For nearly 20 years, Marie Panas has coded for the financial services industry. She receives good pay for her market experience, and she keeps busy. She has had only four days of unemployment since 1983.

Kirk Staff and Jesse Cochran refuse to niche their IT consulting companies in specialized markets, saying it limits their options and profitability. In the 1980s, Chuck Brooke started out vertical, but now he's moving horizontal since his point-of-sale consulting business outlived its need.

Meanwhile, Cotelligent is building consulting niches in health care, finance/insurance, automotive and aviation manufacturing, utilities, and consumer packaged goods.

To niche or not to niche? It's a tough question.

On the one hand, contractors specializing in certain niche markets say they bring invaluable industry understanding to the table. On the other hand, contractors working across broad industry segments say that specializing in a single vertical market limits their options. The answer depends on the technology specialty you're offering and the vertical industry you're offering it to. Some industries like finance or health care (see sidebar) place nearly as much importance on vertical market experience as they do on the technology experience itself. Other markets, such as the fast-moving technology development industry, don't care where their contractors get their experience, so long as it's bleeding edge. In the long run, it all boils down to what value you can give your customer.

"Vertical specialty is a good thing, but only if the horizontal skill is there first," says Gary McGraw, vice president of corporate technology for the IT consulting firm Reliable Software Technologies Corp. "The better you are at your specialty, the better you will be able to add vertical market experience to your bag of tricks."

Vertical Knowledge

There's no arguing that vertical market experience does bring value to your clients. Clients want contractors to understand their processes and quickly deploy easy-to-use solutions for their complex business problems. Those working in specific vertical industries already know the market drivers and common business processes, making it easier and faster for contractors to get up to speed with a new client.

"Companies are not willing to invest in training their consultants," says David Haines, vice president of business development for Cotelligent, a 3,500-strong consulting services firm headquartered in San Francisco. This explains why Cotelligent is snapping up top talent from within each new vertical market it opens up. "When we decided to niche in health care, I hired five people from the health care field," he says. "One was from Columbia (Health Care). She understands the differences between hospitals, HMOs, and PPOs, and can communicate on a process level."

Marie Panas, project manager for Dun & Bradstreet (New York), says her financial background is invaluable. Early in her career, she would sit in development meetings unable to comprehend the buzzwords flying around the table. Now, she's developed a reputation for knowing her clients' business, and her job description shows it. As project lead, she provides analysis and design, establishes business requirements, and acts as user liaison.

"When I started back in 1983, I had never done any checking applications. I'm thinking, 'What's a DDA [Demand Deposit Account] or a BIR [Business Information Report]?' I was lost," she says. "Now, I feel secure that I'm delivering not only technical skill, but quality advice to my customer."

Her payoff? Long-term employment, great salary, and even free training on cutting-edge technology because Dun & Bradstreet would rather invest in her, "a known quantity," than hire someone new who might not understand the financial services industry.

The Vertically Challenged

Contractors who don't specialize in a vertical market take exception to this dogma that vertical experience begets the best IT consultant. "We market ourselves that we understand technology, and we feel our clients understand their industry," says Kirk Staff, president of Jenisea (Mobile, Ala.), an IT consulting firm that specializes in hardware outsourcing and application development and modernization. "Our objective is to marry our client's industry knowledge with our technology knowledge and come out with a sum that's greater than the whole."

Staff admits that it's difficult to offer solutions without knowing the industry. He also says it takes time to get up to speed with the clients' business application needs, which is why his company conducts market research and direct interviews with its clients. This familiarizes Jenisea's consultants with the clients' work flow processes and inefficiencies so they can find areas to eliminate labor.

"We don't want to assume anything, so we tell our clients that we're going to ask a plethora of questions," Staff explains. "We turn this around and make it a positive and say we get to know your specific business better." For example, upon examining work flow and determining that one client was using similar but disparate applications through four of its business units, Staff's group was able to integrate them into one application, a real efficiency boost for the client. Such applications are rarely industry-specific, he says.

Since partnering in the horizontal consulting services firm FutureWare (Orange County, Calif.) last year, Chuck Brooke says his learning curve has gone through the roof. Gone are the days when, at his point-of-sale automation consulting firm, RexBro (also in Orange County), Brooke chummed up with a cliquey group of account reps who effectively marketed his reservation, asset management, and customer tracking systems in the hotel and fine dining markets.

Now, each time FutureWare adopts a new industry segment, there's "a lot of homework," Brooke says. Instead of charging the client for the time it takes to get to know the industry, he and his partner, company founder Jesse Cochran, do most of the research at their own expense. It's all wrapped in with development costs of FutureWare's reusable object applications, for which FutureWare does not charge development fees. "We'll absorb these costs because we want to go into a client with an answer of how we'll solve their problems for them, and we need to be able to talk intelligently," Brooke says.

Say a company executive wants to do something in C++ because a developer told him C++ is cool. If FutureWare consultants have done their homework, they can show the client how to cut the labor sevenfold by just using a set of reusable objects customized for that client. For example, FutureWare reused 80 percent of a security object (access controls) for an amusement park when it worked on the same application for a document management company.

Vertical Speed

In fact, by making their contact management, back-office integration, accounting, and other applications reusable, FutureWare's consultants can achieve some of the same speed to market claimed by vertical market IT specialists. Take, for example, the amusement company client. In nine months, FutureWare consultants rolled out four applications, each one taking less time as they reused objects for the next application. The fourth and final application took only two weeks to roll out. Now, the client is calling FutureWare for more work, according to Cochran.

It will take efficiency processes like these to successfully compete with market specialists, because clients can't wait three years for their ERP applications to roll out. In the case of e-commerce rollouts, the time to market shrinks dramatically. "Speed to market is everything," says Cotelligent's Haines. "With the Internet especially, you're talking warp speed. If you don't move quickly, you're toast."

Because Cotelligent's consulting partners are so ensconced in their vertical industries, they can often build Web business prototypes in 72 hours, according to the fast-talking Haines. For example, if an auto-industry application needs building, Haines calls Cotelligent's automotive industry partner, Market Drive Interactive (Sausalito, Calif.). Cotelligent, in partnership with Market Drive, is building a portal community for a large auto maker that will offer customers their own easy-to-customize Web sites, free e-mail, weather reports, and any other informational stream that interests them. The win is that the manufacturer builds a sense of community among its customers while providing a platform over which to feed information on new vehicle accessories, recall notices, and so on.

"We're on our third contract with that manufacturer," Haines says. "The president of the company couldn't believe we captured its vision in less than a day and a half."

This level of intimacy would be hard to come by among consultants who lack an in-depth knowledge base of the vertical market segment in which they're working. Knowing a vertical also adds up to other pluses for the client. For example, contractors with specialized industry knowledge can help their clients plan for the future. (See "Mixing Business with Coding.") "We don't just understand their industry, we understand where their industry is going," explains Haines.

Even Brooke agrees. Reflecting on his background in small hardware companies, he points out, "I know the small hardware stores don't have membership cards with discounts, which they're going to need soon. That will have to plug into newer customer relationship management software coming out in the next six months."

Panas also draws on her past experience for future deliverables. Panas rode out COBOL batch processing in the '70s, on-line transaction processing in the '80s, client/server in the late '80s, and home-based banking applications in the early '90s. "Now," she says, "we're trying to translate this to the Internet. Instead of delivering customized desktop software to our clients, we're transferring home banking applications to browser front-ends. You want to understand all about financial services to come up with creative ways to deliver new services to customers."

Jenisea's Staff agrees. His consultants get a lot of repeat work from trans-oceanic shipping, distribution, manufacturing, and health care companies because of Jenisea's industry knowledge.

Thus, it seems, even those who don't specialize in vertical markets still find themselves niched somewhere. If niches look good to you, take care in how you proceed. You don't want to work yourself out of an industry the way Brooke did. Nor do you want to pick too small a market niche.

"Does staying vertical limit your options? It depends on which vertical market you pick," Panas explains. "If you pick horse-and-buggy whips, yes, you're going to have a major problem. I picked financial services, which means banks, brokerages, credit companies. It's a huge market. Since I live in New York City, the heart of the financial business, I've got it made."

Deborah Radcliff is a frequent contributor to CP.
Contract Professional/CPUniverse, Dec. 21, 2000.