Cloud Success May Eventually Hinge Upon Channel Verticalization


As the channel becomes increasingly engaged with cloud computing and managed services, many of the partners are likely to turn toward vertical markets as a means of differentiating themselves.

So says Gordon Ritter, a partner with Emergence Capital Partners, a San Mateo, Calif.-based venture capital firm that specializes in the cloud, mobility and enterprise social media sectors. The 10-year-old firm has played a key role in the funding of a number of major players, including Salesforce.com, SuccessFactors, and Yammer.

"The first 10 years of the cloud was around horizontal applications," Ritter said. "The next 10 years we think will be led by more of a vertical opportunity as companies strive to be more creative, sometimes building upon the success of the horizontal services that came before them. Moving forward, success will be based largely upon expertise around vertical markets that best match their model."

 

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Ritter said that although many of the benefits of cloud computing pertain to the reduction of sales and marketing costs as part of an effort to increase market share, the next step lies in the efforts to increase share of wallet.

"Once you enter a market with a particular feature set, you can tune it for a particular industry much more easily," he said. "You find yourself adding new services that can be quite different from the ones you started with, and therefore can take more of that share of wallet over time. Once you have layers of software and own the solution stack within a targeted vertical, you can then tie those layers together with the analytical piece that can also provide customers with increased insights about their data. This can provide a great deal of value to your customer."

Ritter acknowledges that the early days of the cloud have not been focused on the channel. But as the cloud becomes more mainstream, he expects a much more substantial role for channel partners that can adapt to the new model.

"There's not quite as much money up front," he said. "It's like a book of business, almost like an insurance broker would have. But, I think we will see increased opportunities for specialized partners who can leverage vertical expertise into higher price points and more consulting services than they would otherwise get by selling horizontal offerings."

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