customers? Or will they pursue a path at expanding their vertical expertise even deeper, or perhaps expanding into new geographical markets?
Either way, it should be fun to watch.
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