What is vertical SaaS? Key differences between vertical SaaS and horizontal SaaS

icon-calendar

Apr 17, 2024

icon-timer

6 min read

The SaaS industry is constantly changing. With advancements in the SaaS industry, its revenue is expected to reach $135.10 billion in 2023. Giving SaaS businesses a reason to be aware of the latest industry knowledge and grab the opportunities to expand their markets.

Many startups have raised billions dollars of valuation just by focusing on Vertical Saas. Vertical SaaS is a developing branch in Saas that offers software solutions designed for specific industries or niches. To prove how profitable this business model can be, companies like Veeva, Toast, Blend Labs, and Procore have gone public.

This blog will help you recall what is SaaS marketing and take you through what is vertical SaaS and horizontal Saas, exploring the benefits and challenges of vertical SaaS in SaaS marketing.

What Is Vertical SaaS

Vertical software solutions are designed to address small and medium businesses’ unique needs or pain points within particular industries or niches. For instance, businesses in healthcare or restaurants require solutions for tasks like scheduling patient appointments or managing tables, respectively. Vertical SaaS companies develop specialized solutions to cater to such industry-specific needs.

Key characteristics of vertical SaaS include:

  1. Solutions for industries: These platforms come with features and functions tailored to meet the specific needs of particular sectors or market segments.
  2. In depth industry knowledge: Companies specializing in Vertical SaaS possess an understanding of niche markets enabling them to create efficient solutions.
  3. Tailored marketing approaches: By concentrating on markets businesses can target leads precisely resulting in increased conversions and return, on investment.
  4. Flexible solutions: Vertical SaaS platforms often provide customization options to align with the processes of diverse industries.
  5. Software integration: These solutions frequently connect with tools used in various industries streamlining data transfer and enhancing operational efficiency.

Vertical SaaS Vs. Horizontal SaaS

blog

SaaS products are commonly categorized into two main types: horizontal and vertical. These two are constructed and function differently with different business models and target audiences. Let’s look at each of them:

Horizontal SaaS

Horizontal SaaS constitutes cloud-based software solutions tailored to a broad spectrum of business users, irrespective of industry. This model, which has been prevalent for over a decade, prioritizes addressing overarching business requirements over catering to individual consumer needs.

Some famous examples of Horizontal SaaS platforms:

  • QuickBooks for accounting
  • Salesforce for CRM
  • HubSpot for marketing

These platforms aim to serve diverse industries, spanning insurance, supply chains, retail, and manufacturing, mitigating customer acquisition costs through broad market coverage.

Horizontal SaaS companies typically deploy extensive marketing strategies, leveraging various tools like cold email software and automated marketing campaigns to reach diverse target audiences. Slack, for instance, customizes its marketing efforts to resonate with different industry segments, featuring customer stories from varied businesses, agencies, and nonprofits.

Vertical SaaS

We have already discussed the vertical Saas in the above sections. Vertical SaaS adopts a more focused marketing approach, concentrating efforts on a single industry vertical. This targeted B2B SAAS marketing strategy demands fewer resources than Horizontal SaaS, as it caters to a smaller yet highly specialized market.

Here are some examples of Vertical SaaS platforms:

  • BioIQ for MedTech
  • Health Assurance Plan for dental software
  • Guidewire for insurance

Why is vertical SaaS on the rise?

Vertical SaaS offers a distinctive value proposition: crafting a suite of solutions tailored precisely to the demands of specific industries. This strategic approach fosters deep integration into customers’ workflows, cultivating resilient loyalty. Furthermore, it opens avenues for lucrative upselling and cross-selling opportunities, improving your SaaS marketing funnel.

Incorporating fintech products seamlessly into Vertical SaaS offerings can significantly enhance value for both the provider and the clientele. This strategic move not only introduces fresh, often recurring revenue streams but also enhances businesses’ overall value proposition. These solutions provide comprehensive insight into businesses’ cost structures, cash flows, and capital requirements by integrating financial services such as payments, lending, payroll, or insurance.

Furthermore, Vertical SaaS adeptly sidesteps the configuration complexities commonly associated with horizontal software. By delivering a product finely tuned to meet customers’ specific needs, the cumbersome customization process typically required with generalized software becomes unnecessary.

Lastly, Vertical SaaS provides an all-encompassing solution, eliminating customers’ need to navigate multiple disparate tools. The outcome is a streamlined workflow and heightened operational efficiency.

Benefits of Vertical SaaS

blog

Bessemer Venture Partners report says that Vertical SaaS has seen a huge rise in value, growing from $50 billion in 2010 to over $600 billion in 2020. This growth is because these companies focus on helping industries that big software companies often ignore.

For example, they create tools for small businesses in healthcare, food service, finance, and construction, making it easier to handle complex tasks like following regulations or managing unique business needs.

Here’s why vertical SaaS is so beneficial:

Better Fit: It offers complete solutions tailored to specific industries so everything works smoothly together.

Saves Money: Because it’s customized, it’s more likely to be bought, saving on marketing costs. Plus, it can scale up efficiently, saving even more.

Boosts Efficiency: Especially during tough times like the pandemic, it helps businesses do more with less. By integrating well with existing tools, it streamlines operations without needing extra staff.

Big players like Salesforce and Microsoft are also jumping in, realizing they need to offer industry-focused services to keep up with the success of these specialized SaaS companies.

Challenges of Vertical SaaS

blog

Developing Vertical SaaS products presents a unique set of challenges within the dynamic SaaS landscape. Firstly, crafting a successful vertical SaaS solution necessitates an in-depth comprehension of the specific industry it targets. This entails understanding the industry’s unique demands, operational hurdles, existing workflows, and future aspirations. Additionally, regulatory expertise is imperative, particularly in heavily regulated sectors, as compliance is paramount for SaaS solutions catering to such industries.

Secondly, each organization within a given vertical may possess distinct requirements diverging from the standardized norms. Consequently, vertical SaaS providers must adeptly tailor their offerings to meet these varied needs, often necessitating customization of features and functionalities.

Thirdly, ensuring product scalability is a crucial consideration. Businesses seek SaaS solutions capable of accommodating their growth trajectory while seamlessly integrating with other tools to streamline operations. Thus, vertical SaaS offerings must boast a flexible, modular architecture that facilitates smooth scalability and integration, thereby mitigating the need for costly and time-consuming transitions between disparate systems.

Conclusion

Vertical SaaS have the power to target a niche market with powerful SaaS solutions which solves the needs and challenges. This strategy is more beneficial than solutions developed for all industries. You just need to search for missing part in a niche market and focus on creating a smart solution to fill the gap.

SaaS marketing in a startup will always see new trends and opportunities. However, by adding integrated payment to your vertical SaaS offering you can add more value to improve the user experience. Contact us today to find out how Saffron Edge can help you achieve this quickly.


FAQs

What is a vertical SaaS Company?

 
Vertical SaaS is a specialized category of software-as-a-service tailored to the distinct requirements of particular industries or niches.  

What is vertical vs horizontal SaaS?

 
Vertical SaaS solutions are designed to fulfill the specific requirement of a particular industry or niche (e.g., finance, real estate, healthcare, etc.). They offer specialized features and functionality tailored to that market's requirements.   Horizontal SaaS solutions (like project management software or email marketing tools) are designed to fulfill the need of various industries and businesses. They offer more generic features and functionality that can be used across different industries and businesses.

What are the benefits of vertical SaaS?

The advantages of vertical SaaS lie in its ability to provide highly customized and targeted solutions, making it an important element of any SaaS marketing playbook. By solving the specific pain points of a niche market, these platforms can deliver more effective tools and services. Moreover, their focused approach often translates into lower customer acquisition costs and higher conversion rates, as they can efficiently target and engage with their ideal customer base. Vertical SaaS solutions usually come with native integrations tailored to their industry, streamlining operations and enhancing overall efficiency for small and medium-sized businesses.