Horizontal and vertical distribution are opposite business models. These terms are used somewhat loosely, and sometimes ‘distribution’ is replaced with scaling or integration.
People talk about horizontal and vertical distribution in many different ways, as it applies to a number of fields – websites, apps, software development strategies, business organization models, marketing campaigns, and physical products, to name a few.
No matter the context, the same general concepts are always being evoked. Horizontal distribution refers to spreading out resources and engaging with or creating multiple copies of whatever you are dealing with. Vertical distribution is all about enhancing a single resource as much as possible.
Take a typical IT system, for example. Business is good and they are working with more data, and the team needs to make a choice. Should they upgrade their two computers to handle the load (vertical), or should they buy a few more computers to share the load equally (horizontal)?
Horizontal and vertical distribution each have their merits, although it has been reported that horizontal is more cost effective when it comes to servers for website hosting. Costs rise exponentially as more processors are added to single servers, but costs only rise linearly when processors are added in the form of multiple servers.
Horizontal Distribution
Horizontal distribution means trying to reach a broad, diverse audience. The product or content is for everyone, or almost everyone, and is usually simple and easy to comprehend or use.
It can also mean focusing on one particular aspect in a chain of related technologies. When it comes to mobile apps, there are a number of components involved – the hardware, the operating system, the program software, and the app itself. A horizontally-oriented company would focus on one particular link in this chain, and produce only the hardware, for instance. These companies become flexible and learn their craft well, or they don’t last.
Vertical Distribution
An app aimed vertically is for a certain group of people with special skills or needs, like engineers, marketers, or managers. They are typically customized to integrate with particular systems.
Apple is a good example of a company that has gone for vertical distribution of production. They make the hardware, the operating systems, the software, and the apps. Companies like these have more control over their products and profit more from them, but operations are more costly as well.
Both horizontal and vertical distribution are being used successfully, as well as various combinations of the two. Whether a company goes with one or the other will largely depend on their goals, their capital, and their resources.