Wednesday, November 21, 2007

SaaS- Vertical Market or Generic Platform?

I read an interesting post today from Julian (yes another fellow kiwi and further evidence of NZ's entrepreneurial spirit).
Julian discusses the pitfalls of building a SaaS application for a single vertical, where there is risk of that vertical reducing in size or changing in requirements.
I totally agree with Julian, that a generic based application should be the goal when building your product. When making design decisions you should consistently look at how you could build a specific vertical requirement as a configurable generic feature.

Julian then goes on to state that

Would you rather have 1% of 1000 vertical markets? or 100% of 1 vertical market? These days, I’d rather have 1% of 1000 vertical markets!

I don't quite agree with this, there are times where it isn't as clear cut.
Certainly companies like and even the company I am currently involved with Forcelogix have built platforms where if your business is centered around a salesforce selling to customers, then its independent of the vertical market your business is tagged to. It could be Finance, Consumer Goods or Life Sciences and many others.

However, where might a vertically focused application be preferred?
1. Where the vertical has repeatable specialist requirements
2. The market is large enough to support a new SaaS player. US Pharma industry is a good example where there are around 100,000 Sales Reps in Pharma
3. Bootstrapping your own startup and you have years of specific industry experience and contacts within prospect organizations.
4. Prospective early funders/investors might more easily see the value proposition of your product if a vertical is targeted.

I tend to refer to Life Sciences regularly in my blog, and that is due to this very issue. Its happened more than once, where I have built a generic business application and because our initial customers happened to be Pharma, it made it a lot easier to sell to other Pharma organizations. We became experts in this industry. It doesn't mean you can't go on to be successful in other verticals,far from it, it just makes it easier to focus and to grow your business, at least in the earlier stages.

There are proven SaaS success stories with both vertical and generic approaches. You just need to evaluate what is best for you.