Wouldn’t an already proven software solution in many industries be a better choice? Are “Vertical Market” budgeting software applications justified?
I recently attended the annual NAB convention in Las Vegas where we had three client companies exhibiting. This convention is geared toward broadcast professionals, in radio, TV and all other media production marketed to consumers and business organizations.
In passing by the many industry specific hardware and software companies, I came across a surprisingly large booth where a software publisher displayed budgeting and scheduling software, specifically designed for media producers and other companies in the industry.
The featured budgeting solution allowed its users to enter and consolidate multiple budget worksheets arranged by project or media production activity (or by business entity) and then consolidate them in various useful ways to arrive at the company’s annual budget, project budget or any other required set of outputs. The software package also included several other functions specific to the industry. It is only the financial application component I am writing about here.
There were two distinct issues with the budgeting component that I noticed:
- The software did not automatically provide the user with a set of forecasted standard financial statements beyond the Income Statement.
- There was nothing unique about this software that you could not get from a variety of corporate planning, budgeting and analysis software solutions.
The makers of this software claimed that it was designed specifically for the broadcast and media production industry and that it had all the features needed and used in that industry, including the budgeting piece I am referring to here. However, in using such a vertical application with a relatively low installed base and a small developer behind it with limited resources, I can’t see how users can properly benefit from it.
I’m not sure what the price point is but I can’t imagine this being less expensive per user than a broad market application that is designed essentially to do the same thing, is more robust and provides management with critical information they need for sound decision making. Of course, the user (and the vendor) can justify this by saying that for the price of the integrated package they are also getting a budgeting piece which they would have to license separately if it did not exist in this package. Is that a valid argument? I don’t think so. Do you use a product just because it is “free” or comes bundled with something else you must have?
A question that immediately comes to mind is whether there is a need for an industry specific solution vs. implementing an already established and tested application, one already used in a variety of industries.
I’m sure that other vertical markets have their own “fine-tuned” set of software applications marketed specifically to those markets. But in a finance related software, is this a better approach than an application built on a solid foundation where any industry business model can be created and reports and financial statements can be generated and delivered to users and managers who will use it to make informed decisions? Is an industry specific program going to do a better job? It may have the industry specific terminology already set up and the default work flow may be more in line with what these industries’ finance departments are accustomed to, but is that enough reason to consider such a solution?
The planning, budgeting and analytics software category (I sometimes like to refer to this category as CPM – Corporate Performance Management) seems to be quite fragmented, although only several vendors stand out from the crowd. I respect the desire of software developers to market unique solutions to their target markets and of course their entrepreneurial spirit, but do we really need such a large variety of products?
I guess this product category is no different than the ERP software category, or any other consumer or business product for that matter. In fact, it is not much different than in any industry with a new product category. The automobile industry was like that in the first 30-40 years of its existence and evolved from dozens or more manufacturers to a consolidated field of only a few.
If there isn’t going to be a major consolidation of products and vendors in the CPM software category, at a minimum I see only several leading vendors remaining, perhaps one dominant in each customer category, such as SMB, enterprise, etc.