Vertical is a SaaSy space for investors with deep pockets
As appeared in The Economic Times by Shadma Shaikh.
Inbound investor interest, big pocket deals and increasing revenue have attracted a lot of traction and growth in the number of players operating in the software-as-a-service (SaaS) industry. While the success of larger players, including the likes of Salesforce and Microsoft led to startups such as Freshdesk, foraying into the horizontal SaaS landscape, industry growth is also being witnessed in the vertical SaaS domain. As opposed to horizontal SaaS that provides software technology that could be used across different industry domains, vertical SaaS caters to a specific vertical, like hospitality or retail. According to data from Tracxn, over 60 startups operating in the vertical SaaS domain received funding in 2016, comprising 50% of the overall SaaS funding during the year. “Vertical players in SaaS are opening up markets that were underserved earlier. As the SaaS industry evolves, we see scope for new market makers than just fast followers. While the potential for a market maker to scale in a horizontal space is more, vertical players are also attractive considering the scale of market they operate in. A clear example of this is Zenoti (a startup that provides software solutions to wellness centres),” says Sharad Sharma, cofounder of iSPIRT. SaaS applications that have traditionally addressed broad business functions such as customer relationship management (CRM)or enterprise resource planning (ERP) could be served by an industry agnostic large horizontal player.
However, for specific and critical business needs, of say a large retail player, a vertical player that specialises in retail solutions stands out as an obvious choice. This has led to the success of players like Capillary Technologies and Rategain that specialise in retail and travel sectors, respectively. Also, a SaaS tool that can be hosted on cloud and accessed across locations, gives more flexibility and uniformity to traditionally offline vertical players. For Qwikcilver, a startup that specialises in gift card solutions for retailers, having a centrally hosted gift-card solution helped manage inventory and records for retail players and gave more flexibility to consumers, thus increasing the convenience of gift-cards. “The gift-card ecosystem is huge given the complexities of the Indian market. Being a vertical SaaS player, we understand the market well and by providing a SaaS platform that manages a centrally hosted transaction via our platform also enables easy scaling up of a programme,” says Pratap TP, director of Qwikcilver. Serial entrepreneur Sudheer Koneru’s Zenoti, a vertical SaaS startup that addresses the needs of wellness industry also raised $15 million in August in a round led by Norwest Venture Partners. Horizontal customisation While vertical players in SaaS are finding solutions for precise industry requirements, large business serving horizontal players are providing customisation of products to suit varied business needs of enterprise customers. Delhi-based Wingify that provides web-optimisation tools for online business, uses mass-customisation of products. “While most of our products do not entertain personalised customisation, we rely on configurable environments to make specific feature enhancements or changes,” says Sparsh Gupta, CTO, Wingify.