Call it service economics. When the stock market gyrates up and down with the kind of sudden jolts that we've been tracking for the better part of a year, it's time to bet heavily on vertical markets.
Call it service economics. When the stock market gyrates up and down with the kind of sudden jolts that weve been tracking for the better part of a year, its time to bet heavily on vertical markets. In comparison, when the market shows steady growth, its time to test new technologies that can span many markets.
The reason is that vertical expertise is almost always a safe bet in an unstable market. It works something like a hedge fund. For one thing, expertise in a specific industry is easy to advertise as a unique offering, and its difficult for competitors to mount a quick assault because vertical practices cannot be built quickly. It takes years to gather enough talent specific to a vertical market and a solid track record so that youre a recognized expert in a field.
Its not enough just to sell technology solutions in vertical markets. You have to understand the impediments to growth and be able to share that with your customers. Thats not something you learn overnight. Its something you pick up in context with other players in a specific vertical that accelerates as that market either expands or contracts.
Second, as times get tough in a gyrating economy, companies inevitably look to cut costs. To do that, they turn to people with expertise in their particular arena who have a long enough track record to show that these experts still will be in business five years from now to help guide them through the next round of tough times.
That approach stands in stark contrast with a sustained growth wave, like the kind weve lived through for the past two decadesminus a sharp drop in October 1987 and a brief recession in 1991. Thats the time you want to invest in new technologies that can open a vast array of new opportunities spanning multiple vertical markets.
That is why the Big Five consultancies made heavy investments in systems and network integration skills a decade ago, and why Web integrators put so much effort into Web-site design several years ago. Its also why Web integrator stocks had one of the best rides in recent history, until 12 months ago when reality closed in on their dot-com customers and wiped out their earnings.
The lesson to be learned here isnt that the skill set was flawed, any more than PC resellers were five years ago. The problem is that they didnt have much else to offer and couldnt adapt quickly enough to market changes. If any of them had a vertical-market practice to fall back on, they probably would have weathered the storm quite well.
If all of that seems daunting, consider that were now about to enter the next cycle of investment in skills. As inventories hit bottom and the economy begins to dig itself out from the rubble, its time to start looking for new growth areas that again can be leveraged across multiple vertical markets.
Many of the hot new growth areas are extensions of legacy-to-Web integration, and they can be incredibly complicated when you add in such factors as unstructured data, high availability, and a quantum shift inside corporations from building systems that focus on function to processes that span multiple departments. That means this round also will be heavily focused on partnering, and the effect on service economics could be profound.