Servicing Fundamentals: Are Vertical Software Products Becoming Obsolete?

As mobility and the Internet continue to drive changes in how people interact with technology and each other, businesses are finding that the compelling arguments presented by many cloud service providers are tough to ignore. Anytime/anywhere/anymode access to business applications and data, focusing on core business issues and outsourcing non-core processes, streamlining and connecting processes to create efficiency and predictability in operations – these are the benefits which “connected” and cloud technology models are delivering. Cost efficiencies in supporting business operations are also being experienced, as the outsource IT solution often provides fault tolerance, scalability and performance at cost and service levels difficult to achieve with in-house systems and personnel. The scale economies of the cloud cannot be argued with, and it is this cost-efficient and effective provisioning of fundamental business services to users that is increasingly pressuring vertical software makers to either address the market with more fundamentally useful tools incorporated into their products or risk losing users to generalized and commonly used solutions.

Consider that many accounting solutions today have introduced the ability to connect document files to transactions. It makes sense, and provides a basic capability for accounting/bookkeeping which is necessary. On the other hand, what happens to the rest of the documents used in the business – the ones that aren’t associated with a financial transaction? And, if there isn’t mobile access to the accounting system, how are those attached documents made available to remote users and mobile devices? Another thing to think about is the fact that users now have the ability to interact with various files and applications natively on mobile devices, as opposed to having specialized applications to access limited data sets. File sharing applications and productivity tools are widely used by these mobile users, as they provide the flexibility to seamlessly access files regardless of device or location. This fundamental benefit of simple and affordable information access, storage and sharing is proving the value of a generalized approach to enabling users and helps to explain why the operating and file systems were the previous “killer apps” in computing technology. The question for vertical software developers now is whether or not they can effectively incorporate these popular services into their solution, or if the solution must limit its focus on addressing only the truly unique elements of the business rather than the general or fundamental ones.

A great discussion on the subject is an article on PrismLegal.com where author Ron Friedmann describes his similar question in the context of Box.com increasing use in law office environments and how this impacts the legal software market.

More generally, it should cause us to question the future of legal market specific software. I understand the need for customized software; for example, I am currently involved with developing and deploying legal project management software (Cael LPM™ by Elevate Services). But the market – both customers and vendors – must balance the need to meet legal specific requirements with economics and scale.

Box and other cloud providers can potentially sell millions of seats to thousands of organizations. Contrast that enormous reach, which spreads development cost over so many users, with legal market scale. The large law firm market has no more than 400 organizations and 500,000 seats. The development and service cost per user is much higher. Nonetheless, many companies have prospered creating highly customized software for the legal market. In the age of cloud and economies of scale, however, will those economics still be so favorable?

There will always be a place for vertical and industry-specific solutions of certain types, but there is an increasingly large population of businesses which have adopted generalized solutions to address fundamental business requirements, and users (and solution providers) are recognizing that these essential solutions are meeting the majority of the business requirement without specialization (and additional cost) required.

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