It’s safe to say that in the last few years, the SaaS industry has experienced unprecedented growth. According to OpenView Labs, the industry is on track to close 2018 with a 21.5% increase to $71.2 billion. But with that growth comes some pretty serious competition. In 2013, SaaS companies reported, on average, having just two competitors. In 2018, that number had jumped to nine.
With competition growing ever more fierce,
vertical SaaS has become a strategy for getting a foot in the door of a crowded
marketplace.
So what is vertical SaaS, anyway?
When we think about SaaS, horizontal SaaS is
generally the go-to idea, since it’s the more mature model. For example, one of
the most commonly cited SaaS companies is Salesforce, which offers cloud-based
solutions for sales, service, and marketing, kind of a one-stop-shop
subscription service. Which is great! Who doesn’t love Salesforce?
However, as business face challenges unique to the digital age, solutions often need to be industry or company-specific. Even Salesforce recognizes the need for more specific, vertical SaaS. That’s probably why Salesforce partners with companies like Veeva, which provides SaaS cloud-based technology created specifically for the life sciences industry, such as pharmaceutical companies and biotech startups. While businesses of all types use Salesforce, Veeva focuses on the specific needs of one type of client.
As the SaaS industry continues to grow,
vertical SaaS has a few advantages over the older, horizontal model. Here are a
few reasons vertical SaaS offerings stand out.
Vertical SaaS means less competition
We’re living in a golden age of SaaS, which is great. Except for the fact that it seems like a new SaaS company is born every minute. Some estimates say there are as many as 100,000 SaaS apps out there, and even if you think that number might be a little high, we can all admit the market is a tad crowded.
Vertical SaaS cuts out some of that
competition by offering specific solutions for a very particular type of
client. Think of OpenTable. Who knew one little idea could revolutionize the
way we make reservations? But the company solved a very specific problem:
customers needed to know when they could get reservations at their favorite
restaurants, but they didn’t want to go to multiple websites (or, worse yet,
make multiple phone calls) to figure out where they were eating on a Friday
night. Enter OpenTable, which offered an incredibly relevant solution.
Another way that vertical SaaS cuts down on competition is by going after markets that may not have been taken over by the big guys. If Microsoft, Salesforce, and Adobe are your competition, it’s a pretty tough fight, but if your solution is tailored to restaurants or clothing retailers, you may have an easier time making a sale.
Vertical SaaS means easier upsell
And by easy, it could be incredibly simple. For example, 1001 Menus, a SaaS company focused on adding restaurants to all directories, managed to garner 2,500 clients before it even had a product. In the digital age, where managing social channels, reviews, content, and search can be overwhelming, especially for smaller businesses, a simple, relevant SaaS solution goes a long way.