Generic Verticalization Strategies in Enterprise System Markets: An Exploratory Framework

Abstract

In recent years, enterprise system (ES) software markets have been very dynamic. While contemporary customers are increasingly seeking ES solutions that require less and less customization and implementation effort, it is unclear whether all ES providers should take the ‘vertical’ path of offering functionality tailored to specific industries. Given the lack of conceptualization that explores ES markets’ segmentation, this paper offers a typology of generic verticalization strategies. Building on the resource-based view of the firm and the dynamic capabilities perspective, we match ES providers’ organizational characteristics of size and scope with the most effective verticalization strategy. A dynamic dimension is introduced to this framework by analyzing recommended strategies for market entry and growth. Finally, the applicability of the exploratory framework is illustrated using examples from the customer relationship management (CRM) software market.

Customizing Enterprise Software as a Service Applications: Back-End Extension in a Multi-tenancy Environment

“…Vilpola et al (2007) propose a decision support framework in which customization opportunities have a huge impact. Fink and Markovich (2008) point out that flexibility is especially important in the SME market segment and suggests a strategy in which the manufacturer offers a rather generic ERP system and aims to establish an ecosystem of partners. These partners, in turn, see a business case in adapting the generic product in order to meet customer requirements of specific spot markets.…”

“…Given the diverse SME market and the resulting high demand of customization (Fink and Markovich, 2008), partners have different opportunities for customization. In this context, we propose the following set of customization possibilities -desktop integration, UI customization, and back-end customization.…”

“…As described in (Fink and Markovich, 2008), companies have to take a decision after purchasing an Enterprise Resource Planning (ERP) system (Davenport, 1998;Quinn, 1992). Either the company adapts the best practices modeled in the ERP system according to the processes actually performed or vice versa.…”

“…Enterprise application providers try to push their solutions into the SME market leveraging an adaptable-horizontal distribution strategy (Fink and Markovich, 2008) that targets many industries with one underlying product. Industry-specific customizations are built "on top" of the application instead of being an integral part of it.…”

“…Industry-specific customizations are built "on top" of the application instead of being an integral part of it. In order to succeed in an adaptable-horizontal strategy, Fink and Markovich (2008) propose the establishment of an ecosystem of partners. These partners are then encouraged to develop custom adaptions and extensions for spot markets.…”