At face value, it would be easy to view the industry and vertical cloud initiatives by the major technology companies as simply new marketing strategies. There is something far bigger than just a go-to-market strategy happening here, however. The impact will change industries and the technology market as we know it.
This market transition is being driven by customers. What customers are looking for today is the ability to accelerate the growth of their overall business, not simply automate individual functions. As a result, the customer value proposition is shifting from functional value — I have a sales enablement challenge, or I need to automate billing — to a business growth value proposition. This shift is what is driving the market transition to industry and vertical cloud solutions as well as co-creation between technology companies and industry leaders.
Amazon recently announced the acquisition of One Medical and Oracle’s acquisition of Cerner reflects the vertical cloud strategy taken to the next level. Google is partnering and co-creating value with manufacturers, via their Manufacturing Data Engine. Microsoft has announced a series of vertical cloud applications for healthcare, retail, and financial services. This is just the beginning.
Over the last six months in talking with C-level, technology decision-makers in enterprise and mid-market organizations, it is clear that something new is happening. They are looking for more holistic and more impactful technology solutions, with a clear mission of business transformation and growth. As this market transition accelerates, it will have a profound impact on the technology ecosystem as well as on individual industries.
What Is a Tech Company?
Legacy tech industry analysts love to debate whether a company is a “tech company” or not. I ended up in a protracted Twitter thread recently with an analyst who was adamant that Netflix was not a technology company. My point was this is no longer a relevant question.
Other than for investment categorization purposes, the designations no longer make sense. All growth businesses today have technology as a core competency or will have it if they want to keep pace. Is Amazon a retail company or a healthcare company? Is Apple an entertainment company? A watch company? An auto company? Ok, perhaps I’m a bit early on that last one, but don’t be surprised if sometime in early 2023, Tim Cook unveils a car with an Apple logo on it.
As industry-leading companies embrace technology and major technology companies get deeper into industries, we will continue to see this blurring of distinctions about what constitutes a tech company and how confusion on how to properly categorize industry-focused companies. The question to ask yourself is whether this matters and, as noted above, I don’t think it does anymore.
The Return of Co-Opetition
in the early 1990s, Ray Noorda, the founder and CEO of Novell, coined the term “Co-Opetition” to describe the phenomenon of cooperation between competitors. Co-opetition helped fuel the early growth of the PC and LAN markets but, over time, sharp-elbowed competitors drove consolidation.
Many people were shocked by the recent announcement of a partnership between long-time competitors Oracle and Microsoft. The partnership provides a one-stop shop of cloud services and applications for businesses, and it’s not the only cloud partnership that has been announced in recent weeks and months. With all due respect to both Oracle and Microsoft, I think it’s safe to say that neither company has historically been known as partnership driven. This powerful cooperation between Oracle and Microsoft, however, reflects a profound shift, driven by the customer demands and market opportunity that the vertical and industry cloud approach will yield.
New Technology Buyers
As technology decision-making becomes more focused on overall business growth, we will see new buyers entering the purchase process. In a vertical industry approach, those with proximity to customers and their needs become critical to the process of determining how technology can help.
As this plays out, we will see business unit management play an increasing role in technology decisions, many of whom don’t have relationships with or brand loyalty to legacy technology providers. These buyers will also expect vendors to have a deep understanding of their industry and how they can help accelerate the growth of the businesses. Additionally, they will be far less interested in the features of the technology than the impact it can have on the growth of the company.
The Return of Hyper-Change
Every ten years or so, we see a step-change in technology that ignites an era of hyper-change. What previously took ten years, now takes two. What previously took a year, now takes a month. For business leaders, this radical increase in the pace of change can be incredibly challenging. We are in the midst of a hyper-change period and it’s at the early stage of the curve.
In a recent special interview with Bob Evans, Bill McDermott, CEO of ServiceNow, said that “speed is the greatest asset in business today”. New market, customer and partnership opportunities, new competitors, and changing economic, supply chain, and geopolitical conditions are happening faster and faster. Business leaders do not have the luxury of slow deliberation anymore.
We’re seeing the pace of change cause major challenges in various industries. As it accelerates, you will see even more disruption. At the same time, you will see companies that are leveraging the power of technology take advantage of hyper-change to accelerate the growth of their business. This leads us to…
The Haves and Have Nots
History teaches us that during periods of accelerating change, organizations that prepare for and embrace change will distance themselves from their competitors. We’ve also seen examples of companies using hyper-change to enter and disrupt new markets, where competitors were unprepared.
The fact is that companies that view technology as nice to have simply won’t be able to keep pace. We can already see this playing out in various industries. Further, we will see more examples as businesses that have adopted a technology-driven approach will accelerate, and those that haven’t will fall farther behind.
Solving Big Problems
As technology and vertical industries become inextricably intertwined, we are starting to see companies tackling big problems. The rapid introduction of Covid-19 vaccines that changed the course of a global pandemic is a good example.
Google recently announced that its Deep Mind group recently shared a tool called AlphaFold with scientists and released predicted shapes for more than 350,000 proteins, including all proteins expressed by the human genome, which has immediately shifted the course of biological research. If scientists can identify the shapes of proteins, they can accelerate the ability to understand diseases, create new medicines, and otherwise probe the mysteries of life on Earth.
Microsoft has announced a Sustainability Cloud that promises to empower organizations to accelerate sustainability progress and business growth. We are entering an era where technology is fueling exponential leaps and can be used to help tackle some of humanity’s biggest problems.
At the same time, vertical cloud solutions are helping to solve more mundane problems, like supply chain disruptions. It’s clear that the traditional model of marketing driving demand and operations fulfilling supply simply isn’t working anymore. We are seeing demand distortion events in most every industry. Industry Cloud solutions are helping companies align supply and demand data with a more holistic view, reducing the frequency and impact of demand distortion events.
Industry Cloud is more than marketing jargon. It is a foundational shift in the way technology is viewed, purchased, and used by companies to accelerate growth and will ultimately reshape entire industries and the technology ecosystem.
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