Horizontals, Verticals and Functions

This is one of the most fundamental and common concept in today’s world of Service / Consulting Companies. The role and responsibilities of employees / external consultants would align itself accordingly to the matrix formed by these.

Business Functions: Each and every organization would have certain set of functions in order to run their business. These functions can be more or less same in all types of organization but the way each functions are defined differs across industries. The basic business functions:

  • Financial Management
  • Human Resource Management
  • Operations Management
  • Legal, Compliance etc
  • Information Systems
  • Marketing
There may be some other functions specific to specific industry, but these can be taken as the basic set of business functions a company would look into in order to run their business smoothly.

Industries: Each company today caters to a particular industries (excl. conglomerates for which we can consider their Business Units). These are called Verticals. Eg: Banking, Capital Markets, Insurance, Aerospace, Automotive etc.

Now when we talk about Consulting firms especially IT Services firms. These companies would align their solutions / products across the different functions of different verticals. Some services companies are niche and cater to a single vertical eg: Sungard for Financials while some other would cater to a wide array of verticals eg: TCS, Infosys, Accenture, IBM etc.

Lets take an IT Services company eg: Infosys.

Functions:

  • Operations – Delivery, Implementation of Projects
  • HR Management – Recruitment, Compensations, Learning etc.
  • Financial Management – Investments, Acquisitions, Financial decisions
  • Marketing – Sales, Promotions, Corporate Communications, Brand Awareness etc.
  • Information Systems – Knowledge Management, Infrastructure, IT Systems etc.
  • Legal – Self Explanatory
As you can see that the major revenue generator would be the Operations wing, while rest are support functions which would actually enable the revenue generation. As you can see all of these areas would require employees. But the area where the company would need a Consultant would be the Operations.

Now operations would have some processes overlapped with other functions, and this unit would actually be seen to be a matrix across Verticals and Horizontals.

Now since Infosys caters to a large number of companies across various industries, lets see which functions they cater to. Essentially since it is a IT services company they would cater to the Information Systems function. But then again in companies the IT function may not be well defined.

First we would consider which industries we would cater to, i.e. Industry Practices or Verticals. Each vertical would have the same functions but with different processes this is where we require Domain Knowledge. eg: A marketing initiative for a FMCG company would totally be different to a Credit card company.

Then we consider the business functions, i.e. Marketing for Credit Cards company would have many processes of which some would require IT, some would be benefited by IT and some can be optimized with re engineering.

Then we consider the horizontal i.e. the Service Practice we can offer to the specific business function of the specific industry.

Now we must also remember same type of services cannot be valid for the same business function of the same industry. Eg: a legal compliance of a bank may require reporting but the type of reporting would vary in UK to US.

There are certain business processes which may be somewhat similar across different companies in a vertical or horizontal eg: companies adopting th

e best practices of Supply Chain Management. This becomes very easy for the service vendors to incorporate a of the shelf system with minor changes.

So in short:

Vertical are industries, each industry would have different companies with similar business functions, each business function might have different processes, each process would have a specific solutions group together called horizontal.

At the end of the day each and every project is different, requiring to understand the business complexities from the scratch.

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