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Vertical SaaS? Horizontal SaaS? It’s All News to Me

Not sure why, but I have only recently heard of a term called “Vertical SaaS”. Okay, there’s also “Horizontal SaaS”, too. Based on some light research, looks like vertical SaaS is also a growing trend and the number of companies fewer than horizontal SaaS providers.

Vertical SaaS borrows its moniker from the concept of vertical integration whereby there is more control over a supply chain from raw materials to point-of-sale. Here, vertical SaaS companies focus on a niche market (industry) offering a solution that enables more process control.

Horizontal SaaS providers get really good at a particular offering, and widen their market to reach scale. Their focus is on breadth of market, and thus, its sales and marketing strategies can require more resources.

Many vertical SaaS companies (such as Veeva Systems, Guidewire, Fleetmatics) are doing well usurping legacy systems of traditionally slow-tech-adoption industries. Here, vertical companies develop a best-of-breed product, and focus on selling only into that industry. This tends to create “winner-take-all” situations, especially given the smaller number of vertical SaaS providers.

Horizontal companies continue to expand and can create extreme competition due to its vast go-to-market strategy. Horizontal SaaS companies tend to create category winners like Dropbox, Zendesk, and Salesforce.

There isn’t necessarily a “better” strategy, but it’s clear that go-to-market strategies, product strategies, and organizational structures are highly affected by going horizontal or vertical.

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