How to Choose a Vertical Industry or Technology Specialization

By Beth Vanni  |  Print this article Print

Specializations can boost revenue and profitability for IT solution providers, but how do you decide on a vertical or technology niche? Here's a look at some of the factors to consider.

By Beth Vanni, Vice President, Amazon Consulting

Specializations programs are now mainstream parts of many vendors’ competency-based programs.  And, results show a positive impact to solution providers overall. However, selecting the type of specialization to invest in is not as easy as choosing between which vendor to use to print your business cards, or what soft drink brands to stock in your company refrigerator. There are many facets to consider when deciding whether to acquire a vertical-industry or technology-specific specialization from one of your leading suppliers.

In Amazon Consulting’s recent channel study, "How Special are Specializations?," 400 solution providers and 40 IT vendors were surveyed to gain insights around why channel specialization programs matter, and which type of specializations both vendors and solution providers should invest in for the future.

Despite the fact that there’s a high abandonment (57 percent) rate of solution providers not investing in specializations after reviewing requirements, we’ve found that it’s still a safe investment bet for most solution providers looking for future differentiation and revenue impact. When we compared the vendor’s current specialization program types with the partners’ future investment plans, we found that both groups remain focused on technology solutions as their primary skills focus.

The word "solutions" though suggests higher value coming from more multi-product, pre-configured solutions pointed at specific customer pain points versus just point-product skills.  Good examples here are Cisco’s borderless network architecture or HP’s Converged Infrastructure Elite specialization.  And, in terms of investment priority for vendors and solution providers, right behind technology skills is service delivery capabilities, followed by vertical market expertise. We believe services capabilities are critically important for vendors to view partners more holistically and should be integrated as much as possible into all specialization structures, rather than stand on their own.

The current economic environment isn’t very conducive to partners looking favorably at being overly specialized in their leading suppliers’ offerings. Many want to keep their options open and sell to the largest available horizontal markets.  That’s why the technology specializations continue to be so popular., While understandable as an investment strategy in today’s economy, it doesn’t really advance the idea of specializations as unique and coveted versus today’s basic product certification programs.

Vertical-industry specializations are now just coming of age in vendors’ traditional channel programs. A focus on verticals adds a more distinct differentiation for the traditional infrastructure-focused technology partner, and helps vendors propel their success in solving specific business process problems in new markets.  In our opinion, the ability for a solution provider to bring together sales, technical expertise and services skills, and apply them to solve specific industry pain points, is the ultimate expression of partner/vendor success.  IT vendors, even the largest and most industry-savvy, will only ever invest to a certain level in industry-specific sales and marketing tactics. Partners have been, and will continue to be, their entry into these markets.  The top vertical markets that solution providers were most interested in investing in over the next 18 months included Healthcare/Medical, High Tech, Education and Banking.

It’s not one or the other

Specializations for vertical industry and technology are not mutually exclusive. Rather, one should feed the other.

We see that the top three ranked program benefits requested by solution providers remain fairly consistent throughout our research results.  These include higher financial incentives, specialized training (sales or technical) and free or preferred technical support. It seems clear from the research that these benefits are expected by partners of varying sizes and business models.

So where should partners place their bets? It depends on your company’s growth strategy and need for market differentiation. Key considerations will depend on your financial model and level of sales and technical competition, both within the markets you’re currently competing and those where you plan to grow. For example, if you are not already focused around specific industries, gaining vendor endorsement of vertical competency would be a great place to start.  And, of course, evaluating the short and long-term impact (especially financially) of the vendor’s core program benefits can make the decision easy. 

Keep in mind that while partners are looking for profitability and market differentiation, vendors are looking for competency and credibility with their customers and field teams. The balance of the two is where the best specialization programs lie.  Here are the attributes we see for a strong specialization program:

  • Alignment with customer targets and portfolio solutions
  • Enrollment is proportionate to the vendors’ breadth of partners
  • Advances holistic skills of partner (not just technical)
  • Offers distinct and quantifiable benefits to partner, especially economic
  • Gives clear direction to vendor direct sales team about engagement & support
  • Program is leveraged through vendor marketing strategy

So, whether investing in a program to gain vertical market expertise, service delivery proficiency or technology solution skills, solution providers are warranted in demanding a high ROI from their specialization status. So, place your bets. To learn more about Amazon Consulting’s  "How Special are Specializations?" research study, click here.