Just like in any industry, there are types and leaders that dominate the market. Before joining Cyclr I was unaware of the scale of the SaaS or cloud infrastructure industry. I’d previously worked with two different Software as a Service application. Salesforce is a horizontal model, and Class Systems is a vertical model. Both compete in a crowded market, but who is leading?
We explore the types and categories of SaaS applications on the market. It may help to determine which application is appropriate for your business software solutions.
Software as a Service and Industry Growth
SaaS is defined as a cloud-based subscription service, which makes software easily accessible over the internet. It removes the need to download software onto your computer and thus is able to provide regular updates and support.
The SaaS industry has been steadily growing over the past 10 years. The market size in 2020 doubled that of 2014 to 157 billion U.S. dollars. Leaders in the industry include Salesforce, Microsoft and IBM who have the largest market share in the global SaaS market.
The growth of the market can be attributed to a combination of technological innovation, customer behaviour and demand. Recently external factors such as the COVID pandemic have caused market increases. The pandemic, according to Gartner has seen businesses forced to focus on ‘preserving cash flow and optimise IT costs, support and secure a remote workforce, and ensure resiliency. Post-pandemic spending on cloud infrastructure and software is only expected to increase.
“The SaaS industry is an ever-changing landscape. A status that is both exciting and challenging at the same time. You have to be agile and comfortable with a constant state of flux. Sleep on the job and you will lose. I love this dynamism.”
Fraser Davidson, Cyclr CEO
Types of SaaS – What is Horizontal and Vertical SaaS?
There are two different types of Software as a Service model, horizontal SaaS and vertical SaaS.
A horizontal SaaS is a structure well used by established cloud services such as Salesforce, Microsoft, Slack, Hubspot etc. The horizontal model allows big businesses to cater to a broad customer base, from ranging industries, to run their businesses effectively and efficiently. The model makes it easier to expansion or bundle up their offering. Meaning they can expand their services to incorporate a variety of SaaS categories under one roof. For example, Google or Microsoft developed communication products in the shape of Google Hangouts and Microsoft Teams.
On the other hand, vertical SaaS solutions are created to target a specific or niche industry. Examples include insurance, trade or an underserved industry. The model focuses on the industry’s verticals and creates solutions for the niche industry’s pain points and needs. For example, Guidewire, a SaaS solution that only creates software for the insurance industry or Toast software for the restaurant industry.
“Do I prefer Horizontal or Vertical SaaS solutions?
Good question. In fact I like both. A solid horizontal SaaS solution is necessary for core business functions, building a fragmented CRM built of micro SaaS solutions is just not viable. However niche and industry specific solutions are much better suited to verticalised propositions. The reality is you need a combination of both that is unique to your business needs. If you are heavily weighted to either horizontal or vertical then you have probably got it wrong.”
Fraser Davidson, Cyclr CEO
Within the SaaS market, there are categories of applications that provide software solutions dependent on your business, industry or customer needs.
Customer Relationship Management or CRM
Customer data is an invaluable resource for any business. CRMs allow businesses to collate and store all their customer data in an efficient and secure way. In storing customer data effectively it can help improve customer relationships, customer segmentation and better protection of data privacy.
The most common users of CRM software are B2C companies, which sell directly to consumers. The departments within those businesses that use CRM software are sales, marketing and customer service teams. CRM software enables users to automate repetitive tasks, create sales reports, forecast, and scale processes over time. They are able to manage communication with customers and manage customer data in a centralised database across your entire organisation.
Popular CRMs include Salesforce, Mailchimp, Pipedrive, Hubspot and Zendesk. To understand their connector methods you can find them all in Cyclr’s Connector Library.
Human Resources (HR)
Within every company, there is a human resource (HR) department. They are responsible for managing and supporting employees whether it be recruitment, training or administering employee benefits.
HR SaaS software solutions provide a number of benefits to business users. The ability to manage employees in regard to work schedules, holidays, sick leave etc. The software can also keep track of employees’ performance, and time with the company and help retain valuable employees. The HR department is an integral part of a business which provides updates and communication to employees. This helps develop the company’s collaborative culture by keeping employees informed, engaged and productive.
Commonly used HR SaaS software solutions include Breathe HR, People HR and Bullhorn. You can find them all in our ready-made SaaS application Connector Library, and further understand how they can be incorporated into your integration strategy.
Accounting/Billing
Keeping track of finances for any business is crucial. Therefore account and billing SaaS software solutions can provide a myriad of benefits to the user. They help you keep track of cash flow, transactions, and budgets. Using a SaaS application to manage a company’s finances can help save time and effort. Specifically in time spent reconciling accounts, financial errors, data entry, payroll, taxes and customer payments.
Typical industries using account and/or billing SaaS software include banking, business services, manufacturing, retail and the government. Popular accounting or billing SaaS companies include Quickbooks, Chargebee and Chargify.
Communication
In the past year, communication-based SaaS software such as Slack and Zoom have seen unprecedented usage. Communication-based software solutions have replaced typical office methods such as email, phone calls and in-person meetings, with chat messaging, video and/or voice calls.
When a communication SaaS is integrated with collaborative SaaS vendors, such as Google Drive, employees can share and discuss projects. Enabling features such as receiving automated in-app notifications when changes are made. Providing a seamless service, better collaboration, and communication is located in one place.
Want to see how SaaS Communication software could be incorporated into your business? You can find Slack, Zoom and others in our Connector Library.
Project Management
Businesses typically balance between multiple projects at one time, or at least projects are juggled within teams. A Project Management SaaS is a solution that can help businesses or teams stay organised and on top of their ongoing projects. They provide the ability to plan, track, allocate, schedule, communicate and collaborate with other team members on a project in one place.
PM SaaS can show the evolution of the project and track who has completed what in your team. Trello, a project management application allows teams to manage projects, organise tasks, and keep productivity high.
Project Management SaaSs are typically used by larger businesses in industries such as Services (IT, Consulting), Financial, Marketing and Advertising. Popular SaaS vendors include Trello, GitHub and Basecamp.
Content Management System (CMS) and E-Commerce
A CMS is typically web-based software or a low-code toolkit that helps a user to create a website or app. It gives the user the ability to create, manage and modify content without the need to know how to code or technical knowledge.
WordPress is a great example of a CMS that provides building blocks for a website. An e-commerce example would be Shopify allowing business owners to add products, adjust content and monitor changes.
Content Management Systems have a plethora of benefits. They are user-friendly, allow for quick deployment, easy upkeep and maintenance, cost-effective, scalable, and have inbuilt SEO benefits. CMS solutions are used across a variety of different industries to promote new products, publish articles or manage social media.
Other types of popular SaaS solutions include Enterprise Resource Planning (ERP), Customer Experience, Marketing/Email, Product Management, and others. You can see all our SaaS connectors in our pre-existing, ready-made SaaS connector library for more information.
Do you want to learn how to orchestrate your SaaS applications and move data between them with Cyclr?
What types of SaaS are dominating the Industry?
The horizontal SaaS model dominates the SaaS market which you can see from G2’s Crowd Report:
- Microsoft – Teams, OneDrive, SharePoint, PowerPoint, Office (Collaboration & Communication)
- Hubspot – Sales Hub, Marketing Hub, CMS Hub, Service Hub, Academy (CMS, Marketing, Help Desk)
- Zoom Video Communications – Zoom, Zoom Rooms, Zoom Video Webinar, Keybase, Zoom Scheduler (Communication)
- Atlassian – Trello, Jira, Confluence, Jira Service Management, Bitbucket (Project / Product Management, Help Desk)
- ActiveCampaign – ActiveCampaign (Marketing)
- Smartsheet – Smartsheet, 10,000ft, Smartsheet for Gmail Add-On for G-Suite, Smartsheet for G-Suite (Project Management)
- Google – Drive, Forms, Docs, Hangouts, Analytics (Collaboration & Communication)
- Cisco – Webex Meetings, Jabber, Webex (formerly Webex Teams), Duo Security, Cisco Umbrella (Communication & Security)
- ZoomInfo – ZoomInfo, ZoomInfo Engage, NeverBounce, InboxAI, FormComplete (Sales)
- SurveyMonkey – SurveyMonkey, Enterprise, Wufoo, GetFeedback, Market Research Solutions (Survey & Customer Experience)
The top ten listed SaaS solutions are all big-name brands that offer products that can be used no matter what your industry is. The reasons for this dominance could be because of the numerous benefits horizontal SaaS models provide. For not only the developer but also their customers.
For instance, a horizontal SaaS has a broad target and a more accessible market of potential consumers who are easier to reach. Products can be introduced to the market much more quicker, and customers have familiarity with large horizontal SaaS companies.
For their customers, they are a cost-effective solution. For instance, making only one investment in a business software solution. Meaning marketing or project management needs can be accomplished from one platform. This can then lead to better collaboration amongst the customer’s internal teams.
Vertical SaaS for Niche Sectors are Rising
Earlier this year we wrote our SaaS predictions for the year ahead. Of those, we predicted that there would be an increased opportunity for vertically focused SaaS solutions. Vertical SaaS companies can target specific pain points experienced in their industry. They can tackle segments of the SaaS market or niche sectors that are underserved. By delivering more business value to a narrower target audience.
Vertical SaaSs can move away from the oversaturated markets and provide better outcomes for their specific sectors. Their primary benefit is the ability to go deep into the industry to offer solutions to specific challenges faced. Unlike a horizontal SaaS skimming the surface of multiple industries.
Will vertical SaaS disrupt the oversaturated SaaS applications dominating the industry? They are on the rise so we can only wait and see.
“All industries seem to go through phases of fragmentation to consolidation to fragmentation to consolidation. The SaaS industry is no different. The appeal of disparately powerful siloed SaaS tools is inevitably replaced by a desire for fewer platforms and fewer vendors. And then vice-versa. This flux is not going to go away and vendors such as Cyclr sit at the heart of this as we enable the stitching together of application ecosystems in a hybrid way regardless of the direction of the momentum.”
Fraser Davidson, Cyclr CEO
