When businesses lack the infrastructure to automate account keeping, customer service records or inventory tracking, partners could build a profitable business around selling, installing and maintaining these types of applications.

However, today, unless it’s a very small business, these basics are not enough anymore, especially when ERP and CRM applications are becoming hosted in the cloud with ever decreasing cost of subscriptions and ever increasing ease of use. MSPs and ISVs are collaborating to drive the cost and complexity out of the software subscription model with clever wizards that enable customers to configure their own hosted applications in a fraction of the time and cost of the traditional consultant led implementations. Over time, this will substantially diminish the need for traditional technology resellers.

Every business is in a vertical market addressing a specific customer type with specific business models and facing business challenges specific to their circumstances. Companies invest in technology as an enabler to reach more customers, increase efficiencies, become more competitive and grow profitability. So, when the technology becomes a utility, partners must adapt (as I outline below) to a higher value services model that is vertically specialized in enabling that technology to realize these desired business outcomes.

Having a deep understanding of a customer’s vertical market, its customers, its competition, business models and processes is what can differentiate a partner. By being able to speak customers’ business language and address their specific needs, partners can win the customers’ confidence to buy their solutions.

By working directly with business owners/managers to advise them on the best practices in addressing their specific business challenges with technology, partners can become a part of their customers’ planning teams and in the process, transition away from transaction based relationships to value based ones.

[important]According to Microsoft’s research*, Microsoft Dynamics partners who have aligned their businesses by vertical specialization have seen a 32% increase in win rate and a 20% increase in deal size.[/important]

So how do you build a vertical practice? Consider these steps:

WHERE ARE YOU ALREADY SUCCESSFUL? Assess your current customer installed base and identify the verticals your organization has already been successful selling in to. This will give you an understanding of where your organization may already have expertise. It also provides you with potential references for future sales as well as customers to revisit with a new solution.

WHAT ARE THE MARKET TRENDS DRIVING DEMAND? Analyze the state of your target verticals and establish if they are growing. If so, in which areas and due to what market trends? The market trends will indicate where the demand is going to be so that you can plan on tailoring a solution. Establish which business challenges you are going to solve. Use industry specific analysts to discover these trends as opposed to general ones.

WHAT IS THE MARKET OPPORTUNITY? Once you have developed your ideal customer profile, research how many customers there are in your addressable geography. Make assumptions about how many are in market every year and how many you are likely to win. This will give you the basis for an investment and ROI model.

FIND THE RIGHT SOLUTION. Knowing who your target customers are and the business challenges you plan to solve for them, look for an ISV with vertically specialized software that can most effectively solve those business problems. Establish that the ISV can give      your organization meaningful differentiation and competitive advantage. Ensure that there is a compelling ROI for customers – preferably within 12 months. Develop the total solution model with the ISV software, complementary applications and services. Ensure that you have a tiers of solution price points to capture small, medium and large customers.

BECOME THE BEST IN YOUR FIELD. Invest in the right people. Your sales people have to become consultants, therefore, they need to have a background in the customers’ verticals and they have to be thoroughly trained in the software solution that will drive your sales. Often the best sales people will be ones who have worked in that industry and have experiential knowledge accumulate over many years.

REFERENCES FIRST. To establish your credibility with future customers you will need references. The best source of references is your existing customer base. Therefore, focus initial sales activities with your new ISV solution to qualified existing customers. Leveraging your existing relationships can provide the quickest source of new projects and references.

INFLUENCE THE INFLUENCERS. One of the most effective ways to gain visibility with customers in a vertical market is to participate in their community through associations and social networks. These communities often have some of the most influential people active and are an excellent source of opportunities and best practices. By being active in the community you can become a trusted adviser to it and get early insight into future projects.

Whether customers procure their ERP or CRM software on-premise or in the cloud, your vertical expertise, accumulated from many projects over time, will become your source of new professional services revenue and potentially your company’s intellectual property.