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Vertical focus only makes sense for Microsoft

August 19, 2009 12 comments

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.

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