Last year, Tech Pro Research conducted a survey to find out about enterprise adoption of the industry (or "vertical") cloud. According to the results, 36% of respondents said they're currently using industry cloud services and another 38% had plans to adopt them. As an emerging driver of cloud adoption, industry cloud is a vertical SaaS solution that features cloud services and systems tailored to the needs of specific industry verticals.

The fact is, though, that the benefits of vertical SaaS have historically been underexploited by companies--a phenomenon I have always found to be surprising.

For starters, vertical SaaS is not a new concept.

As early as 2000, I was engaged with a vertical financial services SaaS operation where a large credit union contracted with an end-to-end banking software vendor and then recruited many smaller credit unions, which could not afford their own systems, to participate in a vertical financial services SaaS. The small credit unions gained access to software they needed to run their banking operations--software they could not afford on their own. The larger credit union served as a kind of vertical SaaS and got a cost-sharing contribution from the smaller credit unions that helped offset operating costs. Needless to say, it was a win-win for everyone.

Now, companies in many industry verticals are discovering and engaging in the benefits of purposeful, industry-vertical SaaS, which is another way of describing SaaS solutions that are tailored to the information and process flows of specific industry verticals. Vendors with cloud-based offerings in software markets like ERP (enterprise resource planning), such as Infor and Epicor, are responding with industry-specific versions of their cloud-based products.


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Why move to vertical SaaS?

Some of the reasons companies are making the move to vertical SaaS are:

  • The software is already purposed to the needs of their industry vertical, so it can deliver greater business value to their operations.
  • Industry-vertical SaaS comes with predefined best practice metrics, KPIs (key performance indicators), and analytics that companies can plug into their systems and operations to gauge daily and more long-term operations performance.
  • An industry vertical SaaS company has on-staff expertise in both the IT and the end business for an industry that the company can take advantage of.

All these factors can contribute value to small and midsize organizations that lack on-staff resources to optimize their business operations. But companies must know how to leverage these vertical SaaS resources that are at their disposal. This is an area where companies are currently underperforming. You can improve your vertical SaaS utilization by doing the following:

1: Negotiate for add-on services in your initial contract

To earn your business, vertical SaaS vendors often agree to include some complimentary training and/or consulting and/or access to their experts as part of your agreement. Bargain for this--and then use it to improve your own operations and systems with what you learn.

2: Participate in free vendor seminars and conferences

Many vertical SaaS vendors offer podcasts or webinars that are free with a simple sign up. Some of these presentations are geared for IT and some are targeted at end-business employees and managers. Take advantage of these offerings. Also, plan to send some of your staff to vendor conferences. Networking with others who are using the software is a great way to generate new ideas on how your company can use the software and benefit the business.

3: Get engaged with the vendor in new software development

Most vertical SaaS vendors have "customer councils" and a formal product enhancement request process, where you can contribute new ideas to improve the vendor's software in ways that directly benefit your company. Volunteer to be a part of a customer focus group or steering committee and use the enhancement request process. The more you contribute to these feedback channels for new software development, the greater the chance that you will see the vendor developing new capabilities in the product you specifically want to see.

Going vertical

Vertical SaaS vendors are on the rise. There is no reason to think this trend won't continue--but it is still up to companies to get the most out of their vertical SaaS investments.