Bundle Up for Vertical Alignment

Dell has taken the temperature of the healthcare market and has written a prescription for its five-inch Streak tablet as an electronic medical records solution. It’s part of Dell’s big push into healthcare with hardware, software and professional services solutions to digitize and support health care delivery.

This is not an unusual strategy. Geoffrey Moore’s book “Crossing the Chasm” codified the wisdom of targeting vertical markets or similar-type companies to accelerate customer acquisition and growth. The basic idea is that you can build a product or solution once and deliver it virtually unchanged to multiple customers – thus reducing costs and increasing scalability. Playing to focused markets also has a grassroots benefit of networking through customers to find new prospects with similar needs.

Vertical alignment as a go-to-market strategy has been proven time and again as an effective methodology for growing business. But vertical alignment is taking on new importance because it’s more than just capturing customers but building solutions that have greater value.

As hardware and software become commoditized, selling them as point products is increasingly difficult. It’s hard for end-users to justify the expense. And the lower average sale prices mean solution providers will earn less money and, consequently, lower margins. But bundling products into logical packages increases the ASP and profitability.

However, there’s a catch in bundling: true value. A bundle of complementary products doesn’t produce enough value to justify adoption. The bundle must be logical to the intended needs of the customers. And that’s where the new trend in bundling is coming to play. As Dell is showing with Streak, a bundle with healthcare specific software and professional services will make this mobile device more appealing than competitive unbundled offerings that will require separate purchases and after-market integration.

Bundling isn’t the exclusive purview of vendors. Solution providers targeting financial services, retail, hospitality and other verticals can take raw hardware and software, add their own solutions and create a bundle that meets their customers’ needs. Once the bundle is created, solution providers can take essentially the same product to multiple customers in a more efficient sales model than conventional one-off sales.

In an era of declining product values and squeezed profitability, it’s time to bundle up to increase value and yields.