What is Vertical SaaS? It's Benefits, Drawbacks and Future

Are you spending money on advertising but not getting the results you want? Are you looking for more sales and leads but have no idea where or how to start?

Right now, the SaaS market is growing at a rapid rate and is predicted to be worth $60.36 billion by 2023 with a 9% CAGR (compound annual growth rate) within these four years.

When SaaS started in the 90s, vendors focused on providing "vertical" solutions (a.k.a. industry-specific SaaS). Nowadays, many prominent SaaS companies provide "horizontal" solutions (covering several industries). Examples include Microsoft 365, Quickbooks, and Slack.

However, there has been a surge in vertical SaaS companies in the last few years. They create solutions that are tailored to specific industries. People can have specialized AI writers for their needs from niche industries like healthcare and construction.

The vertical SaaS movement is quickly picking up steam. Naturally, there are a lot of questions about how to implement it into your business. That's what we'll cover today.

What is Vertical SaaS?

Vertical SaaS products are industry-specific. They have only recently come on the market, and they're quickly gaining traction amongst established dealers. They provide a targeted solution for one specific need, making them a complete solution in themselves.

Vertical Software-as-a-service (SaaS) companies are focused on a particular niche and develop a product geared to meet the needs of that niche. 

Benefits of Vertical SaaS

Vertical SaaS is becoming increasingly popular given the digital shift in many industries. Here are some of the benefits:

• Integrations

Since vertical Says-as-a-Service provides a more specialized product, the company has complete control to build and implement native integrations into the product. The company can develop newer integrations based on the user's needs since they target a limited sliver of the industry.

• Acquiring Customers

Being niche-specific can do wonders for the company. Just by being in a particular industry, they gain valuable insight into what the inside of their target audience needs. This makes it easier for customers to choose their product of choice. Since word of mouth works better in niche industries, it also reduces the customer acquisition cost as companies usually spend less on marketing and chasing leads.

• Scalability

SaaS companies that have focused on a single niche will reap tremendous benefits in terms of scalability. This is because they have a much smaller number of verticals to manage. Additionally, they will experience an overall decrease in the occurrence of complex problems thanks to their decreased level of complexity.

Drawbacks of Vertical SaaS

No business model is without challenges, and vertical SaaS is nothing special. Though vertical SaaS enjoys some benefits over horizontal SaaS, it also has its own unique set of challenges.

• Narrow Focus

Vertical SaaS companies are typically focused on a smaller niche market, making it challenging to find new leads when even the most miniature customer base is expanded. More innovations may need to be created to create new leads for the niche market.

• Complexity

Vertical SaaS offerings can be complicated to create or update, and you may not have the resources necessary. This can be especially true for customer needs that constantly change, and new solutions are required. Some companies might be hesitant to adopt a vertical because it takes a long time to adapt. Most people are already used to horizontal software, so it may not be worth their while.

• Resistance to change

Companies often have difficulty being innovative with vertical industries because they are less enthusiastic about new solutions, even when those solutions have been proven to be effective.

Older, more conservative companies can be found in banks, healthcare, and automotive manufacturing. Vertical SaaS often targets these industries. These companies usually prefer to stick with tried-and-tested methods that have worked for them in the past and may not be too keen on the new technology, so you have to tailor your business approach accordingly.

Difference between Horizontal and Vertical SaaS

To understand the difference, first, we must look at what Horizontal SaaS means.

Horizontal SaaS

Horizontal SaaS is perfect for serving a diverse array of consumers. It has its eyes on the bigger picture rather than concentrating on a specific niche. This is made possible because there are people in your target audience from vastly different niches that all compose different needs and wants.

Horizontal SaaS firms have been around for an extended period. They offer comprehensive support for all niches. They can do this because they have a lot of experience with different jobs and industries, making them the perfect fit for everyone.

Vertical vs. Horizontal SaaS: What’s the Difference? 

• Marketing

One of the more popular trends in SaaS is horizontal marketing. This means expanding a business towards other markets and trying new things, like sales and marketing. But with vertical SaaS, a company needs to only focus on one business area, and the software can manage the rest.

• Scalability

Vertical SaaS providers are more efficient because their operation is streamlined. The decreased number of tasks means less time spent on unimportant tasks, and the synergy provided by a small team of in-house squad minimizes large problems. A horizontal SaaS vendor typically manages a substantial corporation. Therefore, their scalability and manageability will be greater than those in a vertical structure.

• Digital transformation

The most challenging form of competition for a vendor in the Vertical SaaS is to go wireless. To do this, they will need to embark on a path with their clients towards full digital change- which can be seen as more accessible terms. Meanwhile, the more challenging task for the horizontal SaaS provider is to target non-digital niches. So they too have to classify their companies into conventional niches.

Future of Vertical SaaS

One of the benefits of horizontal SaaS is that it can cater to various industries, which gives companies a competitive edge. This competition factor does present a problem for Vertical SaaS, but it also offers an opportunity. Their breadth of exposure to the market may make them more likely to succeed.

Since the use of Saas systems has proven to work well for many companies, including allowing them to be more productive, there's no surprise that more companies are planning to make their systems SaaS by 2025

Trends can give Saas businesses a better understanding of working efficiently and evolving with coming times.

• Automation

Vertical Saas is implementing AI in its processes to provide high-quality services consistently.

• Intelligence

Stay up to date with customers and make intelligent decisions. Gather every detail and analyze it thoroughly to know any potential future campaigns.

• Emerging niches

With the increasing demand for niche products, it's no wonder more & more companies are utilizing these services. The better chance for vertical systems to expand and become mainstream!

• Branching out

Vertical Saas focuses on making their customers realize their potential. That's why you'll see more services offered, such as advisory, management, cloud consultation, and product migration in the new software.

Conclusion

In summary, Vertical SaaS solutions address problems related to one particular industry. They're often more optimized than standard generalist platforms.

Once you know the answer to vertical SaaS, it becomes clear that going vertical is a hugely beneficial decision for any business. It isn’t going anywhere anytime soon. Once you've found a solution like vertical SaaS, it might reveal that a more specific company addresses the need you had. 

Vertical SaaS is an excellent option for companies looking to increase conversions, retention, and ROI on their services. It can help you get creative with your product offerings while remaining compliant and cost-effective. The future of vertical SaaS looks very bright!