Beware vertical industry cloud solutions that limit your options

Jim McGeever Profile picture for user Jim McGeever January 14, 2015
Choose carefully: watertight vertical industry cloud solutions can limit the potential for business transformation, writes NetSuite’s Jim McGeever

Goldfish in bowl
It’s becoming increasingly difficult to neatly categorize any company as serving a single industry. The lines delineating industries such as manufacturing and retail are blurring as more organizations adapt and grow their business. While catering to several or many verticals may have always been true for enterprises, until recently midsize organizations have tended to stay in their lanes.

Now, competitive pressure from a wider set of global rivals and the emergence of startups using new business models such as subscription services are forcing companies of all sizes to expand or shift their industry focus. That’s only going to continue as more organizations pursue additional sources of revenue and transform their operations to play to their strengths.

There are different ways in which this industry blurring is occurring. For some organizations, it’s a question of company maturity. For instance, a product retailer that sees its sales take off, may decide to provide some type of paid services alongside its product such as implementation or consultancy advice. Soon, that firm is not only a retailer but it’s also a provider of professional services with the need to assign project teams and track and account for projects.

Or, consider the reverse situation: a consultancy that chooses to productize and release more widely some custom software it’s developed for clients, drawing on its deep experience in deploying applications. It now needs additional functionality within its sales, finance and customer service systems to fully support both its core and its fledgling operations.

Industry blurring

This blurring of categories is impacting manufacturing in particular, an industry that traditionally has been slow to automate, integrate and unify disparate business processes. Along with a highly competitive environment, manufacturers now also have to weather a barrage of new technologies such as 3D printing, with the potential to fundamentally change the manufacturing process and unseat long-term makers of simple mass-market products.

As a result, more manufacturers are taking their first cautious steps into the retail arena by developing a direct-to-consumer ecommerce operation. In most cases, this augmentation to their core manufacturing business is a way to explore a new source of revenue and to develop closer, long-term relationships with customers while also complementing the channels and services which their existing retailer and wholesale distributor partners already provide.

Ultimately, this industry blurring has a profound impact on both the companies affected and the business management software they use or plan to use. Firms stuck with rigid on-premise software may find themselves held back by the limitations of their business applications and unable to enter new vertical markets while their peers take advantage of the flexibility of cloud-based business management software.

For some organizations, migrating to a more adaptable cloud-based architecture may indeed be the catalyst to rethink the business and the industries on which it focuses. Being able to run a business on the same single unified suite means a company has options when it comes to future strategy. The organization has the tools to centrally manage and support its operations no matter how its vertical focus may change over time. Firms running their businesses on a single unified cloud-based business management suite are able to maintain a healthy balance between retaining existing vertical functionality and seamlessly adding new industry capabilities as required.

Don’t get boxed in

I believe the rush by some business software vendors to create overly specific industry clouds runs counter to the changing needs of organizations. Companies are seeking flexibility, not watertight cloud industry boxes. If an organization has defined its business processes according to the strict requirements of a single industry and then circumstances dictate a broader focus, the company may end up spending a good deal of time and money to repurpose or add on to its existing functionality.

The inherent danger in taking a very narrow approach means a firm’s systems may actively work against it acting in an agile manner, for instance, being able to acquire and fully integrate an acquisition in an adjacent vertical in a matter of months, not years. Instead, a single industry-focused company may end up effectively running several siloed vertical businesses and be unable to realize any synergies between those operations.

Where we’re eventually heading is the ability for organizations to take a ‘pick’n’mix’ approach to industry functionality, choosing the high-level pieces they need to run their businesses most efficiently and then being able to draw on customized niche capabilities developed by partners or the company itself.

The customization question opens up a broader debate for companies coming to the cloud from the on-premise world. Typically, many organizations heavily customized their legacy business management software in order to support the needs of the industry they served – only to face significant upheaval around upgrades or version lock. In fact, many on-premise software vendors have often warned against the perils of customization, urging customers to keep projects ‘vanilla’ so as to avoid some of these issues.

Moving to the cloud provides the freedom to break with that restrictive and rigid industry past, with customizations that carry forward automatically. This is an area of prime importance to any company seeking to transform their business.

Industry strengths

For organizations already operating across industries, migrating to the cloud is a way to integrate previous siloed industry operations for maximum efficiency. Think of a gym operator that also operates cafes and gym equipment stores within each of its properties as well as running an architecture and construction business to build its gyms. Think of a truck rental company that also manufactures and maintains its own fleet of trucks.

In any focus on industry functionality, a company should take the time to determine where it really has vertical or micro vertical needs and where it can confidently rely on the vanilla version of cloud-based business management software.

As well as drawing on the industry strengths of a software provider, also look to the strong relationships companies like NetSuite already have in place with independent software vendors, consultancies and systems integrators. Many of our partners also have deep vertical expertise and have built out specialized add-ons for a micro vertical like wine growers on top of our cloud-based business management suite. So, companies can leverage vertical strength from a variety of experienced sources – themselves, their peers, their primary and secondary software providers, and other industry-rich partners.

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