Verticalization Strategies of Megavendors: How is Higher Education Faring?

Application megavendors are reaching a level of maturity in their core cloud applications—in delivery, operations, marketing, and business models. They have stabilized the delivery of core applications in many ways:

• Continuous delivery: Delivering new functionality without disrupting their customers’ business
• Flexibility: Implementing configurable applications that work in most industries
• Reliability: Minimal unplanned downtime using modern platform engineering techniques in a controlled environment
• Scalability: Supporting the smallest to the largest organizations with modern platform scaling
• SaaS business model: Providing pricing and service aligned to SaaS
• Mature integrations: Pre-build APIs are ready for integration into third-party partner systems

These companies (e.g., Oracle, SAP, Salesforce, and Workday) who have had industry focus areas in the past, have refocused on industry verticals. Verticalization was not prominent in the early days of these cloud platforms while core business functionality needed to be built. With mature cloud businesses, they are returning attention to the verticals. Having a focus helps both vendors and potential customers in several ways:

• Marketing and sales: Providing clear messaging around the applicability and success within a vertical
• Pre-packaged solution sets: Simplifying buying within an industry by selling a set of applications and add-ons that fit the vertical
• Pre-configured systems: Implementation partners can bring best-practice configurations for the industry, significantly reducing implementation effort and time

Vendors are spending considerable time and capital building out vertical solution sets that are better integrated, have more consistent user interfaces, can be bought more simply, and may also have niche or partner applications that can be included to complete the product suite for an industry.

Verticals that are often addressed include banking and manufacturing (even specific manufacturing niches, such as automotive). The question on our minds is how well are vendors addressing the needs of higher education with these strategies?

Let’s examine the higher education verticalization of several of these megavendors.

Oracle

Oracle is building its cloud student system, and it should be ready for adoption in 2023–24. Oracle has significant higher education functionality in its HCM and finance applications. Held back by the lack of a complete student system, Oracle’s  higher education vertical strategy has not resonated with the market.  Oracle is championing other verticals but has not yet significanty focused on higher education.

Salesforce

Salesforce has been very focused on higher education for several years, driven by its nonprofit unit, Salesforce.org. It began with the first version of what now is the Education Data Architecture (EDA) that underpins most higher education implementations. The Salesforce ecosystem has been consistently adding higher education-specific functionality from Advising Connect to its many partners, such as Affinaquest, TargetX, and Enrollment Rx, among others. The recent partnership with WDCi to bring Rio Education into the Salesforce ecosystem adds core student functionality to the mix for the first time, improving the completeness of vision for student-centric applications.

SAP

SAP is building a higher education vertical with an emphasis on partner applications built as extensions of its cloud platform. Although its student solution is not a strong contender in the US, the integrated acquisitions of Fieldglass, Qualitrics, Ariba, SuccessFactors, and Concur provide a broad footprint of functionality for institutions to consider. Though we have seen little movement in the market to adopt this solution set, SAP is laying out the argument for it with a broad finance ecosystem, including research administration end-to-end functionality. SAP is also targeting industry-specific software partners to complete its offerings in higher education, such as Sodales software to plug into SuccessFactors to accommodate multiple appointments and effort certification. SAP also offers (free to existing ECC customers) RISE with SAP for Higher Education, a business transformation service that uses process mining software.

Workday

Workday was the first to announce a cloud student system and has successfully built and deployed it, along with its finance, HCM, and payroll solutions. It has built deep higher education-specific functionality throughout its product suite. Workday had a separate higher education business unit for a time, but that unit folded into the core business several years ago. Over time, it has kept higher education-specific strategy, offerings, and prices. The higher ed implementation partner community for Workday is also deep and experienced. Partners without deep higher education experience have moved away from the vertical.

What do higher education buyers want? Simplicity. In buying, implementations, and partner relationships. Institutions want proven functionality and partners with deep higher ed experience. This is the first and most important criteria for such critical purchases. Verticalization strategies help present a unified, integrated, and higher ed-focused set of services that make the buying process less complex and less risky.

There are several critical steps to a successful verticalization strategy. I’ve already hinted at them, but let’s dig in.

• Completeness of functionality: For this strategy to work, a critical mass of functionality in core systems needs to be present. This does not mean that every application needs to be accounted for, but it does mean that institutions need some core set of functionalities that, by working together, reduces overall complexity. Buying separate products from separate vendors, delivering incompatible processes, data models, and user interfaces create IT and business costs that are hard to specifically account for but that are very real. Additional costs in access management, training, integration, data management, and cognitive load for employees and students are all real costs. Every boundary erased reduces this cost.
• Pre-integration of components: This is an obvious place for savings, but until the vendors and partners have done the heavy lifting, these systems may as well be from separate vendors.
• Consistent user interface: As mentioned previously, design is imperative to a vertical application suite. Users should not face a learning curve moving from one function to another.
• Simplicity of the contracting and buying process: if an institution needs to complete complex, interrelated transactions to begin a transformation project, it may not happen.

We’re seeing the beginning of a trend of packaging and marketing general solutions that are configurable for an industry. Instead of spitting off versions of code for an industry (e.g., E&G versions of on-premises software in the ‘90s) that had to be maintained or re-derived from the next version, cloud software providers can include industry-specific functionality in base software and allow its configuration when needed. This process is much more effective and sustainable, and it should prove to be valuable for vendors and customers over the long term. The question for higher education is how effectively each of these vendors can deliver a higher education vertical strategy to ensure that its market position can grow.