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Vertical SaaS providers gain ground

With industry-specific applications, software as a service providers continue to gain revenue share in vertical markets.

Software as a service (SaaS) for verticals continues to earn greater revenues than standard or horizontal cloud...

services. Vertical SaaS success is fueled by a greater push to provide mobile applications and services and by the revamping of legacy systems as either mobile or Web versions that work in the cloud.

The appeal of vertical SaaS is the focus on a single industry rather than a one-size-fits-all approach. An industry-specific application gives an organization only what it needs. Organizations using vertical SaaS providers are highly focused on existing customer revenue streams, as well as growth within their existing customer base. The growth is based on selling value-added modules.

The popularity of industry-specific cloud services is evident in the healthcare industry as it continues to struggle with securely sharing patient data to benefit both providers and patients. The same can be seen among energy providers, where mobilization enables field staff to work in out-of-office locations around the globe while still being connected to a network. Other industries rapidly adopting vertical SaaS include pharmacy, life sciences, banking and the construction trade.

Domain knowledge helps development teams and design architects spend time on their application development rather than configuring and customizing a service provider's system to fit their needs. More time is spent on application development than setting up the cloud service, which is a distinct advantage, as well as a cost and time saver.

Industry-specific cloud service providers are numerous. Most of these providers are startup companies or smaller, domain expert providers. However, many of the traditionally horizontal service providers are also adding specific verticals to address this potential revenue stream. In the near future, most cloud service providers likely will move toward offering a fuller menu of pre-customized industry options.

Mobile pushes increased adoption

The move from Web to mobile is literally forcing slower-to-adopt industries into the SaaS vertical cloud space. In addition to the Web, customers and employees have adapted to social and mobile platforms, and can use them easily without additional training. As people experience fast, convenient mobile applications in their personal lives, they expect the same in their professional lives and business applications.

Because the capability to change technology platforms quickly is becoming the expected standard, industries have started to replace outdated systems with vertical SaaS applications.

Because the capability to change technology platforms quickly is becoming the expected standard, industries have started to replace outdated systems with vertical SaaS applications. Once an organization converts successfully within a slower-to-adopt industry like healthcare, for example, that success generates a word-of-mouth response within the industry, fostering trust that a new system truly works for that particular industry.

One example is The Retail Equation (TRE) Inc., which provides real-time transaction fraud prevention for the retail industry. Retail organizations quickly discovered the advantages of an increased ability to prevent fraud and reduce fraud costs by responding in real time to data evidence. Easier access to useful and efficient technology makes financial sense. Once the TRE solution proved its ability to generate value, with a 13% reduction in fraud loss along with a 1% gain in net sales, additional retailers quickly jumped on the bandwagon.

Mobile technology promises to add new use case possibilities for SaaS vertical service customers. Users can already use a smartphone to do their banking, purchasing and other tasks. As mobile technology moves beyond games and social applications, it will set the stage for added business value for SaaS vertical providers to move specific industries into the mobile space. It's easy to imagine a day when everything is done from a smart device, whether it's a phone, TV or tablet, from anywhere and at any time.

This was last published in November 2014

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Where do you see the growth of the vertical SaaS market?
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I believe the two biggest industries to adapt to the vertical SaaS applications are banking and healthcare. Since SaaS applications are designed with ta low if non existent failure rate then these applications will exceed in these two sectors. Healthcare walks hand and hand with biometrics and would benefit from the vertical SaaS application. Banking also needs to evolve into a state where it would use vertical SaaS because it can be highly scalable.
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