Vertical focus only makes sense for Microsoft
Author: Curtis Beebe
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Microsoft’s “verticalization” of their Dynamics channel makes all the sense in the world from a Microsoft channel management perspective. The designation of vertical specialties gives Microsoft an objective approach to resolving channel conflict, assigning leads, and providing sales & marketing support. At first glance, this is one of those “blinding flashes of the obvious” that will enable partners to sell better, reduce sales cycle time, reduce the cost of sales, and stay focused in a specific area of expertise.
The problem is that it doesn’t work. The first issue is that the Dynamics products, just like all of the Microsoft products, are horizontal by nature and design. Sure there are some ISV’s that provide a bit of industry specialization, but ERP and CRM solutions are inherently NOT vertical solutions. They are designed to provide processes and functionality across a range of business types.
That brings us to the second problem. Because they’ve been selling horizontal products, most partners have grown their businesses horizontally. Some of the savvy partners have developed industry specific knowledge and terminology to help them sell, but the solutions remain fundamentally horizontal. As a result of the horizontal approach, partners tend to look at their customer’s businesses based upon the business process groups that are being automated: process manufacturing, discrete manufacturing, professional services, wholesale distribution, depot management, etc.
The big disconnect is that Microsoft is trying to define the customer’s business based upon SIC codes. The SIC codes are focused on the type of product being manufactured, sold, or distributed, rather than the general business process group: one business process could map to dozens of different SIC codes. The result is that partners are trying to manipulate the lead distribution system by selecting all of the hot, unassigned SIC codes within their geographies rather than truly focusing their business.
This effort is doomed to become just lip service that partners pay to Microsoft in order to ensure they get their share of distributed leads.
Dwight Specht
Curtis Beebe
Mark Polino
amen.
Curtis – I appreciate your article and would like to offer some comment – which means I’m not sure if I agree or disagree – perhaps a little of both.
Yes, ERP and CRM are not by their nature verticle solutions. Partners do, in fact, miss significant opportunity by assuming that a particular solution only fits in one domain or another, and fail to recognize its potential in “unconventional” environments. However…
“Savvy partners have developed industry specific knowledge and terminology to help them sell.”
The focus on domain verticles is a marketing strategy that enables the Microsoft to transition from a “product” centric strategy to one that is more “solution” oriented and focus on the business needs of the customer.
One area where we are in violent agreement is the idea that every business is comprised of a set of processes or operational functions – finance, marketing, product development, manufacturing, supply chain, customer support, etc. Functions that are defined by their operational processes, organizational specifications and applicable technology, and functions that have significant commonality from industry to industry. However, the key to overall business success is how well they are integrated and work synergisticly to support the business.
Just as partners may be missing out by not recognizing opportunity horizonitally – i.e., opportunities to sell existing products in unconvential environments – they also run the risk of missing out on opportunities to sell vertically within existing accounts and business environments.
Dave,
Thanks for the comments.
I guess the point I’m trying to make, is that, while the vertical approach makes sense to Microsoft, it doesn’t represent the real world of most partners. The vast majority of partners, at least in North America, are regionally focused and horizontal. Trying to force a vertical view seems to be just that: forcing it.
Curtis
Great post, Curtis.
It has always been challenging to Partners to try to go vertical because most Partners are involved in their community and most sales are relationship-based. Friends, associates and repeat business from CFOs/CIOs/controllers that change jobs provide a large percentage of new sales opportunities for most Partners.
As you mention, the horizontal nature of the product also sets the stage. xRM is a perfect example. Sure, it would be nice to build an industry specific xRM app and sell it into a vertical. (Maybe we will see more of this.) But the power of xRM is that is is easy to adapt to any industry.
When Partners are investing in marketing, the regional numbers in a vertical are usually pretty small. The whole pie is much more appealing to market to than just a small slice. My bet is most xRM marketing will be horizontal as well.
Hey Barb, great to hear from you.
That’s a great point about xRM….there’s nothing vertical about it..really just a development/application delivery platform. Like you say, once you do one, there probably isn’t a concentration of similiar businesses in a given geo to be able to leverage.
Curtis
Curtis,
Good post. Like many things Microsoft, verticalization is a concept that aligns very logically to presentations and discussions however I would agree that it does not translate cleanly into many partner businesses. In addition to the points you make one other challenge to verticalization is geography. Many partners serve relatively small geographies however as you move to specialization the pool of opportunities shrinks.
Another good discussion going on over at http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=2393&discussionID=6235563&goback=%2Eanh_2393
Hi Curtis,
Last week I posted the below comment on your LinkedIn thread.
I have a vertical success story that I wanted to share:
http://www.directimpactnow.com/pdf/VAR_Success_Story_SAG_PSOs.pdf
I hope that this will illustrate the value that vertical marketing can bring.
All the best,
Robert Lesser
President // Direct Impact Marketing
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LinkedIn Comment:
We can provide another perspective: we conduct vertical marketing programs for Dynamics partners under the VMAX program.
In speaking with thousands of prospects over the years through teleservices, end users are clear in their need for vertical solutions.
The pain points that we uncover are often vertical in nature. Most importantly, prospects ask for customer evidence of vertical capabilities.
I would suggest that as a partner your probabilities of both engaging a prospect, generating a lead and converting it to a sale are much better with a vertical focus.
Some partners do not create vertical add-on solutions. We have seen partners successfully address the vertical requirements through service customization in system integration, product bundling, consulting services etc.
In a mature industry like ERP solutions with a consolidating number of players, a vertical positioning may be one of the best ways to differentiate your business.
(Note: there will always be exceptions. For example, there are geos that are not very attractive for vertical marketing (e.g. Alaska).
I hope that helps.
Robert Lesser
President
Direct Impact Marketing
Website http://www.OnDemandInsideSales.com
Twitter http://www.Twitter.com/RobertLesser
Blog http://www.directimpactnow.com/leadgentools/blog/
Microsoft is still referring leads by geography rather than expertise.
Last week we met an unhappy user who purchased a system from a local Var who did not know their industry.
It reflects very poorly on Microsoft and the Var that did the project when an ISV had the solution they needed.
Plus they have a very cumbersome ISV certification process. It should simply be based on references.