Vertical industry expertise didn’t come up as a valuation booster in my recent MSP Summit panel or my interview with Evergreen’s Jeff Totten, but for the right buyer it makes a huge difference.
Abacus, a global managed IT and cybersecurity provider, is one of those buyers. “We are maniacally focused on two verticals, the financial services vertical and the healthcare vertical,” said Jonathan Bohrer (pictured), the company’s president, during an MSP Summit conversation. “We are not a generalist.”
Which by extension means it doesn’t buy generalists either, a fact that presents both advantages and disadvantages in the M&A market. The obvious disadvantage is that great specialists are harder to find than great generalists. The chief advantage is that specialists tend to like joining forces with other specialists.
“When we get in front of somebody in the healthcare space, we speak their language,” Bohrer notes. “We become a much more compelling cultural fit.”
With an extremely compelling joint market opportunity, one might add, especially in AI. U.S. businesses spent $1.4 billion on healthcare AI last year, according to Menlo Ventures, nearly triple what they spent the year before, and healthcare organizations are deploying AI at more than twice the rate of the broader economy.
Those investments are paying off too, according to recent data from Bessemer Venture Partners showing that buyers projected ROI on healthcare AI spending within about 24 months, on average, and got it in about 12 instead. The situation is similar in financial services, where 89% of companies surveyed by NVIDIA say AI’s helping increase revenue and decrease costs.
Abacus has been capitalizing on that adoption appetite within both verticals in multiple areas, including security. Investment firms, for example, are simultaneously encouraging employees to develop custom AI-powered analytical models and worrying about the harm those models could do.
“The citizen coder is very dangerous,” Bohrer notes. “But to an investment manager, not having a citizen coder to compete is even more dangerous.” As a result, Wall Street is pleading with firms like Abacus for help deploying AI safely. Helping healthcare providers optimize “revenue lifecycle management” is proving equally promising.
“The healthcare holy grail is [addressing] the difficulties of billing and insurance and which code and all that,” Bohrer says. “It’s a really good use case for AI.” Indeed, back office AI investments are returning 3-4x their cost within 12 months on average, according to Bessemer.
Use cases like that abound in pretty much every vertical, including retail and field services, as regular readers have seen here recently. And there are a lot of verticals. 1,012 of them to be precise in SMB alone, according to Omdia’s Jay McBain during a recent interview on MSP Chat, the podcast I co-host. Take just one, he says, like flower shops, and you’re likely to find nine industry-specific, AI-powered enterprise solutions for sale. The same goes everywhere else too.
“If you don’t own a flower shop, you own a tanning salon or if you own a daycare center, you have your own nine versions of somebody went out on Microsoft .NET and built something to manage your entire business,” McBain says.
Every last buyer of those systems will need help choosing one, implementing it, and customizing it from someone like Abacus, moreover. “We have a real sense of optimism that there’s opportunity there on the advisory side,” Bohrer says.
Let’s face it, there’s no substitute for speaking with Jay McBain directly
The next best thing, though, is hearing him speak, as you can in that MSP Chat episode I just mentioned, where we get into the partner-led services opportunity in AI, the future of resale, the power of community in the channel, and much more. Tune in here, and then go here to check out our many other insightful interviews with industry thought leaders here.
