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 businesses 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
We all know how much it costs to acquire a new client, but something that’s less commonly talked about is how important it is for SaaS companies to upsell existing clients. Studies find that $1 of upsell revenue is just 24% of the cost of acquiring a new customer. Vertical SaaS, which often provides immediate value for companies looking for very specific solutions, are often able to quickly upsell because the value is easily demonstrable. For example, restaurants that found themselves fully booked after subscribing to OpenTable.
Vertical SaaS brings more potential for partnerships
As Veeva’s partnership with Salesforce shows, a best-
Of course, if there’s one thing the SaaS boom has taught us, it’s that innovation that provides tangible benefit is always welcome, no matter how crowded the space is. It’s truly an exciting time to be in the industry!