Vertical Markets: Partners to Profit from Booming Demand

Solutions providers are making great strides into vertical markets, including finance, education, health care and public agencies. This focus on specialized industries comes at the right time one analyst firm says IT spending by these segments alone in the United States will reach $416 billion in 2005.

Research firm IDC expects spending on worldwide IT services to reach $423.8 billion in 2005. The greatest demand is coming from banking, manufacturing and government, IDC says. This year alone, software purchases will reach $106 billion in the United States, and IDC notes the buyers mostly will be services companies and manufacturers, along with people in the consumer/home segments. Meanwhile, U.S. IT services will reach $180 billion in 2005, and the U.S. PC market will top $49 billion. Buyers for the former category largely are in banking, manufacturing and government, and the consumer/home sector accounts for much of the latter categorys growth.

The promise of proliferation will remain steady through at least 2008, which is when IDC predicts U.S. IT spending will reach $501 billion.

“Banking, discrete manufacturing, and government stand out as the largest IT buyers. IDC believes vendors can continue to succeed in this market by selling solutions that can help industries solve their business challenges, says Anne Lu, manager for IDCs worldwide vertical markets research program. In addition, vendors need to create efficient vertical market strategies to tackle the different pain points of various industries.”

Research group In-Stat agrees. In its report, David vs. Goliath: Health care Vertical SMB vs. Enterprise IT Trends and Expenditures in the U.S., the firm calls on companies to provide products that best serve small and medium health care organizations. Those end users last year spent $21 billion on IT services and equipment, In-Stat says, while larger health care businesses of 1,000 or more employees spent approximately $27 billion.

Some of the opportunities within the health care industry include helping entities comply with federal HIPAA rules, providing them with mobile and wireless solutions, and selling applications that improve patient care and reduce medical errors, In-Stat says.

IDCs and In-Stats forecasts bode well for the partners already capitalizing on the opportunities found in niche markets. Systems integrator Ronco Communications, for example, recently finished a network overhaul for the State University of New York at Cortland (SUNY). Ronco, a Cisco Systems Inc. Silver Certified channel partner, wrapped up the six-month project by deploying more than 4,000 Cisco Unity unified messaging voice mail boxes and Cisco IP telephones.

Faced with an outdated PBX phone system that had reached its maximum capacity, SUNY Cortland couldnt add phones or update features. Besides, the manufacturer had discontinued the operating system. “I could not see putting good money toward old technology, and I also knew that we did not want a hybrid solution,” says Dan Sidebottom, director of administrative computing for SUNY Cortland. [T]he flexibility of our new network has allowed us to bring functions such as expensive and time-consuming moves, adds and changes in-house, as well as better utilize our staff’s expertise. We estimate cost savings is already approximately $75,000 per year, but more important than the monetary savings has been the improved efficiencies and support.

Similarly, channel partners focused on selling business continuity services, have access to a new program that will help them offer interoperability to public safety agencies, enterprises and other entities.

SmartLink Radio Networks Inc. makes two-way radio networking software, and last month launched its new regional partner program, SmartPartner. SmartLink makes the I-Network platform that brings radio frequencies together, and is targeting systems integrators, dealers and others as it main alternate channel distributors.

The need for interoperable radio frequencies was highlighted by the terror attacks of Sept. 11, 2001, when police, fire and other emergency personnel were unable to communicate among the various agencies during rescue operations.

Its not just emergency situations that call for organizations to spend more money on IT products and services. As baby boomers require more medical care, for example, health care facilities find themselves needing better ways to keep up with more patients. Plus, changes in insurance and federal regulations mean everyone is trying to cut costs while maintaining high productivity. There is a plethora of applications and opportunities out there, and the savvy channel partner only has to spot a niche, find the pain and provide a helpful solution.

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