Vertical Venues

Consider how Darren McBride, president and CEO of Reno, Nev.-based Sierra Computers & Training, found a revenue opportunity when the federal government legislated the Health Insurance Portability & Accountability Act (HIPAA). Sierra Computers created a five-day intensive HIPAA course where IT workers learn how their technology expertise will be used to make companies compliant.

In addition, Sierra Computers designed a four-hour HIPAA-Awareness class for regular health-care workers that focuses on the privacy and security aspects of the law, McBride adds. The solution provider is also targeting opportunities generated from the potential need for customers to continually monitor operations for HIPAA compliance.

It's not enough to put procedures in place "and dust your hands off and say, 'I'm done,'" McBride says. Companies have to install ongoing security measures. "To me, that is another substantial opportunity," he says.

Today, at least 50 percent of Sierra's revenue comes from offering clients HIPAA training. And another 35 percent is generated from selling hardware and software in the health-care community.

The remaining 15 percent of Sierra's revenue comes from the other vertical market that, according to VARBusiness research, currently holds the most opportunity: finance. The solution provider makes most of its money by focusing on clients in the home-mortgage and loan-refinancing businesses, McBride says.

"I'm sure there are banks that are still consolidating all across the country, but in northern Nevada, we are seeing a quiet [time]," he says. "It's almost to the point where...there is a technology refresh going on."

A definite trend within the vertical is streamlining processes. Frequent acquisitions and mergers between major corporations--such as the one involving Nations Bank and Bank of America--have been creating a lot of opportunity for high-tech consulting and integration, says Joel Scotkin, CEO and president of New York-based Random Walk Computing.

"There has been a continual push toward operational efficiency and cost savings," he says. "As the [stock] market became flat, more firms have been trying to minimize the number of people involved in trading or the overhead of any activity involving the transfer of money. The result has been that automation has become very important throughout banking and brokerage firms."

To that point, the buzz phrase in finance is Straight Through Processing (STP), which entails taking people out of the process of trading stocks and funds, and having these tasks completed through electronic automation. "All normal transactions are handled without people having to touch [them]," Scotkin says.

Interestingly, the financial-services vertical is not alone in looking to streamline operations. Others are betting on the telecommunications sector--an area that rose from eighth in importance last year to sixth this year. That piece of research may raise some eyebrows, since telecom has suffered a well-publicized bust in the past couple of years.

Veritas Software president and CEO Gary Bloom, however, cites the vertical as one of the two largest revenue-generators for his company. How has Mountain View, Calif.-based Veritas made money in telecom? By showing telecom customers how to streamline various business processes, Bloom says.

Government Focus
Paul Smith, Veritas' vice president of government operations, says one only has to look at the budgets proposed by the Bush administration to see there is money to be made from targeting the federal government, which is making a huge push in security measures. The federal government is proposing a 15 percent increase in IT spending--from $52 billion to $60 billion--for 2004. In fact, IT spending on the federal level has been going up each year. In 2000, spending was tallied at $30 billion and rose to $40 billion in 2001.

"It's an important part of the agenda," Smith says. "This administration believes that all wars now are information-centric."

Military spending is a big piece of federal spending, to be sure. For instance, 10 years ago, during the Gulf War, roughly 20 percent of the weaponry was considered high-tech or "smart." In the more recent war with Iraq, more than 70 percent of the weapons were smart.

"Everything is more about a joint campaign," Smith adds. "There is more sharing of information between all the military [agencies.]"

The pie, however, is not as big among the state and local governments' budgets, but IT spending has still increased. Smith says state and local governments spent about $39 billion in 2001. That's projected to increase to $41.5 billion in 2004.

"So there is some modest growth there," Smith acknowledges. "But the short answer is we are investing heavily in both [federal, and state and local government opportunities]."