Vertical VARs

The need for channel partners to develop true vertical expertise goes hand-in-hand with their ability to add genuine value and increase their margin potential. In the enterprise hardware and software space, verticalisation — the ability to develop, deliver and implement solutions suitable for specific industry sectors — is already well established.

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By  Stuart Wilson Published  October 26, 2005

Customer demand|~|varghoul200.jpg|~|Tarek Ghoul, regional channel manager at Cisco|~|The need for channel partners to develop true vertical expertise goes hand-in-hand with their ability to add genuine value and increase their margin potential. In the enterprise hardware and software space, verticalisation — the ability to develop, deliver and implement solutions suitable for specific industry sectors — is already well established. Major vendors are pushing hard to encourage channel partners to develop the business, technical and service skills required to take these solutions to market Customers are increasingly demanding solutions tailored to their specific business needs. The days of selling a generic software and hardware solution, whacking on a load of extra coding and going through an arduous and often lengthy systems integration process are being consigned to channel history. Vertical focus and specific business process expertise are the watchwords of forward thinking vendors and channel partners alike in 2005. “Approaching specific vertical markets is something that Cisco has been actively engaged in for several years,” explained Tarek Ghoul, regional channel manager at Cisco. “There is an increased emphasis for both Cisco and its partners on serving the needs of customers in specific verticals. The idea is to present a technology architecture that supports the customer’s business, has the ability to enhance productivity and revenues, with the overriding aim of helping drive growth while simultaneously controlling costs.” “In major vertical markets such as real estate, banking, healthcare and government, Cisco has already developed industry specific solutions that meet the needs of these clients. Then it is about building strategic relationships with solution providers for specific technologies suited to specific verticals,” Ghoul added. The ability to take vertical solutions to market is driven not just by the vendors developing the necessary hardware and software architectures to reflect specific business processes, but also by the channel’s propensity to develop its own skill set. Major vendors in the ERP sector have mirrored Cisco’s efforts in the networking arena. Creating vertically tailored ERP solutions is now a well-established part of the business model. Hari Padmanabhan, executive director and president at ERP vendor 3i Infotech, explained: “We have already looked at the areas where we have significant expertise in implementing solutions for specific verticals and mapped this experience against the market requirements. In some areas, it is clear that there are significant advantages justifying the creation of a vertical solution — a prefabricated offering that provides more value than the customer would otherwise receive.” A series of Orion Advantage solutions from 3i now cater for the needs of specific vertical markets covering a wide range of business areas ranging from plastics manufacturing to IT distribution. While it remains very easy to talk about verticalisation at a conceptual level, what exactly does this mean in terms of the architecture of the solution offered? Padmanabhan is happy to explain: “It is incredibly business specific. For example, in IT distribution, customers need functionality that allows them to track serial numbers and warranties as well as service components. We can build this into the solution for them. In the food distribution space, customers need functionality that allows them to track expiry dates and schedule deliveries accordingly.” ||**||Integration needs|~|varsblower200.jpg|~|Phil Blower, sales director at SAP Arabia|~|One vendor leading the way in verticalisation is global ERP giant SAP. For Phil Blower, sales director at SAP Arabia, there is no question that the process driving the creation and delivery of vertical solutions can only accelerate moving forward — especially in the enterprise account space. “It is not just SAP that sees advantages from developing vertical solutions,” says Blower. “Every single IT vendor and customer is saying the same thing. It is a given now, not something that is up for discussion. Vertical solutions are here to stay.” It is a view reiterated by all major vendors operating in the Middle East and the channel community targeting the large account space would do well to take heed. Simultaneously, it is also worth noting that vertical solutions, which today may be the preserve of the enterprise account space, will eventually start to make their presence felt in the midmarket as well. Channel players — especially those with service aspirations — need to start figuring out precisely how they will address the growing demand from customers for implementation partners that understand their business processes. “By creating vertical solutions, it certainly reduces the requirement on partners for any specific code to be added,” said Blower. “But as anyone who has worked in this industry for any length of time will tell you, that is a great thing because that is where all the disasters take place. Vertical solutions decrease the coding requirement but increase the role of the implementation partner as an agent of change, a true business advisor and an educator of the customer.” To date, partners in the Middle East have started to develop vertical skill sets. This is especially true in fast-growing and major vertical segments such as oil and gas, retail and the public sector. However, building up expertise is not an easy option and the vendors themselves are keen to assist their channel wherever possible. ||**||Pushing partners|~|varhari200.jpg|~|Hari Padmanabhan, executive director and president at ERP vendor 3i Infotech|~|“It is a bit of a challenge still because of the nature of the business partners in this region,” said Padmanabhan. “Not all partners are capable of working across countries in a fragmented region such as the Middle East. Partners that build expertise in certain verticals can scale their business faster with less incremental costs for each additional sale. That’s the real benefit.” 3i now has 20 partners for its Orion Advantage solutions spanning 12 countries in the Middle East. According to Padmanabhan these partners are closely mapped to vertical markets in countries such as the UAE and increasingly Saudi Arabia, but admits that other countries need to hit a critical mass in terms of the number of implementations before this degree of specialisation can occur. Chasing vertical solution sales is far from easy, but rewards are there for those partners prepared to make the effort. “We have to encourage partners to pursue the more difficult vertical solution sale,” explained Ghoul at Cisco. “If they chase and win a consultancy-led vertical solution sale, we will reward them accordingly. Building vertical skills and consulting expertise within Cisco partners is an ongoing task. We have become very sophisticated at this now — it’s like playing a game of multi-dimensional chess.” As the Middle East channel matures, the formation of ecosystems capable of delivering vertical solutions will become more important. The dream for most vendors is an ecosystem of their own in-house resources working in tandem with a skilled vertical integrator and a proximity partner if the customer requires it. Vertical solution sales are here to stay. ||**||

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