By Lana Gates
New technologies such as gamification and visualization are uniting vertical industries, but mergers and acquisitions continue in this space.
Vertical industries are forced to embrace new ways of conducting business to keep up with an always-on customer base. Cloud computing, social media, and mobile technology are changing the landscape—and mergers and acquisitions continue as software vendors in the industries solidify. Vendors must overcome myriad challenges to keep up in their respective spaces.
"A lot of industries that have had vertical-specific software have realized that proprietary software is dead," says Venecia Liu, research VP of the vertical industries team for market research firm Gartner. For vertical industry companies to survive, they have to have open software, or at least include a Web services interface, she says.
Gartner is seeing a move toward what it calls the Nexus of Forces: the cloud, mobile technology, social media, and big data. These four areas "are transforming and impacting industries in how they conduct business and get information out," explains Liu.
Numerous industries embrace mobile technology using both tablet computers as well as smartphones. Some of the top adopters, according to Gartner, include healthcare, media, insurance, banking, sales, telecommunications, and transportation.
Insurance agents, for example, use mobile devices to upload images of building damage and car accidents at the scene and synchronize the photos to claims processing.
The banking industry is extending bank statements to mobile technology and looking at ways to allow consumers to do other transactions from their mobile devices.
Telecommunication technicians carry reference manuals on tablets instead of having calling an 800 number from a customer’s location while the agent on the other end of the phone looks up the needed information.
In the transportation sector, United Airlines moved to paperless flight decks in 2011. The airline did away with pilots’ 38-pound briefcases of flight manuals and reference materials in lieu of 1.5-pound Apple iPads that carry electronic versions of the resources in an app called Jeppesen Mobile FliteDeck, according to PR Newswire. The move was forecasted to save the airline 12,000 sheets of paper per pilot for a total of 16 million sheets of paper, resulting in 326,000 gallons of fuel saved.
Leading the Trends
Because society is moving so quickly to these convenient technologies, vertical software vendors must do the same. And indeed, they are. "Companies are allocating larger portions of their external software budget toward industry-specific software," notes Monika Kumar, program VP of global technology and industry research organization at International Data Corp. (IDC).
Vertical-specific software leaders, according to Gartner, are Dassault Systemes, manufacturing; Siemens PLM Software, manufacturing; Cerner, healthcare; Cadence Design Systems, manufacturing; Mentor Graphics, electronics; PTC, manufacturing; Allscripts, healthcare; SunGard Data Systems, financial; General Electric, infrastructure; and Epic, healthcare.
IDC adds GE Healthcare and McKesson to the list of healthcare leaders, an area we covered in our Spring 2012 issue.
Up-and-coming vertical-specific software companies include Temenos in banking and Thales in transportation, according to Gartner.
IDC considers the retail industry to be up-and-coming and groups location-based mobile marketing execution in that area, which includes such vendors as Groupon, Amazon, Responsys, and AisleBuyer.
"While healthcare providers and retailers are traditionally not heavy investors in IT, they invest in industry-specific software to gain efficiencies from best-of-breed technology that is built with their industry’s processes and regulations in mind—healthcare, and to provide their customers with an innovative and seamless omni-channel experience—retail," explains Kumar.
IDC conducted a study earlier this year that tracked social media trends across six major verticals: retail, banking, manufacturing, government, healthcare, and utilities. It found that, of those six verticals, retail leads the adoption of social media. Retail and utilities lead a move toward analytics. The utilities industry, followed by manufacturing, is leading investments in smart technologies. In addition, retail is an early adopter of mobile technologies, and banking is leading these verticals in embracing the cloud.
First Insight is one example of retail’s move to embrace social media, analytics, and mobile technologies. The company offers a front-end tool that helps retailers determine a product’s success or failure in advance and arrive at what customers would pay for the product by engaging feedback.
"We empower retailers and manufacturers to drive new product success by introducing the right products at the right price, explains Joe Callahan, director of marketing, First Insight. "Months before product hits the floor, a company can take hundreds of new designs and have thousands of consumers evaluate them within 48 to 72 hours."
The product uses a technology called gamification, which incorporates gaming elements in a fun, exciting way, explains Jeff Warzel, SVP of supply chain for David’s Bridal, which is using the company’s new product validation platform as a way to market bridal gowns that users want. He explains that gamification takes advantage of social media and people wanting to play games online.
David’s Bridal takes photographs of products it’s considering marketing, writes up descriptions for each of the gowns, and sets them up in the "What Would They Pay" game, Warzel says, a process that can take up to two weeks from start to finish. "It takes longer to set up the game than it does to get the results," he adds.
Once the system is set up and pushed out to consumers, results start pouring in. "We can get meaningful statistics in three to four days," says Warzel, a process that used to take six to eight weeks by testing dresses in select stores.
Use of the First Insight product saves David’s Bridal in inventory investments and time getting styles out to all of its 308 stores across the country and in Canada. The tool saves the company the "delay of getting newness out to the chain," adds Warzel.
"If we have a new style we’re considering, we use the tool and get off-the-charts assessment from consultants and customers," sometimes bypassing store testing, points out Warzel. "If it’s a winner, you get revenue quicker."
David’s Bridal likes being able to include consultants in the evaluation process of new styles. "Because the tool is Web-based, we’re able to use the tool to communicate to our store staff. It allows stores to feel like they’re participating in reviewing and helping us decide on newness. And it’s a fun benefit for the consultants," Warzel adds. "For buyers here, it’s another opportunity to get a bunch of additional eyes looking at these assortment choices and figuring out where the winners are."
The bridal retailer chooses its selection group based on customer information. When brides register with David’s Bridal, they have the opportunity to participate in surveys. The company sends those customers a link to the First Insight tool. They click the link and are presented with a series of gowns. They interface with the software to make their selections.
David’s Bridal tests about 300 different styles over the course of a year, pushing a selection of 10 to 12 styles out at a time. Although the software allows for multiple sample groups simultaneously, "we try to limit to avoid fatigue setting in and affecting results," notes Warzel, adding that the company doesn’t keep any survey open longer than a week.
Despite the product’s success, David’s Bridal still does a substantial amount of its market testing in stores. It’s only using the First Insight product on bridal gowns at the moment, but the retailer also sells accessories, lingerie, and dresses for bridesmaids and mothers of the bride and groom. Warzel says the company has started using the tool for testing in the other categories but adds, "Really, we’re just scratching the surface there."
Speaking a Common Language
Similar to retailers, manufacturing companies invest in smart technologies to better meet customers’ needs. "There is a need for manufacturers now to understand how to create products that are much more agile and what customers want to purchase. They have figured out a way to incorporate social media and are bringing that information into the whole production side," says Gartner’s Liu.
Vertical industry leader Dassault Systemes is one such company. It offers a social innovation application called 3DSwYm—which stands for "see what you mean"—to help global organizations collaborate on design. Visteon, an automotive supplier reporting $8.05 billion in revenue for 2011, is using the product to help create what it calls its e-Bee concept car—a vision of mobility in 2010—which incorporates three themes: simplicity, flexibility, and frugality, according to Tim Yerdon, global director of innovation, design, research, and development, Visteon.
Research and development has evolved over the past 20 years, he adds, from an open innovation model to a co-creation model that incorporates feedback from customers. "Today, we’re in a mashup between open innovation and social media. It’s driving us toward social innovation."
Because Visteon operates its business across 28 different countries—which means different languages and different time zones—collaborative innovation can be a challenge. 3DSwYm "really helps us break down those barriers," explains Yerdon. Since the product is cloud based, "it gives us the potential to reduce some of our capital investments," he adds. "It gives us the ability to be mobile, to access the tool anywhere through our systems."
The product is very visual, he points out. "We have to have a lot of visual design language in the automotive industry. When everyone can visualize it, we can rapidly make decisions versus arguing over a single solution over the phone. This online tool reduces hours of time in meetings," Yerdon explains of 3DSwym.
The product allows Visteon to think up visual ideas and share them with co-workers across the globe in a social media-type setting. Visteon couldn’t gain much from this product if it weren’t cloud-based. The company is including 100 geographically dispersed people in the e-Bee project.
In reality it all comes down to "how we learn, share, and create," says Yerdon. 3DSwYm helps break down Visteon’s language barriers by putting concepts in a common language, "which is three dimensional," he says. "It gives us the ability to ask the right questions, which leads to a much higher-quality product."
Leveling the Playing Field
As vertical software industries embrace social and mobile technologies, we can expect a lot of shakeups. "The vendor landscape is fragmented and still evolving," notes IDC’s Kumar. "We expect a fair amount of consolidation over the coming years."
Indeed, those mergers and acquisitions have already begun. Dassault Systemes acquired Netvibes, a provider of social media monitoring analytics, and Exalead, a French search platform provider—among other companies. Healthcare provider Cerner acquired Clairivia, a maker of healthcare workforce management applications, and Resource Systems, provider of electronic documentation solutions.
Electronic design software manufacturer Cadence Design Systems bought Denali Software, another maker of electronic design automation tools. Mentor Graphics, also in the electronic design automation space, took ownership of the Flowmaster Group’s system design assets and CodeSourcery, the open-source tools provider.
Financial industry company SunGard Data Systems scooped up Stratix Consulting financial consultancy and ValueLink Information Services, known for its validated financial data product offerings. Interesting to note, SunGard also acquired Predictive Metrics, maker of predictive scoring and analytics software.
Fiserv, another financial industry contender, bought CashEdge, a provider of consumer and business payment technologies; Maverick Network Solutions, a prepaid card processing vendor; and Mobile Commerce, a manufacturer of mobile banking and payments.
Still another financial company, FIS, acquired GIFTS Software, Web-based cash management provider, and Capco, a financial services consultancy.
Other notable deals include auto insurance software provider Solera Holdings’ acquisition of License Monitor, a provider of driver violation monitoring software. Retailer Retalix acquired store systems provider Cornell Mayo Associates. Ebix, in the insurance industry, bought TriSystems, an online insurance trading hub. IBM acquired retailer DemandTec for its cloud-based, collaborative analytics application.
As the vendors continue to consolidate and solidify, other challenges need to be addressed before full-fledged support of social media and mobile technology is embraced across the board. In social media alone, according to IDC, the top challenge to overcome is managing and keeping track of posted content.
Other challenges specific to social media include getting customer buy-in, justifying investments in social software, finding resources to manage social media, quantifying the impact of core business objectives on this outlet, and making use of the data.
David’s Bridal has run into some challenges with using social media technology. "It’s another data point," explains Warzel. "It’s not a panacea." When he first heard about First Insight’s product, Warzel thought it might eliminate his company’s need for in-store testing altogether, but after using the tool for more than a year, he still sees a need to use in-store testing along with First Insight testing on certain styles.
Bridal gowns are complex products that involve a lot of intricacies, he points out. Some of those intricacies can be difficult to capture in photographs. And different monitors can affect colors as well. "It’s hard for someone to see in a flat picture on the Internet all the detailed lacework that goes into the price of a garment," acknowledges Warzel. "There’s nothing like touching and feeling the product."
That said, David’s Bridal has no intention of stopping its relationship with First Insight. In fact, the retailer is working with the vendor to arrive at a way to show a 360-degree form and to magnify parts of the dresses.