In the October issue of ENX Magazine (“There’s Gold in Selling Software Solutions, but You Have to Dig for It”), both dealers and software vendors touted the benefits of focusing on vertical markets. Let’s drill down on the reasons why that might be the smartest strategy for your software business.
- A vertical focus offers the most value. The more closely you can set up and configure the software to the industry-specific processes, the more the customer will pay for your services. You will get bigger margins for a plug-and-play solution, because you can add consulting services on top of the software sale.
- Focusing on verticals is more scalable. Even within a vertical, every customer will have unique needs. However, core business processes tend to be very similar from one company to the next within an industry. Healthcare organizations, for example, are all mandated to handle certain documents in the same way. Once you have a working configuration in, say, an ECM or accounts receivable package, the work setting it up for subsequent customers is much less.
- Domain knowledge is important. You can’t be an expert in every type of business within your territory, but you probably have learned something about how the biggest verticals in your areas operate through your experience supporting their document imaging systems. That gives you a base to build on and to show that you understand the specific processes that the software will support.
- You can build on your existing relationships. Dealers tend to have clusters of customers within a specific industry. Presumably, trust has been built up with those customers, not just as a reliable supplier of hardware and service, but again, as a partner who understands how the business works. That’s important to avoid, as Greg Bryan, CTO of KDI Office Technology put it, the “Jack of all trades, master of none” impressions that customers often have of dealers who go into other fields. It’s then easier to have a conversation about software when you already know how to talk about the customer’s business, especially if you are selling software that is a natural extension of your document imaging business.
- Most software vendors already have a vertical approach. Software companies often offer options that are pre-configured for certain industries. ECM vendors Digitech Systems and M-Files, for example, offer vertical solutions including legal, healthcare, manufacturing, and education. This doesn’t mean you can install the software as is out of the box; there will still be some customization. However, you can expect a lot of the heavy lifting to be done for you, and know that your software partner is able to provide you with industry-specific support.
- A vertical focus in software is a competitive advantage over other dealers. Once you have success in one vertical selling both software and equipment, you become more attractive to other organizations within that vertical. It’s an opportunity to have conversations about consolidating the software and equipment sales and support with one provider, and you will have references to help make your case.
- It’s repeatable to other industries. Once you go through the process of building a software practice in one industry, you have deeper understanding of the investment required as well as the risks and rewards. You can then start looking at other verticals in your area that have the need and that you can scale.
