When you run out of new ways to provide innovative technology, you go vertical. That was the running joke among CTOs back in the day. It usually meant the market had reached the saturation point and you could not find new growth, so you hoped that a health care strategy would save you. Sorry, no.
Salesforce.com is the latest provider to push into verticals, with its announcement that it will provide industry-specific versions of its cloud-based software. The hope is that Salesforce.com can maintain growth, which is critical for a company that's publicly traded, as Salesforce is. Company execs have even been talking smack about SAP, claiming Salesforce will surpass the No. 4 enterprise application provider.
Salesforce Vice Chairman Keith Block and Executive Vice President (and former U.S. CIO) Vivek Kundra are planning to go after the verticals with a mix of internal investment, partnerships, and perhaps acquisitions. Those verticals include financial services and insurance, health care and life sciences, retail and consumer products, communications and media, government, and automotive/manufacturing.
So many companies have tried this approach -- many times -- but most found limited success. I can't help but think the same will occur here. Salesforce will soon discover that when you get into vertical industries, the existing foundation of industry-specific applications is difficult to displace.
Although Salesforce can always play the SaaS card, most of those industry-specific providers have already moved to SaaS or are in the midst of such a move. That means SaaS won't be the key differentiator it was when Salesforce first provided its powerful sales automation service more than a decade ago.
My assumption is that Salesforce execs believe they can buy their way into verticals. That's actually not a bad approach, but it comes with the big risk that Salesforce won't be as welcomed into the vertical as its execs think. They can't buy everyone, and as long as there are other options with the same or more credibility, Salesforce will be a much harder choice for vertical-industry companies to make than Block or Kundra seem to think.