Horizontal SaaS Vs. Vertical SaaS

Being a product owner or a developer isn’t easy. There are many factors to consider when developing your business strategy, and your product lies at the center of most of them. How you scale your product will determine what kind of niche you’ll excel at, the type of audience you attract – and how successful your venture will be in the long run.

Before jumping into these waters, however, you should pay close attention to how you will scale your SaaS. It may seem like a very basic element, but that’s precisely why so many startups end up hitting a roadblock so early into their journey. What type of SaaS product do you offer? Are you aiming to please a large community of users, or is your focus much more specific? What are the differentiating factors that bolster your end product? Answering these questions will help you a long way, but let’s not get ahead of ourselves.

For the moment, let’s answer the essential question: what’s the difference between Horizontal SaaS and Vertical SaaS?

Horizontal SaaS

First of all, Horizontal SaaS has a much larger scope. It aims at a much larger client base than its vertical cousin, giving solutions with a vast array of use cases. From insurance to retail marketers, you can count on a bigger market share if you’re willing to invest in a horizontal development.

On the other hand, the competition these products face is a rather uphill battle. Differentiating a product in such a wide net can be costly, which is why it’s necessary to look for diversification of user stories to create a more appealing product. Even if you’re a product owner, an engineer, or a developer, it’s worthwhile to look at relevant marketing strategies that may help in this department.

Some Tips

It doesn’t matter if you’re looking to develop QuickBooks, Slack, accounting software, or a CRM. There are some small tidbits of information you can take advantage of if you’re willing to develop a Horizontal SaaS Product:

1. Have a strong team: Invest in knowledgeable developers that know how to implement viable solutions, and obtain resources to manage the growing user base. Horizontal SaaS is about reach, and your team needs to be up to the task.
2. Create a strong Onboarding process: Your product will certainly attract a varied user base – make sure that you have a defined and organized onboarding process for all use cases. Word of mouth and marketing will help you a long way, but this part of the process is key if you want to retain your existing customers.
3. Scale, scale, scale: Scaling and testing your product will be a constant throughout its entire lifespan. Make sure you have adept QA testers and a way to properly scale all available versions of the product.

Vertical SaaS

If you have a particular niche, if your business model depends on a laser-focused approach – then Vertical SaaS is for you. Unlike the above examples, here we’re aiming to satisfy a very specific market. This brings another host of advantages and challenges.

Once again, the scope is the key here. Due to it being a more recent model of product scaling, this one offers a whole new set of opportunities – satisfying a smaller but more dependent user base can be excellent since the competition is much much lower. Having less alternatives to a solution means that the customer base depends more heavily on you when compared to the horizontal counterpart.

Customer acquisition and retention tend to be simpler, given that you’re essentially playing in your home field, by your own rules. Of course, that means that your product best be quite the revolutionary endeavor, or else you’ll face the risk of obscurity and, eventually, obsolescence.

Some Tips

Vertical SaaS will normally work wonders with certain market niches, such as Healthcare (deeply in need of creative solutions in the tech department), Guideware for insurance companies, certain types of neobanking, etc. That doesn’t mean there aren’t some guidelines that you should consider before investing, however.

1. The differentiating factor: What makes your product unique? Have you gone over it with your team over its features? Solving a specific problem in a specific market will mean that you’ve won half the battle, but this also means that you need to be able to trust your team to make the best product possible.
2. Timeframes: The allotted time for developing your product tends to shrink rapidly. Many startups look for Vertical SaaS solutions as they face less competition, but they also depend on the goodwill of their investors. Managing those lapses and reaching your time-to-market goals is not an easy task, so managing successful methodologies like Agile will help you a long way.
3. Customer Retention: Your customers will have very specific needs, so your product – even if it’s not horizontal – still needs a breadth of scope to satisfy them properly. Make sure you’ve planned for every eventuality.

Horizontal or Vertical SaaS, Look For The Right Reasons

In short, we can look for three key factors that might define what kind of SaaS product you develop:

• Type Of Market
• Level of Competition
• User Base

Find what most suits your business model. Grow it, and scale it according to your needs. As you can see, however, this is not an easy task. You need scalability options, easy management of resources, and the right team of willing engineers, developers, and QA testers. No matter which type of product you’re interested in, this is something you cannot avoid.

Here at Teravision, we offer the best available teams for these types of ventures. We’ve been in the market for nearly 20 years, helping developers be at the forefront of the technological revolution, offering the right tools at the right time.

Other Resources

Horizontal Vs. Vertical SaaS: Exploring the Contrasts