Zijun Lian

Alan, Leong

MGMT 499 A

08/19/16

Current Status & Future Trends of Vertical SaaS Software Company

Introduction

Today, firms recognize the value of cloud computing to their businesses. Cloud-based

software debuted in the software market as horizontal products that targeted a huge consumer

base by focusing on software categories. As an increasing number of companies deployed on-

demand applications due to its advantages over on-premise solutions, it became apparent that

there was a need for industry-specific SaaS. Vertical SaaS now accounts for a notable market

share in the cloud computing landscape that was initially dominated by horizontal solutions. The

present paper seeks to explore the impact of vertical SaaS. More specifically, the discussion will

cover the benefits imported by this platform in the transport, energy, manufacturing, healthcare,

and hospitality industries. The analysis will also cover the distinctions between horizontal and

vertical SaaS as well as the market opportunities within the five industries.

Horizontal versus Vertical SaaS

SaaS cloud computing revolutionized the software industry. During the advent of this

technology, horizontally-focused SaaS companies sought to disrupt the market for on-premise

solutions. At the time, it was expensive to develop solutions that suited specific niches. Instead,

the initial market entrants chose to design horizontal SaaS solutions that catered for wide

business functions including finance, customer relationship management (CRM), analytics, e-

commerce, human resources, and so on. For instance, SalesForce and Oracle provided CRM and

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online accounting software respectively meant for companies across different industries.

Horizontal SaaS refers to products that are designed for a variety of industries, and it emphasizes

on software categories that cover broad business functions and target mass consumers in every

industry.

Under the horizontal enterprise model, companies focus on the breadth of the market.

Firms like Oracle, Microsoft, and SalesForce design software products that target a mass market

comprising of consumers from every sector. The businesses preferred the horizontal approach as

a means of competing against well-established on-premise solutions and to convincing more

clients to switch to cloud-based SaaS. Fortunately, this approach worked. An increasing number

of consumers began to deploy horizontal SaaS as they realized the value of cloud computing.

In essence, cloud-based SaaS solutions imported multiple benefits over conventional on-

premise applications. First, cloud-based SaaS led to sizeable cost savings. cloud-based SaaS

users typically gain access to business applications online, deployed by software vendors as a

service instead of having to install a product on their servers. There is no need to obtain, install,

configure or maintain costly hardware and software, which either reduces or eliminates overhead

costs. What happens is that the SaaS software vendor caters for any IT infrastructure and rolls out

any upgrades. The other advantage associated with SaaS is scalability. As businesses grow, they

need to include more users and instead of purchasing additional software licenses or on-site

server capability, they could simply adjust their cloud subscriptions. Additionally, cloud-based

SaaS is accessible from any geographical location, which is especially beneficial for companies

that work in remote areas. Cloud-based SaaS solution is also resilient. The data and IT

infrastructure reside in the vendor’s data center, meaning that users do not have to suffer

downtimes since they can simply access the cloud from any location. As horizontal companies

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ventured into designing SaaS solutions in different software categories such as human resource

management, CRM, and accounting, the applications became an integral part of improving

efficiency in these business functions.

Over time, SaaS usage gained traction and is expected to phase out on-premise solutions.

Today, horizontal SaaS companies hold a large share of the software market. Consumers

understand the benefits of cloud computing and no longer need to be educated about its

advantages over on-premise software solutions. Companies in this landscape have now shifted

their focus from creating awareness over cloud products and customer acquisition to customer

retention. Even so, the horizontal software market currently features high competition due to the

proliferation of excellent products that customers can choose from. Horizontal SaaS providers

find it difficult to deliver distinct applications that differentiate them from their competitors.

Aside from that, the market already has established category winners. The market leaders in SaaS

software are SalesForce (held 11% of the market as at 2015), Microsoft (8% of the market share),

and Adobe (6%) (Bourne para 3). Consequently, new market entrants and smaller businesses

found difficulty in gaining market share because established category winners currently dominate

the horizontal SaaS landscape. Furthermore, large corporations have the capacity to pay top

dollar for emerging innovative solutions within the industry. In contrast, their smaller

counterparts do not have this financial advantage and may not even have the ability to design

unique enterprise-grade products that can compete with dominant products.

Horizontal SaaS providers also have to incur high costs in marketing their products to the

large addressable market. One of the major drawbacks of adopting a horizontal business model is

that it is difficult for companies to be capital-efficient because of the heterogeneous nature and

large size of the target consumers. Fundamentally, the strategy of targeting a high-volume

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market with a large consumer base means that horizontals have to incur high expenses on

marketing campaigns. Due to the broad base of customers, marketing spend in horizontal SaaS

companies exceeds the amount spent by their vertical counterparts who target a smaller

homogeneous market. A comparative study of a sample of five horizontal and vertical companies

showed that the former spent an aggregate of 43 % in sales and marketing expenses in 2013

(Spielman para 5). The latter only recorded an average expenditure of 25 % (Spielman para 5).

The inevitable outcome of higher expenditure on sales and marketing is reduced profit margins.

When SaaS made its debut in the global software market, horizontal providers mainly

developed products that were widely applicable as they targeted a vast market. For this reason,

they did not build industry-specific offerings that catered for the needs of specific industries.

This situation created a demand for better-tailored and niche-specific software solutions that led

to the emergence vertical SaaS companies. As industry leaders like SalesForce, Oracle, and

Microsoft focused on developing products for a mass market, a new branch of vendors began to

shift from this horizontal approach to a vertical one. At best, the horizontal companies offered

generic cloud computing that did not necessarily take into account the apparent variations across

different segments. Vertical SaaS created a wave of disruption that hit the advancing horizontal

space. Vertical clouds have the same advantages as horizontal solutions over on-premise

software with regards to cost savings, scalability, resilience, and augmented efficiency. However,

vertical SaaS companies narrowed down their specialization at the niche-level developing sector-

specific offerings that met the unique demands of each industry. Industry-specific cloud

companies moved to resolve the issues that their horizontal peers initially considered too

fragmented to address by delivering innovative software solutions.

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There are several other factors that distinguish vertical SaaS from horizontal SaaS. First,

as mentioned earlier, large software vendors design products with the objective of maximizing

on the available mass market. Conversely, vertical SaaS products are developed to address

sector-specific issues, which often results in a highly targeted sales and adoption process. Such

companies can carve out a substantial market position since their products are superior to generic

ones due to their narrower focus on the specific needs of an industry. This business approach

allows them to focus their capital on offerings that are widely acceptable to the addressable

market, which also meet the pain points that are ignored by horizontal software providers.

Indeed, the overall addressable market for Vertical SaaS is lesser than the one for horizontal

SaaS. Even so, their target market is homogeneous in nature, which enables startups to penetrate

easily and thrive in the market. For customers within different industries, the niche-specific

nature of the products effectively minimizes or even eliminates the need for them to customize

horizontal SaaS, which saves money and enables them to achieve higher productivity.

One of the main characteristic of the vertical SaaS marketplace is low competition. The

main reason for this is that there are no definite category winners. As a result, vertically-focused

businesses need not face market leaders who have entrenched their positions in specific niches.

What's more, product differentiation is quite problematic under the horizontal model, but it is

highly achievable for vertical SaaS businesses that provide better-tailored products in specific

industries. Also, business success in the vertical front is difficult to replicate, which is

advantageous for companies who have obtained success within their vertical. In contrast,

horizontals can easily copy the models used by others and still thrive, which creates stiff

competition in the market. In effect, this enables the vertical firms to gain a competitive

advantage over their counterparts. Companies that work under the vertical business model are

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also more profitable because there are relatively fewer verticals in the landscape. Other than that,

specialized vendors also have the advantage of charging premium prices because they offer

specialized products and face relatively low competition that would bring about pricing wars.

Vertical SaaS firms deliver software solutions that become deeply entrenched in the

workflows of their customers after adoption. Horizontal cloud vendors typically direct their

attention and energy on a slice of a client’s business, which then forces them to pursue growth

opportunities by bringing onboard new customers across several industries (Spielman para 15).

However, the emphasis of a vertical organization is on renovating the core business functions

and operations of a specific sector to foster greater impact on each client (Spielman para 15).

This increasingly deep integration into the operations of their clients allows vertically-driven

businesses to earn more revenue from existing clients as well as entrench their position in the

market. According to Speilman, targeting a single sector presents the opportunity to satisfy

specific needs (para 7). Once a vertical cloud business has addressed a key pain point, it can

expand its portfolio to cater for other needs within the sector (Spielman para 7). Under the

vertical cloud system, a key product can evolve into an all-inclusive platform with many layers

of products designed to meet the needs of an industry (Spielman para 7). All things considered, it

is possible for startups to venture into the vertical SaaS market, provide reliable industry-specific

products, become category winners, and dominate their selected niche.

Vertically-focused businesses have to educate their target consumers but have less

marketing spend than horizontals. Vertical SaaS vendors have to spend time and money

educating clients to convince them to migrate from either on-premise or horizontal solutions and

instead deploy industry-specific software. Despite this obstacle, this business model remains

attractive because it involves low marketing spend. In essence, focusing on a narrowed down

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market inadvertently reduces the addressable market, which enables vertical companies to reach

their customers faster and at lower costs. It is also possible to leverage low-cost marketing

strategies of acquiring customers like receiving referrals through word of mouth or even

targeting clients during industrial events. Vertical SaaS companies can cover the potential client

base with a leaner sales force than their horizontal counterparts (Spielman para 6). As a result,

verticals make more savings, which has a positive effect on their profit margin. Spielman affirms

this point by noting that this cost-efficient customer acquisition framework increases profitability

as well as business growth (para 6).

Vertical SaaS in the Manufacturing Industry

Today, manufacturers face challenges that are unlike any of the issues they encountered

in the past (Invensys and Microsoft i). Some of them include a volatile global economy,

unpredictable changes in consumer purchasing behaviors, greater connectivity, and rise in

consumer technology (Invensys and Microsoft i). As a result, manufacturing companies have to

embrace and deploy automated SaaS-based solutions that will enable them to leverage the

opportunities created by these changes while avoiding the risks associated with them.

In the first instance, global economic conditions such as currency fluctuations,

unemployment, and flat spending have an impact manufacturers’ profit margins (Invensys and

Microsoft 2). The solution might lie in adopting vertical SaaS-based manufacturing solutions. In

essence, deploying cloud software reduces IT infrastructure and the lifecycles of existing or new

operations by up to 54% (Invensys and Microsoft 2). In effect, cloud computing leads to cost

savings and reduces time for marketing (Invensys and Microsoft 2). SaaS offers effective

solutions at lower cost of traditional desktop software. Further, it enables manufacturers to run

their production processes efficiently from inputs acquisition, processing orders, scheduling, and

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routing, to order fulfilment and pricing. As a result, companies achieve higher productivity, roll

out finished goods at a faster rate, and avoid incurring unnecessary expenses.

Manufacturers also operate in a logistics-intensive landscape, which makes it necessary

to achieve seamless supply collaboration and optimal performance across the network.

Companies within the industry use vertical SaaS solutions for supply chain management. The

software enables chain partners to build and maintain critical relationships through real-time

communication with top industry performers. In essence, cloud computing fosters the creation of

a cohesive supply chain network that brings together multiple players together. The outcome of

this integration is higher visibility and scalability. SaaS users access critical business intelligence

that ultimately informs their strategies. For instance, marketing automation software enables

manufacturers to keep track of the outcome of their marketing campaigns and align their content

and strategies accordingly (Columbus para 14). Also, vertical SaaS improves the visibility of

individual firms due to greater connectivity. With regards to scalability, firms gain the ability to

meet consumer demand much more easily. SaaS platforms have helped to accelerate the

development and introduction of new offerings by necessitating higher collaboration in the early

stages of design cycles (Columbus para 12).

One example of an industry-proven cloud software vendor is IFS. IFS has a long track

record of delivering vertical SaaS solutions that enhance origanzational agility by streamlining

key manufacturing processes including production, asset and service management, projects, and

supply chain operations. Other critical functions on IFS platforms include inventory tracking,

CRM, distribution, billing and invoicing, order fulfilment, purchases, and accounting. In this

way, IFS automates and tracks production operations that help improve efficiency and

productivity, which ultimately boosts profit margins.

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Manufacturing is presently the leading industry market segment for cloud-based solutions

and represents the largest prospective market for SaaS solutions. According to Gartner’s

estimates for the year 2016, the global market for public cloud services is set to experience a

16.5 % growth totalling to a value of $204 billion (Gartner para 1). The market will continue to

demonstrate high growth rates and this trend will continue even in 2017 (Gartner para 2). On its

part, the market for SaaS software is forecast to rise by 20.3 % in 2016 and total to $37.7 billion

(Gartner para 4). This double-digit increment will continue as more companies shift from on-

premise software to on-demand cloud-based products.

Table 2: Global Public Cloud Services Forecast (Billions of US Dollars)

2015 2015

Growth

(%)

2016 2016

Growth

(%)

Cloud business process services (BPaaS 39.2 2.7 42.6 8.7

Cloud application services (SaaS) 31.4 15.5 37.7 20.3

Cloud application infrastructure services

(PaaS)

3.8 16.1 4.6 21.1

Cloud system infrastructure services

(IaaS)

16.2 31.9 22.4 38.4

Cloud management and security services 5.0 20.7 6.2 24.7

Cloud advertising 79.4 15.4 90.3 13.6

Total Market 175.0 13.7 203.9 16.5

Source: Gartner, 2016.

The global manufacturing sector is essentially a multi-trillion dollar sector, meaning that

there is a great market for cloud-based solutions (Columbus para 15). In 2014, IDC predicted

that the global market for SaaS functions and manufacturing applications would reach an

estimated $5.8 billion by 2018 (Columbus para 7). As of the year 2013, 7.3% of business

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operations and manufacturing applications were SaaS-based and forecasted to rise to 10.30% by

2018 (Columbus para 7). This double-digit growth in vertical SaaS deployment by manufacturers

presents considerable opportunities for start-ups that offer niche software solutions.

Vertical SaaS in Transport and Logistic Industry

Transport and logistics organizations typically use SaaS-based Transport Management

System (TMS) software. Saas-based TMS is a valuable solution that allows organizations to plan

as well as manage logistics and transportation activities. With TMS, companies gain access to

multi-tenant, multi-lingual and multi-currency capabilities, which are important features in the

global market. In transport and logistics industry, supply chains have become more and more

complicated while the need for network partners to work together more efficiently, augment

operational efficiency as well as comply with updated regulatory standards remains.

There is a high demand for connectivity, compliance, and collaboration within the global

chain, which is achievable through vertical SaaS. This platform allows different partners in the

entire supply chain community to connect with each other in a shared cloud-based network that

has the multi-tenant capabilities. In this way, the application facilitates the creation of a

worldwide logistics network that brings together multiple communities. The cloud creates a

cohesive chain that brings together regulatory agencies, transportation providers, suppliers,

customs filing service providers, customers, logistics providers, carriers, distributors, and

retailers in a single platform.

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This revolutionary feature delivers a wealth of benefits to the industry. First, facilitating

the integration of supply chain partners in a single cloud fosters increased data streaming across

the network. Individual businesses gain access to accurate and robust information that informs

their decisions and market strategies. Further, SaaS enhances the visibility of partners within the

network as well as real-time communication and connectivity. The outcome of multi-party

connectivity facilitated by SaaS solutions is increased visibility. With increased visibility

businesses can share any information faster. Companies can also collaborate with their peers

across networks, and even share transport assets. SaaS solution also fosters scalability, which

provides users with greater flexibility in the face of unprecedented demand. The software enables

firms to bring on board new carriers, suppliers, and customers or upgrade existing service

offerings to match the existing demand. Software facilitates these processes by creating seamless

between layers of supply chain providers thereby simplifying supply chain processes. As a result,

businesses can meet large demand promptly, a capability that is absent in traditional approaches.

SaaS solutions have the ability to track and manage every aspect of the worldwide supply chain

on a single platform, fostering seamless collaboration between chain partners.

The cloud-based software also allows firms to automate routine business functions and

improves workplace productivity. Using SaaS solution is also more cost-efficient than on-

premise software solutions. Rather than purchase and set up internal software solutions,

businesses only need to purchase cloud spaces from external vendors. SaaS software providers

bear the cost of hosting the cloud applications on their servers. For this reason, companies no

longer need to make a big upfront investment to install the software, since they only pay for the

services they need to use.

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AGISTIX is a vertical SaaS vendor that demonstrates the impact of industry-specific

SaaS. AGISTIX delivers world-class transportation software that caters for all modes of

transport. The company’s Logistics Management Automation (LMA) is essentially a workflow

engine that enables users to gain control and visibility of both internal and external shipment

operations (SDCE 17). The firm’s award-winning solutions enable its clients to achieve cost

reductions while gaining a quicker return on investment (SDCE 17). The platform automates the

management and execution of global chain activities and enhances visibility (AGISTIX para 1).

Figure 1: Vertical SaaS impact on the sector.

Today, SaaS cloud computing is a popular choice in the transport and logistics segment.

SaaS TMS solutions compete with on-premise solutions that until recently accounted for a large

portion of the market share. Businesses within the industry prefer cloud systems due to the

wealth of benefits it imports such as greater visibility, seamless collaboration, and cost-savings.

There is a rising demand for vertical SaaS, which is tailored to meet the needs of the industry.

Supply Chain IntegrationScalability, visibility, and seamless collaborationReal-time access to information

Individual Business AvantagesCost mitigationAutomated business functions

Vertical SaaS ImpactIndustry-wide efficiencyEnhanced business productivity

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This situation is particularly advantageous for startups due to the difficulties associated with

getting into the horizontal SaaS landscape. This space features high competition from category

winners such as SalesForce, Hubspot, Zendesk, Github, and so on. As a result, it is difficult for

new market entrants to penetrate the market.

Conversely, the vertical SaaS space does not have as many category winners. Startups

can, therefore, design niche offerings to meet specific industry needs rather than generalizing

their offerings. By focusing on consumers within a specific industry, investors can offer better-

tailored solutions, which will enable them to gain a considerable market share. Vertical-specific

cloud solutions remain the keystone of the overall SaaS market as subscriptions for vertical

applications are on the rise (Bourne para 3). Under the Vertical SaaS model, startups can

achieve greater market penetration and growth because the target consumers are intrinsically

homogeneous and often try to emulate the advances made by their peers within the industry.

Vertical SaaS in the Oil and Gas Industry

Cloud-based services are becoming popular in the day-to-day operations in the oil and

gas sector. There has been a shift from on-premise to on-demand cloud-based software.

Accenture lists five pivotal gains by vertical SaaS in the energy sector. First, oil and gas

companies have to manage and interpret an unexpected and ever-increasing mass of data

(Accenture 4). For instance, energy exploration today usually involves applying data-intensive

imaging tools to find deposits at greater depths in multiple remote terrains (Accenture 4). This

technique uses specialized sensors and machines that collect data at every juncture of the

production process.

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With cloud computing, companies can access real-time information, leverage proficient

analytical capabilities, and undertake specific data-heavy tasks such as analyzing seismic data

(Accenture 4). In essence, energy firms are highly dependent upon consistent information.

Vertical SaaS facilitates their operations by permitting companies to track, investigate, analyze,

and monitor operations and then determine the best action plan. In the energy sector, SaaS

enables companies to obtain, spread, analyze and manage critical business data in far more

proficiently and quickly than conventional on-premise software. Without cloud-based

applications, companies would have to filter through mountains of documentation, which makes

the data analysis process quite problematic.

Second, the intensity of global competition along with the volatile market, economic,

regulatory conditions mean that companies need to achieve greater productivity, increased agility

and cost-savings (Accenture 4). The platform enables firms to control costs and concurrently

have higher scalability and agility (Accenture 4). Currently, firms within the sector are migrating

critical operations such as discovery, exploration, and asset maintenance to the cloud. More

specifically, organizations can access utilities such as rig tracking, fleet management, data

acquisition and maintenance, management of right-of-way and land contracts, and regulatory

updates. Other utilities that are accessible on the cloud are workflow organization, proactive

maintenance, and managing spending and product prices.

Further, SaaS enables energy firms to manage large, complex and geographically

differentiated ecosystems (Accenture 4). The cloud augments efficiency due to its universal and

instantaneous availability in remote locations across the globe. This feature has far-reaching

benefits especially in major capital projects where businesses have to relay data and instructions

to off-shore rigs located many miles away. Also, vertical SaaS plays a vital role in customer

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relationship management (Accenture 5). Cloud computing enables companies to keep track of

their ecological footprint and mitigate their environmental impact by managing their operations

efficiently and removing redundant assets (Accenture 5). Finally, oil and gas companies are

subject to a mix of regulations. The organizations can manage different regulations using

compliance cloud solutions on a single platform without a huge cost.

Table 1: How SaaS fundamental features address the defining factors of the industry

Defining Factor Vertical SaaS Characteristics

Ecologically dispersed and data

intensive

Real-time data availability and computing

Challenges in connectivity and multiple

layers of suppliers

Cohesive integration, seamless collaboration,

and easy information sharing.

High production rates and low

operational cost

SaaS-enabled operations that enhance

operational efficiency at reduced costs

Customer relationship management Instantaneous customer communication and

engagement.

Environmental concerns Monitoring environmental impact and

managing differentiated regulations

In recent years, there has been an accelerated adoption of vertical SaaS within the oil and

gas segment. The industry represents the largest manufacturing-based market for IT-based

solutions. SaaS adoption is set to dominate investment plans in coming years (Rangel et al. 5).

More energy businesses acknowledge the benefits associated with SaaS use such as reduced

software management overheads and support for high workloads and are increasing their

spending on the software. Due to its unique nature, the industry features high demand for vertical

SaaS designed to suit its needs and address energy-related issues.

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The demand for industry-specific cloud solutions means that there is still untapped

investment potential in the energy landscape. Oil and gas companies are on the lookout for cloud

computing services that they can leverage to improve operational efficiency, manage every

aspect of the production and distribution process, and outperform their competitors. Now, these

advantages are achievable through vertical SaaS products. As mentioned earlier, niche-specific

markets are yet to have a lot of competitors. For this reason, start-ups can easily venture into this

market by offering solutions to issues that other vendors perceive as being too fragmented to

tackle.

An example of a successful vertically-focused firm in the energy sector is Fielding

Systems. Fielding Systems is a Florida-based cloud-based solution provider that specifically

targets upstream and midstream firms in the oil and gas sector. The company’s FieldVisor

dashboard enables energy firms to monitor production processes across multiple departments.

This cloud-based product captures field data, which energy firms can apply to streamline their

operations. It also allows access to data, allows improved trend filtering. The firm was founded

in 2009 and has since become a leading vertical SaaS vendor of field data capture as well as

SCADA monitoring.

Vertical SaaS in the Healthcare Sector

The medical industry has been particularly quick to adopt cloud computing and the

players who are yet to follow suit the software undoubtedly have plans to deploy it shortly.

Vertical SaaS currently enjoys the greatest popularity among cloud-based systems adopted

within the healthcare industry. Cloud computing is causing an inevitable shift from insecure and

costly data centers currently maintained by medical practitioners and hospitals (Kocher and

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Roberts para 12). In fact, on-demand software solutions are set to displace conventional data

centers and even render them obsolete. Healthcare providers essentially need access to vast

computing and data storage facilities that traditional models cannot deliver. Vertical SaaS offers

unparalleled data storage and maintenance facilities at a fraction of the cost of on-premise

systems. Cloud solutions inherently support vast data sets such as electronic health records. The

positive contribution of this cloud platform is often immediate, which impacts positively on the

financial metrics of medical establishments.

Moreover, SaaS-based solutions have greatly revolutionized the healthcare sector by

shifting focus from paper-based operations to a digital platform. According to Kocher and

Roberts, centralized systems that facilitate information sharing across different regions and

organizations will ultimately replace paper-based processes (para 14). Healthcare providers

typically share health data across multiple contexts and geographical locations. As a result, using

inefficient systems can jeopardize patients and hospitals by causing significant, unavoidable and

unnecessary delays in treatment. Vertical Saas-based cloud solutions resolve this problem by

facilitating easier and seamless information sharing between healthcare providers across different

settings, thus, enhancing service delivery as well as industry-wide operational efficiency. By

maintaining massive health data on the same cloud, different facilities can gain swift and easy

access despite their location. Medical practitioners can, therefore, obtain and share life-saving

information, which saves the time and cost associated with duplicated testing.

One cloud computing product that has revolutionized the healthcare landscape is the

robust IMEUS Cloud Ecosystem. This innovative cloud ecosystem enables doctors to gain real-

time access to information that helps them to make informed decisions (IMEUS para 1). This

platform is also extremely beneficial to health consumers who can receive affordable cloud-

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delivered medical services such as real-time consultation, online reminders, virtual access to

second/expert opinions, and Lifetime Health Records (IMEUS para 2). Ultimately, these

important utilities enhance outcomes, compliance, security, patient satisfaction, and safety

(IMEUS para 2).

SaaS also facilitates effective data analysis within the medical sector. Medical

professionals usually have to seek out the most effective treatments by filtering through vast

amounts of empirical studies for evidence-based treatments. Cloud-based software facilitates this

process by providing real-time access to research, enabling practitioners to share information and

ideas on the studies as well as offering analytical tools. As a result, doctors can choose

recommendations and offer the best treatment to patients. Also, there is greater demand for web-

based healthcare services, which has prompted medical providers to expand their technological

capabilities by adopting vertical SaaS software. Now, healthcare providers are bound by high

standards of confidentiality and security set by the government. Hospitals and doctors need to

restrict and track access to medical records and ensure that they are only available to authorized

users. Fortunately, vertical cloud solutions developed by vendors are tailored to address these

security concerns by incorporating security risk mitigation features. Medical SaaS solutions also

have non-clinical applications such as managing receivables, financial information, and human

resource management. SaaS helps in streamlining diverse processes workflow coordination,

which enhances service delivery as well as industry-wide operational efficiency.

Currently, cloud-based solutions have pervaded the health care industry with SaaS usage

accounting for the largest percentage. In spite of the size of the sector and its high growth rate,

the healthcare industry was initially considered an impenetrable or unattractive target for IT-

based innovation (Kocher and Roberts para 3). Even so, early market entrants managed to

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venture into the market and sell SaaS to healthcare providers and ultimately gain a substantial

consumer base. The cost of delivering medical services is on the rise, which makes it imperative

for the industry to evolve and adopt strategies that reduce operational costs and keep pricing at

affordable levels. The healthcare market has distinctive needs that creates significant investment

opportunities for startups. However, healthcare cloud computing has to be deployed with high

security and confidentiality. At the same time, there is a need for long-term maintenance, data

traceability, high storage capacity, and real-time access to information. Start-ups can venture into

the market by designing niche offerings that incorporate these capabilities.

Vertical SaaS in the Hospitality Industry

The adoption of vertical SaaS has had a positive impact on the hospitality industry. First,

cloud computing has led to extensive cost-savings. In essence, SaaS is a cost-efficient on-

demand alternative to traditional on-premise software. When a user adopts the software, the

vendor hosts the software and conducts any necessary maintenance which allows companies

industries to cut costs associated with on-premise software. Also, instead of making high long-

term investments in software and the hardware, hotels can purchase the software monthly. These

features effectively eliminate the need for hefty upfront investments.

Vertical SaaS also offers a platform for customer relationship management. The software

incorporates CRM functions such as analyzing customer feedback to improve their experience

and achieving greater client retention. In the hospitality sector, exceptional service delivery is

paramount because the profitability and success of a business depend on the quality of services

and how well customers deem these services. Brand image is key, and companies cannot afford

to have a bad reputation. Due to the proliferation of social networks, customers can share

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information about hotels with great ease, and rate a hotel’s services as poor or excellent, which

can affect its reputation. SaaS enables firms within the service industry to manage their offerings,

maximize client relationships, revolutionize customer experiences according to changing

demand, and achieve high customer satisfaction. Ultimately, these factors boost profitability.

SaaS software also allows organizations to streamline multiple layers of business

functions and day-to-day operations at reduced costs. Currently, hotel businesses use cloud

computing to track inventories, monitor orders as well as manage online and on-site bookings,

reservations, events, and rates. Cloud computing also helps in the management of guest

information, billing, check ins and check outs, and menus. SaaS also has automated workflow

management capabilities (such as front desk and housekeeping tasks) and provides access to

information in one database. Companies can achieve high productivity and meet evolving

customer expectations promptly. Also, using vertical SaaS reduces the incidence of system

downtimes such that hotel staff can work on offering exceptional service without unnecessary

disruptions.

RSE, Inc is a specialist SaaS vendor that offers Hotel Management System software for

small and medium-sized independent hotels. RSE’s annual revenue is estimated at $ 10 million.

This California-based firm was founded in 1998 and has now gained popularity for offering an

inclusive suite of SaaS-based software solutions for the hospitality industry. The company’s

Hotel Management covers the following key hotel operations: catering, housekeeping, front

office operations, reservations, online booking, and guest experience. RSE software permits

users to access information on a global spectrum, which is beneficial to all industry players

including travel agents, guests, wholesalers, hotels, and tour operators (RSE para 1).

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The market for industry-specific SaaS solutions is set to achieve incremental growth,

which means that the SaaS revenue pool in the hospitality segment will continue to rise. The

performance of SaaS-based solutions across different markets has exceeded initial forecasts, and

the service sector is no different. Cloud-based software is expected to edge out on-premise

alternatives within the industry, which means that there is a great market potential for vertical

SaaS. The reason behind this progressive trend lies in the fact that SaaS business has over the

years managed to deliver tangible results that have increased their market share in the hospitality

segment.

The accelerated deployment of SaaS and increased spending on cloud computing in the

industry has created high demand for vertical SaaS solutions. In reality, this means that there are

opportunities for startups that are willing to abandon the horizontal business model and instead

provide niche-specific SaaS software that caters to the unique needs of the hospitality sector.

Vertical SaaS presents viable business opportunities for startups due to reduced saturation of

competitors and category leaders, which makes market penetration relatively easy.

Moreover, the niche market is much smaller than the targeted consumer base by

horizontal SaaS firms. Nonetheless, firms that adopt the vertical business approach achieve faster

market penetration due to the homogeneity of the target consumers. Finally, vertical SaaS

businesses within the hospitality segment more profitable than their peers who are more prone to

incur heavy losses. The first reason is that the market is already saturated with competitors and

category leaders who are difficult to displace. Further, vertical SaaS firms also apply their capital

more efficiently since their client base is homogeneous in nature.

Conclusion

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To sum up, vertical SaaS imports a variety of irresistible benefits for companies operating

across different industries. Vertical and horizontal clouds essentially have some matching

benefits including cost savings, scalability, accessibility, and higher efficiency. However, the

factor that sets them apart is that vertically-focused companies concentrate on addressing specific

pain points that affect each industry. For instance, SaaS-based TMS offers indispensable

solutions in the logistics-intensive transport sector by fostering cohesive supply chain

collaboration and connectivity. In the oil and gas segment, vertical SaaS clouds enable energy

companies to access utilities such as data acquisition and maintenance, rig tracking, land

contracts, and regulatory updates. For manufacturers, vertical SaaS helps in reducing time to

market, supply chain management, cost reductions, and smoothening production processes. As

for the medical industry, cloud computing has displaced traditional data centers with an

unparalleled storage platform. Here, SaaS users can share healthcare data across multiple

contexts and geographical locations, which enhance service delivery as well as industry-wide

operational efficiency. Lastly, the hospitality sector mainly leverages this platform for CRM by

using it to deliver exceptional services and revolutionize customer experiences according to

demand. There is currently a high demand for sector-specific cloud solutions that start-ups can

fulfill by developing software solutions tailored to meet specific industry needs.

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