Knowledge Management Vendors Go Vertical

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Struggling against a tough economy, some players in the knowledge management industry are trying to increase their business proposition to potential clients by developing offerings aimed at specific vertical industries.

By developing solutions that are designed to meet a certain business need within a vertical market, the vendors believe they will have an easier time selling their products in today's rough business climate, and increase their traction. In recent months such vendors as Sopheon, IBM Global Services, and members of the Big 4 consultants have released suites or established practices aimed at vertical markets. In so doing, they're looking to leverage their experience, tailor their marketing message, and offer a higher-value proposition to their clients, says Gregory Dyer, a senior research analyst with the KM practice at International Data Corp. (IDC).

"In some respects it comes down to differentiation," says Dyer. "There are a lot of companies out there saying that they do KM, so the challenge, particularly for some of the smaller guys, is to find a way to stand out. They're picking one area, drilling down, and basically becoming the experts. If they can do that effectively, they can maybe keep out some of the bigger players."

On Target

Sopheon has been one of the most aggressive vendors, in terms of developing offerings aimed at specific targets. The London-based company, with North American headquarters in Minneapolis, has released suites for the healthcare sector, life sciences, and industrial manufacturing. The next sectors under its scopes are banking and financial services, and chemicals.

"We made the decision some time ago that this is a business model that is sustainable," says Andy Michuda, the firm's chief executive officer. "I think we'll see that other companies are going to have to make that decision as well."

Michuda says the decision to go vertical was based on much more than the tough economy, although that certainly fortified the move. A few years back, at the height of the Internet boom, he says companies plowed money into KM projects without any real basis for a return on investment. As a result many of the projects implemented in those days failed to get traction, as employees failed to see a compelling reason for contributing to or using the systems. As a result, some analysts firms have estimated the failure rate of KM projects has been as high as 70 percent.

The missing link, believes Michuda, is that the companies didn't start by introducing a KM solution that satisfied a particular business need in the first place. "You have to find a business problem and attach your software to that problem," he adds. "At that time, a lot of KM vendors were promoting their solutions as the end game."

Sopheon offers a number of products and consulting services aimed at improving a company's base of expertise and ability to capture expertise. In addition to software, it also employs a staff of 50 analysts to aid in the product of reports for clients. "We take the best of technology and combine that with the best of human interaction," says Michuda.

However, it has had particular success of late with a KM solution aimed at helping companies solve a very specific business problem: getting new products to market faster. It's offerings come pre-loaded with data which help planners determine such key factors as the potential size of a market, competitors, and future revenue projections, to help get products through the Stage-Gate process. (This process refers to the critical meetings were company executives decide whether or not to fund a product's development).

"It can be an incredibly time consuming process going out and gathering all the data needed for a Gate meeting," says Michuda. "We've been able to cut that back to a fraction of the time."

By helping its users achieve some very measurable cost and timesavings through this approach, Michuda says his firm rarely encounters problems with employee buy-in. The solution becomes an integral part of the product development process.