Vertical SaaS
Abstract:
Vertical Software, or application software that focuses on specialized verticals, represents the next big wave in software. While many business needs have been partially addressed by software giants using a one size fits all approach (or so called Horizontal Software), vertical software offers software solutions per vertical with better features, a faster time to product, quicker gain of market share, a better customer experience, and features that fit the specific needs of each ver- tical. According to Gartner, while vertical-specific software vendors comprised only 21% of the total software market at the end of 2013, vertical application software will grow from $194 billion in 2014 to $245 billion in 2018, representing a 6.1% CAGR. While the horizontal software approach consists in having the broadest level of application across industries to increase market size, the vertical approach consists in delivering a “best of breed” solution to tackle sector-specific problems. In doing so, vertical software providers’ ability to quickly develop new solutions, gather feedback from their customers to respond to specific needs, and tweak capabilities to address sector-specific pain points leads to a faster sales and adop- tion process, a lighter overhead structure and quicker path to profitability, as well as an ability to penetrate markets more deeply, including those that have historically been resistant to change. Further, vertical software’s expertise led- approach also enables high-value sector-specific measurements and data generation, as well as deeper adoption over time with up-sell of incremental features, leading to increased revenue growth. While vertical software’s reach and applications span across the markets, manufacturing ($49.5 billion), banking/finance/ insurance ($33.4 billion), and retail ($17.8 billion) were the 3 largest segments by size in 2014, according to IDC. Other key sectors that have seen rapid vertical software adoption include the agricultural sector, autos/car rentals and fleet management, healthcare, and energy intelligence software, among others, where the vertical approach is especially ef- fective at navigating complex systems with unique processes, metrics, and regulation. Investor enthusiasm has followed suit, with investors choosing to dedicate an increasing proportion of their investments to vertical software according to PwC MoneyTree, with some deciding to focus their software investments exclusively to vertical SaaS.
Discussion Topics:
Please introduce yourself, your firm, and take a minute to express an opening view on today’s discussion topic.
Where do you think we are in the adoption cycle of Vertical SaaS?
What are other challenges to further the adoption of vertical software?
What types of analytics features are in greatest demand by your customers?
What role does machine learning or AI play in Vertical SaaS?
How will horizontal SaaS providers react to the rise in Vertical SaaS?
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