I watched horizontal CRM lose to industry-specific software in 15 consecutive deals.
Same pattern every time:
Prospect: "We evaluated Salesforce. It's powerful. But it doesn't understand construction project workflows. We'd need to customize everything."
Competitor: "Our construction-specific CRM has project management, change orders, and subcontractor tracking built in. Works out of the box."
Result: Competitor wins.
After the 15th loss, I asked our sales team: "Are we losing because our product is worse?"
VP of Sales: "No. We're losing because we're building for everyone and they're building for construction companies. In a specific industry, specific beats general every time."
That's when I understood: Horizontal SaaS dominated the last decade. Vertical SaaS will dominate the next.
Why Vertical SaaS Is Winning
After three years watching vertical players displace horizontal platforms across industries, here's what I've learned:
Industry-Specific Workflows Can't Be Configured Away
Horizontal platforms promise: "Our flexible platform can be configured for any industry."
Reality: Configuration requirements become so complex that the platform stops being useful.
Example: Healthcare
Horizontal EMR approach: "Here's a flexible patient records system. Configure custom fields for SOAP notes, billing codes, treatment plans, medications, allergies, and lab results."
Vertical EMR approach: "Here's a system designed for healthcare. SOAP notes, billing codes, treatment plans—all built in with proper workflows and compliance built in."
Which one works better?
The vertical product. Every time.
Because healthcare workflows aren't just "enter data in fields." They're:
- Clinical decision support at point of care
- Drug interaction checking
- Insurance eligibility verification
- Regulatory compliance (HIPAA, HITECH, Meaningful Use)
- Integration with labs, pharmacies, imaging centers
You can't configure a horizontal platform to handle all that complexity as well as purpose-built vertical software.
This pattern repeats across every industry I studied:
Construction: Horizontal project management can't handle RFIs, change orders, and draw schedules like construction-specific software
Legal: Horizontal document management can't handle court rules, case law citations, and trust accounting like legal-specific software
Manufacturing: Horizontal inventory management can't handle BOMs, shop floor control, and quality workflows like manufacturing-specific software
Vertical SaaS wins because industry workflows are complex and specific.
Industry Expertise Creates Competitive Moats
Horizontal SaaS companies hire generalist product managers and engineers.
Vertical SaaS companies hire industry experts who understand the domain deeply.
This creates massive competitive advantages:
I watched a vertical construction software company pitch against our horizontal platform:
Their CEO: Former general contractor who'd run projects for 20 years
Their product team: Half were former construction project managers
Their demo: Used real construction terminology, showed workflows they'd personally experienced
Their credibility: Immediate. They understood the customer's problems personally.
Our team: General SaaS background. Smart people. But no construction experience.
Our demo: Generic project management concepts applied to construction
Our credibility: Lower. We were clearly outsiders trying to sell to construction.
The vertical player won.
Industry expertise isn't just marketing. It's product development advantage:
- They know which features matter (change order workflows)
- They know which features don't (social features construction teams don't use)
- They know compliance requirements (prevailing wage, certified payroll)
- They know integrations needed (accounting systems, subcontractor portals)
This creates a moat horizontal players can't easily cross.
Higher Willingness to Pay for Industry Fit
Horizontal SaaS competes on price. Lots of alternatives exist.
Vertical SaaS commands premium pricing because alternatives are limited.
Example pricing conversation:
Horizontal CRM: "$50/user/month. Similar to every other CRM."
Vertical construction CRM: "$150/user/month."
Customer objection: "That's 3x more expensive than Salesforce."
Vertical response: "Yes. But Salesforce requires 6 months of customization work at $200/hour. You'll spend $100K customizing it to work for construction. Our platform works for construction out of the box. Which is actually cheaper?"
Result: Customer buys the vertical solution at 3x the price.
Buyers pay more for industry-specific solutions because:
- Lower total cost of ownership: No customization required
- Faster time to value: Works immediately instead of months of setup
- Better fit: Purpose-built instead of force-fit
- Lower risk: Designed for their industry, proven with similar companies
I've seen vertical SaaS products command 2-5x pricing of horizontal alternatives.
Network Effects Are Stronger in Vertical Markets
Horizontal platforms have network effects across industries. But they're diluted.
Vertical platforms have concentrated network effects within industries.
Example: Industry-specific marketplaces
Horizontal freelance marketplace: Upwork
- Buyers and sellers across all industries
- Network effects spread thin
Vertical construction marketplace: BuildZoom
- Only construction contractors and homeowners
- Concentrated network effects
- Contractors know they'll find construction work
- Homeowners know they'll find vetted contractors
The vertical marketplace has stronger network effects in construction than the horizontal marketplace.
Same pattern for:
- Vertical healthcare networks (doctors referring patients within platform)
- Vertical legal networks (lawyers collaborating on cases)
- Vertical real estate networks (agents sharing listings)
Concentrated industry networks create stronger engagement and retention.
Industry-Specific GTM Is More Efficient
Horizontal SaaS markets to "all businesses." That's expensive and broad.
Vertical SaaS markets to "construction companies" or "law firms." That's focused and efficient.
GTM advantages:
For horizontal SaaS:
- Attend dozens of industry conferences
- Create content for all industries
- Build sales team that understands all verticals
- Compete in every channel
For vertical SaaS:
- Attend the 3 main construction conferences
- Create construction-specific content
- Hire salespeople from construction industry
- Dominate construction channels
Marketing efficiency is 3-5x better for vertical players.
We spent $2M on marketing to reach all industries. Our vertical competitor spent $400K to reach only construction. They got better results because their message was focused and their channels were targeted.
Vertical focus = better ROI on marketing spend.
Switching Costs Are Higher
Horizontal platforms are somewhat interchangeable. CRM A to CRM B isn't that hard.
Vertical platforms become deeply embedded in industry workflows. Switching is painful.
Why vertical switching costs are higher:
- Industry-specific data: Construction project histories, legal case files, healthcare patient records—these are complex and industry-specific
- Integration depth: Vertical platforms integrate deeply with industry-specific systems (construction accounting, legal research databases, healthcare labs)
- Workflow dependency: Teams build processes around industry-specific features
- Training costs: Retraining on new industry-specific workflows is expensive
I've watched companies try to switch from vertical to horizontal platforms to save money. They almost always switch back because:
"The horizontal platform was cheaper but we lost critical industry-specific features. The cost of workarounds exceeded the savings."
Vertical SaaS has retention rates 5-10 points higher than horizontal alternatives.
The Horizontal SaaS Response (And Why It's Not Enough)
Horizontal platforms are fighting back:
Strategy 1: Industry Templates
"We'll provide industry-specific templates that customize our platform for construction, healthcare, legal, etc."
Why this doesn't work:
Templates are surface-level customization. They don't provide:
- Deep industry workflow integration
- Compliance and regulatory features
- Industry-specific integrations
- Domain expertise in product development
Customers try the templates, realize they're inadequate, and choose vertical solutions.
Strategy 2: Vertical-Specific Sales Teams
"We'll hire construction salespeople to sell our horizontal platform to construction companies."
Why this has limited success:
Sales expertise helps. But the product still isn't purpose-built for the industry.
Salespeople can talk the talk, but when the demo happens, the product doesn't walk the walk.
Strategy 3: Acquisitions
"We'll acquire vertical SaaS companies to own those markets."
Why this works sometimes:
This is actually the most successful horizontal response.
Companies like Salesforce, Oracle, and SAP have acquired vertical solutions to compete.
But acquisition creates challenges:
- Integration complexity (combining horizontal and vertical products)
- Cultural clashes (horizontal company culture vs. vertical focus)
- Pricing pressure (acquired vertical product gets pushed to use horizontal pricing)
Some acquisitions work. Many destroy the vertical product's advantages.
What This Means for PMMs
If you're marketing horizontal SaaS, here's what's happening:
You're losing to vertical competitors in specific industries. Not because your product is worse overall. Because their product is better for that specific industry.
You have three options:
-
Double down on horizontal and accept vertical losses: Focus on industries where vertical solutions are weak or don't exist yet
-
Build vertical offerings: Create industry-specific versions of your platform with deep customization
-
Shift to vertical focus: Pick one or two industries and go deep, essentially becoming a vertical player
Option 3 is what I'm seeing most often succeed.
If you're marketing vertical SaaS:
You're winning. But competition is coming:
- More horizontal players will enter your space
- Other vertical players will emerge
- Horizontal platforms will try to acquire you
Your advantages:
Industry expertise, better product fit, higher retention, more efficient GTM
Your challenges:
Smaller TAM, need to expand beyond core industry eventually, risk of horizontal competitors outspending you
The Future: Multi-Vertical Platforms
I'm watching a new model emerge: Multi-vertical platforms
Instead of horizontal (serve everyone) or vertical (serve one industry), some companies are building platforms for multiple specific industries:
Example model:
Year 1-3: Build deep vertical solution for construction Year 4-5: Launch second vertical for field services Year 6-7: Launch third vertical for property management
Each vertical gets:
- Industry-specific features
- Industry-specific integrations
- Industry-specific GTM
- Industry-focused product team
But they share:
- Underlying platform infrastructure
- Core technology stack
- Some horizontal features (billing, reporting, admin)
This creates unit economics advantage: Develop once, deploy across multiple verticals.
I believe this multi-vertical model will define the next generation of successful SaaS companies.
Managing messaging frameworks, competitive intelligence, and go-to-market strategies across multiple verticals creates organizational complexity. Tools like Segment8 help PMMs organize industry-specific materials—being able to maintain construction messaging separate from healthcare messaging while sharing core competitive intelligence saves significant time compared to managing completely separate systems for each vertical.
Five years ago, I worked at a horizontal CRM company losing to vertical competitors.
Today, I work at a multi-vertical platform company serving three industries deeply instead of all industries superficially.
What changed:
I stopped believing horizontal platforms could serve all industries equally well. They can't.
Industries are too complex. Workflows are too specific. Buyers demand too much industry fit.
The future isn't horizontal SaaS. The future is vertical or multi-vertical SaaS.
If you're building horizontal SaaS today, you're fighting an uphill battle against:
- Vertical competitors with better product fit
- Higher customer willingness to pay for industry-specific solutions
- More efficient vertical GTM
- Stronger vertical network effects
If you're building vertical SaaS, you're riding tailwinds.
The market is shifting from "software for everyone" to "software for this specific industry."
That shift is accelerating.
The question isn't whether vertical SaaS will win. The question is: Which vertical will you dominate?
That's the future of SaaS.