The business software world is changing. More industries are now choosing vertical SaaS over horizontal platforms.

Horizontal SaaS tools—like CRMs or project managers—are built for general use. They do fulfill general needs across many industries, yes—but they often need extra customization for specific problems. 

Vertical SaaS platforms, by contrast, are built for one industry. They come with the specific tools and features that workers in that industry need. 

The result? Better efficiency and smoother operations.

And so vertical SaaS is quickly becoming the face of the B2B software world. Here’s what you should know.

Why Vertical SaaS Is on the Rise

Vertical SaaS works better than horizontal SaaS for many industries. Here’s why.

1. Solving Specialized Problems

Each industry works differently, with unique workflows and processes.

For example, car dealerships track inventory in a specific way. Hospitals need medical coding and insurance billing.

Horizontal SaaS, like generic CRMs, usually can’t support these specialized needs. At least not without extensive tweaking.

Meanwhile, a vertical SaaS program is tailor-made for these specific processes. They typically include things like automation templates for common tasks in that industry.

2. Built-in Compliance

Industries like healthcare, fintech, and law face strict regulations. HIPAA, SOC 2, GDPR, and PCI-DSS, to name a few. In healthcare, Vertical SaaS platforms often integrate HIPAA Compliance Solutions directly into their design, ensuring sensitive patient data is protected from the start.

Vertical SaaS can be built to comply with them from the ground up. Users don’t have to rely on third-party plugins like they do with horizontal programs.

And tech such as AI and blockchain will eventually change many industries. This will only lead to more regulation in the future. Industries with lighter regulations may become more heavily controlled.

Vertical SaaS will become even more in demand because of this. 

3. Local Data Requirements

Many industries’ requirements no longer end at data privacy. Data locality—or where data is stored matters too.

For example, banks in the EU. They are required to store customer data within national borders. 

Horizontal SaaS tools may struggle with this. Vertical SaaS platforms can be designed to meet these rules out of the box.

All this will be even truer in the future. Tech, markets, and regulations grow more complex each year. And so will industries—not just highly regulated ones.

They will have greater needs and face more specialized problems. No wonder researchers expected it to grow to $369.24 billion by 2023.

Key Infrastructure Decisions

Considering building a vertical SaaS platform? You’ll need to keep these things in mind.

1. Multitenancy vs. Single-Tenancy

Multitenant systems have clients sharing the same database. This is easier to scale and maintain. Industries with leeway for data control choose this for cost efficiency. 

Industries with stricter data rules typically go for single-tenant platforms. The greater the control over data, the easier it is to comply with the law.

A mental health app, for example, needs to protect patient data. Single-tenancy will be better for them.

2. APIs and Integrations

Even when using vertical SaaS, businesses still rely on other software. Vertical SaaS platforms need to work smoothly with them. 

It’s necessary to have strong APIs and seamless integrations with things like:

  • Government databases
  • Hospital ERPs
  • Niche point-of-sale (POS) tools

For fields like logistics, real-time syncing is crucial. It can spell the difference between on-time delivery and missed deadlines.

Even integrations with consumer-level cybersecurity programs like VPNs are critical. This helps users remain safe even when working remotely. Make sure to check on more info on VPNs here.

3. Built-in Security

However, VPN integration and built-in data encryption aren’t enough. After all, cybersecurity is a growing concern across all industries. 

Modern Vertical SaaS platforms should include:

  • Zero-trust architecture
  • Role-based access controls (RBAC)
  • SOC 2 Type II audits
  • Two-factor authentication (2FA)

After all, security goes far beyond avoiding breaches. It’s a trust signal, a badge of legitimacy. It’s the first thing potential clients in regulated industries consider.

Go-to-Market Advantages for Vertical SaaS

Marketing vertical B2B SaaS products is easier in many ways. While 

1. More Focused Messaging

Vertical platforms serve a clear audience—the industry they’re targeting. As such, they can make marketing as targeted as possible.

You can mention pain points. You can use their jargon. You can speak their language and resonate with them more.

For example:

  • “Admissions workflows for private colleges” 
  • “Fleet compliance for commercial trucking”
  • “Medical coding software for hospitals.”

And any advertising expert will tell you that this is a huge advantage. 

2. Stronger Communities

Horizontal SaaS platforms cast a wide net. Vertical SaaS platforms thrive in niche communities.

This is especially true in industries where almost everyone knows almost everyone. Here, referral loops tend to be tighter and trust spreads faster. 

As such, vertical SaaS platforms can sell even with more modest marketing. With strong customer success programs, you can scale largely through word-of-mouth

3. Higher Retention Rates

Vertical SaaS products often support critical tasks. Users rely on them daily for operations like scheduling, billing, or compliance.

As long as the tool helps meet the users’ needs, they have little reason to stop using it. Doing so and stopping these crucial tasks, after all, is costly. 

They simply need to ensure that their product evolves alongside their users’ needs.

Challenges and What to Watch For

Still, building and marketing vertical SaaS platforms have their challenges.

1. Smaller Market Size

Vertical SaaS platforms serve one industry—and one industry only. Some even only serve specific geographic locations due to geographic regulations. 

Branching out is, of course, always an option. Many vertical SaaS founders expand horizontally within the sector. They first meet one need, then expand to meet another.

For example, some expand from hospitals to private dentists, while others reach into adjacent industries. 

Note, however, that you always risk diluting your product when expanding horizontally.

2. Complex Sales and Onboarding

Vertical SaaS platforms are all about deep, highly specialized workflows and compliance requirements. Onboarding can take time because of this.

Sales teams will also need to know the industry inside out. The problems, the jargon, the rules—all of it. Or at least seem like they do.

And to sell them, companies will need to go into in-depth discussions about the product. Generic messaging, like what horizontal SaaS platforms do, won’t cut it.

3. Need for Expertise

But before you even sell the platform, you’ll need to build it. And to build the right product, you’ll need teams who truly understand your target industry, for example–product managers, engineers, and customer success reps. 

Finding and hiring them may be difficult, but still essential. Without concrete expertise, it’s incredibly difficult to build credibility with customers. 

What’s Next: The Future of Vertical SaaS

New technologies—especially AI—are making industries even more specialized.

We currently have generative AI. But we’ll soon have agentic AI. Such AI can act independently, not just answer questions.

The best of vertical SaaS will leverage this technology. They’ll ship with these AI co-pilots who are trained on specific industry workflows and data.

Horizontal tools won’t disappear—they’ll support general-use tasks, while vertical SaaS will tackle the specialized ones.

Conclusion

Why is vertical SaaS on the rise? It’s simple. Depth is the name of the game. Specialization is almost always more valuable.

The future of SaaS isn’t about doing more things for more people. It’s about doing one thing really well—and doing it better than anyone else.