Software as a service – we've spoken in great detail about how the shift to cloud-based subscription services has impacted our daily lives and delivered real change to how we run our businesses. It's been a growth opportunity model for any developer, entrepreneur, or investor right across the board.
It doesn't matter which survey or data-set you look at; the metrics are all pointing one way, 'up,' making SaaS one of the most attractive models for providers and users alike.
During SaaS's formative years, providers were looking to grab the biggest market share available—with it, the biggest payout. A single product that appealed to all industries looked like their best bet, so why wouldn't it become the most attractive?
As SaaS has spread its wings, we've seen how directing specific industry expertise and solving niche problems in specific industries offers advantages and benefits while achieving superior figures than initially expected.
Welcome to the world of the industry-specific, vertical SaaS.
So, what is vertical SaaS?
As the world moves towards managing every angle and aspect of their business digitally, SaaS has become the simplest and most efficient way to manage daily tasks and more. How? By taking advantage of improved data manufacture and availability, artificial intelligence, automation, and so much more.
It has replaced the static, offline systems that become outdated with each change in legislation, new trend, or discovery.
SaaS moves with the times; it updates automatically, is entirely mobile, and its subscription price fairly reflects its necessity within your operation.
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Horizontal SaaS – meeting the needs of all businesses
Vertical SaaS – meeting the needs of a defined market
Vertical SaaS has become the new users' favorite. With each application being industry-specific, they answer the problems a generic, out-of-the-box app doesn't. Vertical solutions understand your business as an industry insider would, unraveling issues unique to each environment without complicated customization, problematic plugins, or custom code rewrites.
Vertical SaaS has become more niche than ever, partly because the designers and developers have learned that the numbers don't have to suffer just because the market share is narrower.
The state of vertical SaaS in 2022
The vertical SaaS market has swept into the digital arena at an incredible rate over the past two or three years. The signs point to continued growth, operation, and success.
- Continuing rapid growth – Vertical SaaS solutions will keep growing, boosting their market share and profitability.
- High investor demand – Vertical SaaS is an excellent investment opportunity; more support will be available from investors and partners for entrepreneurs, startups, and providers.
- Increased movement in the merger and acquisition space – Due to their financial successes and the talent in the field, mergers, and acquisitions will be abundant, providing fabulous growth opportunities, shifts in market share, and movement in new verticals.
Predictions for vertical SaaS solutions
- Acquisitions for both strategic and financial merits – Vertical SaaS has become strategic purchases for growth-stage verticals and horizontal companies. With new startups and opportunities constantly emerging, it's prime for mergers and acquisitions, enhancing the business footprint through and across markets.
- New SaaS providers are entering smaller and public markets – Even the smallest industry operations will see an app or SaaS built to drive them to success. With investment available for the most likely successes, despite the market size, they'll be encouraged as stepping-stones toward growth throughout those small markets or into alternative verticals.
- More support for vertical startups from venture capital – As with any good-looking investment opportunity, they attract attention. Investors are already more than aware of the possibilities within the vertical SaaS sector, so expect to see far more venture capital heading their way at the early and growth stages of operations.
Vertical SaaS is one of the biggest trends in 2023! Do you want to learn about more SaaS and IT trends? Get our premium e-book with expert predictions for free!
Vertical SaaS as compared to Horizontal SaaS
Let's take an outlined look at the differences between horizontal vs. vertical SaaS:
Industry-wide or industry-specific?
Horizontal SaaS delivers tools to help operations across all kinds of industries.
Vertical SaaS provides tools for specific industries and, in some instances, even to deal with a single, unique problem.
Complex or simple operation?
Horizontal SaaS packages tend to be out-of-the-box one-size-fits-most options, which make them reasonably simple to set up and operate from the get-go.
Vertical SaaS solutions can be as complex as its industry needs it to be. This doesn't necessarily mean they're harder to get to grips with but will require a level of inside knowledge to utilize the package to its best.
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Custom means customizable
Horizontal SaaS offers customization that covers the range of applications they manage. That means anything slightly custom to any given industry will be problematic or require additional plugins, APIs, or add-ons.
Vertical SaaS is explicitly created with those customizations at its heart. As a result, most barriers or obstructions will have been dealt with during the primary build or with updates because the experts behind its operation understand just what you need and want it to do.
Horizontal SaaS providers simply can't monitor all industries and their legislation, trends, issues, and highlights, so adapting to the latest rulings, data, genius discovery, or disaster takes time to roll through.
Vertical SaaS, again, is built for those changes. Providers monitor their industry for all the latest movements, adapting their software and service within regular updates to keep you up to date and ahead of the field.
Marketing to the masses or a minority
Horizontal SaaS has the advantage of an almost bottomless market pool. However, selling to everyone is more complicated than you'd think. Getting noticed in massive markets takes more effort and resources, leading to higher marketing spend and cost per acquisition.
Vertical SaaS markets are often neatly rounded up into easier-access opportunities. Smaller, easy-targeted options are often simpler to find and sell to, with a higher chance of conversion, lower marketing spending, and cost per acquisition.
The benefits and challenges of choosing a vertical strategy for your business
Vertical SaaS benefits
As we uncovered in the previous section, despite having a smaller market pool, most vertical SaaS operations experience (and enjoy) a lower customer acquisition cost and a smaller marketing spend.
Also, lead conversion is higher as prospects already have a vested interest in the niche market. It's not only conversion that counts here, but also retention. With industry-specific legislation catered for, as well as expertise, updates, and reactions to revisions of any point in their field, it makes the vertical SaaS' sticky' and harder to switch out from for an alternative.
Vertical SaaS challenges
One of the challenges of making those conversions includes accessing these smaller markets. Marketing strategies involve researching prime opportunities to access decision-makers and their operations. Understanding where they hang out online, in life, the events they attend, the publications they read, the sites they visit, and the people they pay attention to all become part of your sales funnel.
Another acquisition aspect covers convincing prospects to go digital if they're still operating on dated methods or converting from a horizontal SaaS if they've already taken a step into digital operations. People don't necessarily find it easy to embrace change if they can't see the advantages straight away—especially if those changes come with recurring costs.
Key points for choosing your preferred SaaS model
The following points lend themselves to horizontal SaaS projects:
- Are you building a generalized tool ideal for users across all industries?
- Would you prefer to build a product you can market to the broadest possible market?
- Does your marketing team excel in wide-reaching campaigns to generalized markets?
The following points lend themselves to vertical SaaS projects:
- Are you leaning hard on your (or a partner's) expert industry knowledge and experience to provide a solution specific to that niche?
- Do you have links and relationships with important and influential players in a chosen industry?
- Have you got skills and knowledge that can convert into tools and information from which people in your industry would benefit?
- Do you understand the legislation and processes specific to your sector and how to simplify them for your customers?
- Have you got access to customers or testers to help drive the difference between your tools and those in a horizontal alternative?
The 13 examples of successful vertical SaaS companies
Given the rise in the number of vertical SaaS companies, there's no shortage of vertical SaaS examples to appraise, examine and inspire.
According to saastitute.com—a comprehensive resource for all things SaaS—their top ten vertical SaaS companies for 2022 are as follows:
1. Riskalyze – Financial advice sector
A tool for plan development, investment analysis, and portfolio building. Advisors can measure risk capacity and tolerance on a 1–99 scale. Riskalyze is one of the leading vertical SaaS companies in the US.
2. Applied Epic – Insurance sector
Automation process for insurance agencies. Includes property management, sales, and revenue from a single, simple dashboard.
3. Clear Care – Healthcare industry
A CRM tool designed specifically for home care agencies, managing electronic records into a simple single-space patient portal.
4. Textura – Construction industry
Payment management and contract management tool that helps the company stay within budget and adhere to each timeline with online workflows and e-signatures.
5. Procore – Construction industry
A project management tool that allows access and editing of drawings, plans, spec sheets, and more at any time and from any location. It tracks project issues, bidding, schedules, and planning.
6. Venga – Restaurant and fitness sectors
A CRM tool that collects data to provide insights into customer habits and preferences when dining in restaurants. Venga is one of the largest dining networks; it manages establishment reputations, streamlines operations, attracts diners, and drives repeat visits.
7. Infor – Business sector
A multi-tenant cloud ERP package (enterprise resource planning) that caters to a vast range of industry-specific opportunities.
8. Thapos – Sports industry
Thapos is a sports management tool for players, associations, coaches, clubs, and leagues, covering payments, registrations, schedules, and matches.
9. HotSchedules – Restaurant industry
An employee scheduling and communication tool. Team members can pick, release, and swap shifts with a single click or automate shift choices when they want more or less time off. It also tracks inventory, stock, talent development, forecasting, and staff management.
10. Veeva – Business sector
Customer, content, master, and commercial data management and analytics processing create custom cloud solutions for various vertical options. Veeva manages the critical functions that allow businesses to achieve goals faster and more efficiently, whatever their size or scale.
But Saastitute's list wasn't enough for us, so after our own thorough research, we present 3 more favorites among the vertical SaaS companies:
11. Buildertrend – Construction industry
A project management solution for the construction industry that mainly facilitates project scheduling, budgeting, and communication.
12. MindBody – Health and Wellness Industry
A vertical SaaS company for the health and wellness industry that proposes appointment scheduling, class booking, and customer management tools.
13. Rootstock - Manufacturing and Supply Chain Industry
An enterprise resource planning (ERP) software solution for manufacturing and supply chain businesses, including tools for production management, inventory control, and order management.
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Vertical or horizontal SaaS? Who will be the winner moving into the future?
Watching the fast growth of SaaS during its recent development and through the many forced applications of the pandemic, we're seeing a sure-fire shift towards vertical SaaS, serving the unique needs of each and every industry.
As we integrate more AI, machine learning, and blockchain functionality ever, the latest vertical SaaS adds to how personalized each operation can be, utilizing specific industry-based data sets to help drive businesses forward with tools they couldn't have dreamed of 10 years ago.
Planning on building a vertical or horizontal SaaS soon? Take a look at SaaS Boilerplate benefits for your development team.