What Is Vertical SaaS: Benefits, Challenges and Considerations

Product
7 min
Oct 03, 2024

Software as a service technological solution has changed the landscape of software business in the last decade. But technology never stands still, offering innovations and transformation. And this is what vertical SaaS is about — a new approach in cloud-based system development that focuses on unique industry needs.

The market for this cutting-edge solution is expected to reach $194.81 billion by the end of 2025, so this industry might be a new, blooming field for those considering investing in software development. Let’s explore the specifics of vertical SaaS, its advantages, and pitfalls.

What Is Vertical SaaS?

Vertical software as a service is a breakthrough concept that serves specific industry needs. The scope of work of such a platform is narrower than in horizontal SaaS, but it is focused on providing meticulously crafted solutions to meet the requirements of particular industries.

Instead of covering multiple aspects like the horizontal approach, a vertical cloud-based project circles out one field, researches it deeply, and delivers the outcome where users don’t need to use various tools but can go through all the workflow steps with one program.

Importance of Vertical SaaS in Today’s Market

As technology develops, businesses look for solutions to meet their unique needs. So, the demand for such applications is very high.

Let’s imagine the situation that happens every day in the healthcare niche. New patients are arriving, and they need to be registered. Some clients want to schedule online consultations, and staff must have a well-organized schedule to avoid losing precious time. All these operations typically require several tools while data between them is not synchronized.

A vertical SaaS product offers a unified technological solution catered only to the challenges of a specific field.

Understanding Vertical SaaS Specifics

Vertical software as a service product is designed to cover the needs of a specific niche in a targeted market. Unlike the horizontal type, where all features are generic and aimed to serve large audiences, this innovation offers new benefits and challenges at the same time.

Solutions for Specific Industries

The task of a vertical SaaS is to address all nuances of the particular industry. This means a product offers expertly built features tailored to operational, compliance, and efficiency requirements. On top of that, such products offer great customization opportunities, providing freedom to users.

Benefits of Vertical SaaS

This innovative idea comes with many advantages:

Benefits of Vertical SaaS

  • Improved efficiency. The processes become smoother when one product offers solutions to all industry operations. Implementation of such a technology streamlines workflows, freeing up more space for the execution of other tasks.
  • Reduced costs. By offering a unified system with all the needed instruments in one place, businesses can save money to maintain other tools. Companies also don’t need to spend resources on customizing the existing product as it appears tailored to their needs.
  • Higher customer satisfaction. A common pain users struggle with is the lack of customizable solutions. However, this aspect gets addressed with a vertical SaaS, and thus, customers receive a ready-to-use tool for all business operations.

Vertical SaaS Challenges

The complex nature of vertical SaaS product development and maintenance poses several pitfalls you need to be aware of before investing in this industry.

Vertical SaaS Challenges

  • Small lead pool. While horizontal cloud software is applicable in various industries, vertical platforms have a limited pool of leads. Thus, when you provide services for one company, it might be challenging to switch to another customer, given the fact of custom-made solutions.
  • Narrow scope for adjustment. This technology focuses on a narrow field of solutions, making it impossible for other broadly developed companies to integrate it. Also, it is not quite flexible in terms of feature modification, so businesses will need to wait for the implementation of new functionality.
  • High initial investments. Even though, from the long-term perspective, vertical SaaS development is less resource-consuming than horizontal one, it requires a significant sum initially. This is because you will need to dive deep into the details of the industry knowledge.

Key Components of a Vertical SaaS Solution

You are already aware of the functions regular horizontal cloud-based products perform. But what about niche-specific technological advancements? We will look at this below.

Core Functionality

Depending on the sphere requirements, vertical SaaS platforms offer features that address specific niche demands. Such applications have industry-required workflows, tools for tracking regulatory compliance, customizable dashboards, real-time analytics, role-based access control, task automation, customer relationship management, and others.

Customization and Flexibility

Even though vertical SaaS products are not that flexible to be used by different industry companies, they offer enhanced customization within the specific field. Since every company has unique needs, rules, and workflows, this product can be tailored to the requirements.

Integration Options

Companies usually use additional tools and services, so taking that fact into account, vertical SaaS solutions are developed with solid API and cross-platform capabilities. This ensures smooth integration into the existing operations without disruption and data discrepancies.

Horizontal and Vertical SaaS: Comparison

Horizontal SaaS vs vertical SaaS differs in scope, targeting, and specialization. To understand their specifics, let’s discuss their distinctive features.

Key Differences

The main unique characteristic of a vertical SaaS is its focus on industry-specific needs. Such platforms deep dive into one particular niche, research it, and develop solutions that will satisfy users only within the field. With a vertical SaaS, companies solve numerous pains, including customization that regular generic SaaS platforms can’t cover. In the horizontal SaaS realm, the focus is on versatile functionality that can serve many industries. The applications have regular features that users should adapt on their own. However, this solution doesn’t require being an expert in the field and is easier to develop.

Examples: When Vertical SaaS Suits Best

Niche-oriented cloud-based software best applies to industries with complex compliance rules and operations. These fields are the best to create vertical SaaS for:

When Vertical SaaS Suits Best

  • Fintech. Financial establishments deal with sensitive data and thousands of everyday operations. Compliance-enhanced vertical SaaS can greatly contribute to its security and leverage operational aspects by automating workflows.
  • Real estate. Vertical SaaS capabilities perfectly address real estate challenges. They can provide property management features like payment collection, tenant management, and maintenance scheduling. This technology can also track market updates that shape this industry.
  • Healthcare. Being the most regulated industry, healthcare is the best area to build a vertical SaaS. With this tool, you can expect solid compliance with laws, workflow management for all parties, electronic health records, remote monitoring, insurance claims processing, etc.

Vertical SaaS Examples

A few vertical SaaS companies adopted this industry-specific technology and successfully conquered the market. Here is an overview of some of them.

Toast

Toast vertical SaaS is a breakthrough innovation in the restaurant industry. This on-demand tool has transformed the operational part of dining spots with such features as point of sale (POS) for payment processing, inventory tracking, workers management, and customer satisfaction instruments. Scalability is the main challenge in creating a vertical SaaS for a restaurant business. There are small cafes and large eating houses, so the platform should be flexible. And this is what Toast offers: easy implementation for any business size.

Shelterluv

Vertical SaaS is in high demand in industries such as animal welfare. Shelterluv has become a software application that addresses all processes behind the scenes in animal adoption. It provides animal management tools, adoption management, and volunteer management with real-time analytics. Animal shelters hold a lot of sensitive information about donors. Knowing that, Shelterluv has prioritized solid security and data protection.

The Future of a Vertical SaaS

Even though vertical SaaS is currently an innovative solution for the software development realm, its capabilities have already been broadened. Artificial intelligence (AI) and machine learning (ML) are the novelties that are entering the market. With the help of these technologies, users can expect to get better prediction, automation, and task optimization. For instance, the AI mechanisms can gather the symptom history and provide suggestions for the diagnosis. Or analyze the inventory place and guide you on how to place products with practicality in mind.

A challenge that might prevent the vertical SaaS development niche from rapid growth is a limited addressable market. Developers still doubt the decision to invest in the technology that will have a limited pool of clients.

Conclusion

Vertical software as a service is a unified solution for those industries that require high customization. This product is distinctive from the horizontal cloud-based platforms because of the focus on addressing niche-specific issues. Vertical SaaS dives deep into the particular industry specifics, identifies its pain points, and targets them with enhanced functionality.

Since vertical SaaS development requires strong specialists, you should hire professionals like Uitop agency. We aim to provide the best solutions for your idea without sacrificing market trends and innovations.

by Ivan Klyzhenko
UX Startup Advisor, Uitop

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