Earlier this year, I spoke with over 30 senior executives from across the technology and services industry, all of whom have responsibility for their companies’ sales and go-to-market strategies. They all agreed on three major factors that are having a profound impact on their companies:
Within the context of these three observations, I’ve written this blog to talk about how moving to a more vertical go-to-market posture can help technology and services companies grow revenues and improve sales performance.
Traditionally, most technology products and services have been sold as a horizontal solution that can be sold to and adopted by companies across different industries. There are, of course, exceptions; healthcare and industrial equipment manufacturers have typically focused on industry-specific offers.
From all the publicly available data, we can conclude that technology and services companies that take their offers to market with an industry vertical focus are, in general, more profitable than those that don’t. Born-in-the-Cloud SaaS companies typically grow revenues faster, but profitability remains a big issue in that slice of the industry.
So, based on the feedback from the interviews that I conducted earlier this year and the fact that more vertically-focused companies are more profitable, surely everyone should be making this shift.
In October 2018, TSIA conducted research in order to understand whether companies with a vertical go-to-market posture are growing subscription revenues faster than those who remain horizontal. The results were impressive; we classified companies as having either a horizontal go-to-market posture, a partially vertical posture or a fully vertical approach to go-to-market.
(Click image to enlarge.)
Making the shift from being horizontal to vertical in the way you function as a business clearly makes sense, especially when you further consider that one of the imperatives of being able to engage with business buyers is that you have to speak their language. You must be able to demonstrate to them that you understand their business and that you can show a tangible connection between the solutions you offer and the business outcomes that they are looking to achieve.
Most companies will start by making the move to being partially vertical. We call this the “Thin Vertical Veneer”. As you can see from the results in the chart above, the benefits of doing this are worthwhile. Nearly double the number (49% vs 28%) of companies that have made this move are growing subscription offer revenues by more than 21% year-over-year.
The process described below is the one we see most companies follow. It usually starts with Marketing making a move on the company website to talk about case studies in a particular industry, and then the rest of the company follows.
(Click image to enlarge)
This isn’t the only way that companies evolve a partially vertical go-to-market but it’s the most common approach that we see in the technology and services industry.
In our experience, the infrastructure OEMs find this shift the hardest, and it’s slightly easier for software companies while the non-OEMs (SIs, ISVs, MSPs) find it relatively simple to make these first steps.
The practices that we’ve seen successful companies adopt as they take this journey include:
Companies that have made this shift have highlighted the importance of changing the metrics and starting to introduce elements of compensation change to start driving the right “vertically-oriented” behaviors. The metrics that have been introduced as companies start to make the shift include:
To find out more about what you can do to improve your vertical leap, be sure to watch the keynote presentation, “Improving Your Vertical Leap” by TSIA’s executive director, Thomas Lah. TSIA members have access to the corresponding research paper, “Why Improve Your Vertical Leap,” where Thomas and I explain in detail the concepts mentioned above and offer tips for getting started. If you’d like to learn more about our Subscription Sales research practice of how TSIA can help your organization map out your vertical go-to-market strategy, please reach out to us. We look forward to hearing from you!
Post Date: December 18, 2018
Martin Dove is the vice president of subscription sales research for TSIA. In this role, he works with TSIA members to help optimize their organization’s sales of subscription, or “as-a-service” offers, to both new and existing customers.
Over the last 25 years, Martin has built a reputation for driving business growth across the technology and services industry as a pragmatic sales leader with a focus on simplification and removing friction in the pursuit of sustainable performance improvement.
Please join the conversation! We love thoughtful communication and are interested in what you think.
All comments are moderated and will be visible once approved. Please only use your real name, not your business name or keywords. Advertisements for your products or services will not be approved.
The Technology Services Industry Association (TSIA) is dedicated to helping services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.