What is a vertical solution and why is it the future of Professional Services Organizations?
- What is a Professional Services Organization?
- Industry's definition
- Very specific issues
- Towards a digital transformation that makes sense
- What is a vertical solution?
- Vertical solution vs. horizontal solution: what are the differences?
- Vertical solution: what are we talking about?
- The benefits of a vertical solution for Professional Services Organizations
- Break free from horizontal solutions to perform
- Specialization, visibility and scalability
- Vertical SaaS: example of a staffing solution
- Vertical solution: to the future and beyond?
60.2 billion is the value of the cloud industry in 2022. This market is teeming, evolving and participating in the transformation of companies. Except that in 2023, their challenges and needs are not the same as they were 10 years ago. And in particular those of intellectual service companies. Gone are the days of software that targets a wide audience with a universal service offering. Today, in order to perform, service and consulting companies aspire to more specialization. This has created a new member of the SaaS family: the vertical solution.
So, this term is becoming more and more important as a new differentiating lever. But in concrete terms, what is it? How can this verticality meet the challenges of organizations? Are these solutions the future of SaaS? These are all questions that it is useful to ask in order to fully understand the interest, benefits and strength of a vertical solution.
What is a Professional Services Organization?
First and foremost, it is important to review the specific nature of these organizations. Intellectual service companies, commonly referred to as PSOs, are companies that provide services based on the know-how of their talents. The catalog of services is broad, such as management or information technology consulting, training or even recruitment. The idea is to intervene from strategic consulting to the implementation of technical solutions to meet the complex problems of customers. And this is precisely what distinguishes them from traditional companies: a fine and native knowledge of the issues and challenges their clients are facing, before submitting solutions adapted to their specific needs.
Very specific issues
And while we’re on the subject of challenges and needs, those of service and consulting companies are just as difficult to meet. Depending on the size, the field of expertise or the target market, these may vary, but remain relatively common to all organizations: project portfolio management, resource planning, process optimization, profitability maintenance, risk management, etc. A whole host of aspects that PSOs must be able to manage effectively to ensure the quality of their services and the satisfaction of their customers.
Towards a digital transformation that makes sense
There has been a lot of talk about digital transformation, digitalization and change management in recent years. This challenge inherent to our time leads intellectual services companies to question their way of acting. A reflection that is essential to gain in performance, continue their development and sustain their growth. This invitation to transformation is no longer a choice, but a priority. But it is still necessary to carry out a transformation that makes sense, that aligns with the challenges of each company. Although SaaS has been committed to digitizing processes for years, it sometimes has its limits. Indeed, the industry presents solutions that are not always adapted to each type of company. This brings us to the notion of verticality.
What is a vertical solution?
Vertical solution vs. horizontal solution: what are the differences?
When we talk about vertical solutions, we naturally compare them with their horizontal counterparts. In a simple way, we could say that it is a choice between ultra-specialization and universality. But let’s be more specific.
Since its beginnings, the cloud industry has been mainly driven by so-called horizontal solutions. These are defined as cloud software that is outsourced, universal and quickly operational. Targeting a wide audience with an equally wide range of services, these solutions tend to meet the generic needs of organizations of all kinds. This includes software such as CRM, ERP or HRIS, which can be used to meet human resources management, customer relations or project management needs. The objective is to offer companies extensive functionalities. This bias leaves the choice to service and consulting companies to choose the ones that suit them. But very quickly, these horizontal solutions can be limiting to meet very specific needs. Indeed, this generic approach tends to cover a broad service, sometimes too broad for intellectual services organizations. This is where vertical solutions come in, with an approach that takes the opposite path.
Vertical solution: what are we talking about?
Unlike the horizontal solution, the vertical SaaS starts from a specific issue towards a technological stack dedicated to the industry. Very often, such a solution has been imagined and developed by experts in the industry in question, who are therefore very familiar with their problems and needs. The functionalities are specific, such as resource planning, customer collaboration on a mission, budgeting or occupancy rate optimization.
A vertical solution is thus based on 4 main pillars:
- Specialization: a solution dedicated to its industry.
- Cost: a technological base designed and developed for specific challenges.
- Scalability: an AI that is always aligned with its evolving needs.
- Ecosystem: minimal deployment time and native integration with other products.
With specific, complex and increasingly narrow needs, intellectual services companies have their own aspirations. They are now looking for data-driven solutions that enable them to generate more performance, growth and profitability while meeting business objectives.
The benefits of a vertical solution for Professional Services Organizations
Break free from horizontal solutions to perform
As mentioned above, generic horizontal solutions have dominated the market for years. Decision-makers automatically turn to these software solutions, thinking that the universality of their offer will meet many of their needs. If we can note that this is a first step, a first step towards their digital transformation, it can become futile. In fact, initiatives are being implemented to better inform decision making, to retain talent more effectively or to maximize revenues. These efforts are met with less than engaging results: horizontal solutions struggle to meet the ambitions of intellectual services companies. So how can a vertical solution reverse this trend?
Specialization, visibility and scalability
Beyond this ultra-specialized approach, verticality offers significant benefits for intellectual services organizations. Forrester Consulting has identified three main challenges for decision makers: lack of visibility, lower-than-expected benefits, and poor employee and client retention. Meeting targeted requirements, providing industry-specific tools, verticality remains a real opportunity catalyst for services and consulting firms with direct benefits:
- Ultra-specialization: meets the needs of a specific industry,
- Faster value creation,
- Better operational and economic efficiency,
- Minimal deployment time,
- Scalability aligned with organizational challenges,
- Strong and native integrations with other products.
Vertical solutions have the strength to lead organizations to such benefits. So yes, some more generic software can achieve these goals, but not without a heavy customization budget.
Vertical SaaS: example of a staffing solution
As you can see, decision-makers recognize that their needs are unique and complex, and that customizing horizontal solutions is far too costly. Especially since the industry is constantly evolving, forcing them to constantly adapt their tools. A never-ending cycle that traditional SaaS cannot really influence.
Among the challenges facing service and consulting companies, the digitalization of staffing dominates the podium. Switching to a dedicated solution makes more sense than ever to modernize processes and improve performance. This vertical SaaS solution delivers benefits aligned with the objectives of customer and employee loyalty, project portfolio management and financial forecasting. By relying fully on data, the solution offers all the necessary visibility on the availability of talents, their skills, the project portfolio, but also delivers keys to establish reliable financial forecasts. To be able to perform in one’s job while concretely meeting the objectives of the same group, a staffing solution allows this synergy. Employees can be more efficient, effective and focus on value-added tasks. The result is an undeniable virtuous circle: as everyone’s aspirations are heard, talent retention decreases, an ideal equation for maximizing the margin and commitment of teams.
Today, the intellectual services organizations that manage to put talent at the center are those that perform best. By leveraging data, they can more easily connect talent to business opportunities and deploy them on projects over time.
Vertical solution: to the future and beyond?
Specialization, efficiency, performance, optimization and competitiveness, the arguments in favor of vertical SaaS are not lacking. For all these reasons, we can answer in the affirmative: yes, vertical SaaS is the best thing for IT services companies. And we’re not the only ones to think so: 89% of organizations predict that verticality is the way of the future. A projection that can reassure decision-makers who today place their full confidence in such solutions and who envisage their future investments in this perspective.
By providing a concrete answer to issues such as project management, resource planning, cost, margin and revenue visibility, while aligning business and human issues, a vertical solution enables organizations to differentiate themselves from the competition, provide added value to their customers and ensure long-term financial stability. More and more, each industry has a solution adapted to its core business. This idea of verticality is democratized and welcomed by its users to become a new promise, that of a synergy between data, human and performance.