Vertical break-through horizontal expansion industry perpendicular market is the cloud era new blue sea

Ultimately, the ability to tap the hidden value of input and behavioral data can be the most critical capability for any SaaS provider to gain market success. This is an absolutely impressive number, as sales and marketing costs are often the biggest cost items in the business world.

This article is written by Gordon Ritter. Gordon Ritter is one of the founders of Emergence Capital, a company devoted to investing in cloud, and a partner of the firm. In the era of cloud computing, he argues, professional firms focused on vertical services will have a great opportunity to develop. Because its customers get lower cost, make money faster, master more data, and customer relationship can be more closely.

Prior to the cloud, enterprise software vendors focused on the vertical market were considered second-class citizens relative to the "big men" selling things in the wider market. That's a far cry from market share to income and profit. The idea of a solution that specializes in a niche market or a particular industry (unless the market or industry is becoming more horizontal) is considered parochial.

However, with the advent of the SaaS model, the situation has been reversed. Focusing on vertical niche markets or specific functional areas is likely to become one of the most strategic aspects of enterprise cloud software. While there may still be a number of "all-inclusive" solutions for everyone to be successful (such as Microsoft, Oracle), the success of most cloud solutions will depend on their ability to focus and do a good job. Solutions that have specific goals, are split vertically or functionally and that meet the unique needs of your customers are becoming key to software success. Why do you say that?

Better than absolute numbers, making money is the hard truth.

Some of the driving forces are obvious. Perpendicularity can significantly reduce customer acquisition costs (CAC). The absolute number of potential target groups has become smaller, the audience group has been refined, can not need so many sales personnel ordered to contact the customer's speed greatly accelerated, and in the classification of users under the Word-of-mouth spread widely recommended, sales and marketing efficiency has been significantly improved. In most traditional models, CAC is usually the equivalent of signing a contract price of one or two years with a customer. In other words, it is possible to do more. Many times it takes two years to get the cost back and the third year to make a profit. However, in the vertical area, CAC can be as low as One-fourth of the annual contract price, so the first year can be immediately realized profits.

Verticality also allows you to gain more market share in a shorter period of time. The level of the solution needs to conquer the territory is too big, need to attract too many enterprises, so very few people can get more than 5 or 10 points of market share. However, concentration in the vertical area can effectively increase the permeability-in some cases even up to 60%, while also allowing your solution to become an industry standard, and becoming a standard may further increase your market share and form a virtuous circle.

Veeva Bae, a CRM platform in the Life sciences field, is an example. With Focus, the company has spent only 4 years eroding Oracle's share of the U.S. market. Because of focus, OpenTable a 12% share in the North American reservation market, WebMD accounts for 40% of online health traffic.

Faster and more

It may sound corny to have a lower market share of success, so let's get something new. The cloud platform allows innovative companies to quickly deploy competitive technology over a few quarters of a short period of time, and in the case of a locally deployed software model, it takes at least a few years. This unprecedented new paradigm allows businesses to gain greater revenue and collect more data for larger data analysis.

The introduction of the value layer

This focus on deploying software modules for specific classification and management issues can help companies gain greater revenue share. With the advent of new customer requirements, the unique infrastructure architecture of the cloud model can help to shorten the cycle of development deployments, reduce costs, and provide a new functional layer for specific industries. The emerging portfolio company, for example, Veeva This, and provides a range of horizontal solutions from CRM to marketing automation in the Life sciences field. The company has completely updated the functional layer two times in a year. Like the platform Veeva receptacle, which is responsible for marketing and data management, its Veeva Vault content management solution was made from scratch, and it took only 18 months to market. Another example is RealPage, a property-focused company with a market capitalisation of $1.6 billion trillion, that has now expanded into its surrounding areas, including apartment buildings, student dormitories, and elderly communities.

Using data to become a senior advisor

One of the fundamental advantages of cloud mode is the unprecedented ability to capture data. In the localized software installation mode you may be able to learn about the number of seats provided by the system, while in SaaS mode you can go further, even the number of active users is known, and more importantly, you can also know the user's use of the platform. In a cloud environment, you can capture user data, archive and analyze it, and visualize it. This analysis and the ability to correlate statistics across layers can be insight into customers with unprecedented depth.

Lithium technologies, another social software provider, used its in-depth analysis of the data to successfully build a consumer community to help clients achieve "Community Health Index (CHI)", which allows a detailed analysis of community use to predict community success. Lithium realizes this process of pipelining operation, can automatically create Chi report, and it bundled with the additional services, so that the value of this data monetization. Zillow is another good example. The company keeps track of each user's clicks and then brings the user a more tailored experience. By allowing users to add details to their attributes, such as descriptions, photos, and so on, the company uses the power of crowdsourcing to enhance the value of the data.

Using data to help consumers succeed is a powerful and effective tool for upgrading a company from a software vendor to a senior consultant. And it's much easier to achieve this in the vertical. Under the same platform, if you are dealing with a particular industry, such as a pharmaceutical company or a retailer, it is much easier to classify data and "pattern" matching.

Ultimately, the ability to tap the hidden value of input and behavioral data can be the most critical capability for any SaaS provider to gain market success. Being a top consultant not only makes your solution more valuable to your customers, but also enables your company to become a trusted partner and enhance your company's position. Demonstrating your value as a data analyst and consultant will strengthen your role as a market expert and market leader.

This focus can reduce the cost of customer access to the highest 75%. This is an absolutely impressive number, as sales and marketing costs are often the biggest cost items in the business world.

(Responsible editor: Lu Guang)