Should You Invest In Vertical Software Solutions?

As technology continues to evolve, new startups and small businesses are switching to vertical software solutions to funnel their time and resources into highly efficient and portable workflows to assist their growth. Veteran software packages are often filled with features that are simply not useful for new businesses. This results in a lot of wasted capital when investing in generalized software solutions.

Thankfully, there are vertical software solutions that allow businesses to streamline their workflow with highly efficient and easy-to-learn software solutions. However, they do come with the caveat of being slightly less adaptable should your business pivot in the future, but is this issue worth overlooking for the ease and simplicity that it offers?

What Is a Vertical Software Solution?

To start, let’s define what a vertical software solution is.

A vertical market is one that offers specialized goods and services that are designed for a specific industry. For example, medical software that is designed for use in a clinic or a video game engine are both examples of vertical software solutions. They are designed for a very specific use and generally cannot be repurposed. It does not include solutions such as customer relationship management software because it can be used in a variety of different industries. Vertical solutions are generally designed for a highly specific market.

By catering to these specific industries, vertical software solutions are often highly agile, easy to learn and portable to different platforms. Many vertical software solutions are based in the cloud, meaning they can be accessed by any device to access the full range of features. A lack of competition in these markets means that they can be a little more expensive than general software packages and solutions. However, this cost is often offset by the benefits that it offers. In some cases, bespoke software can be created to give a company a highly specific software solution to tackle specific issues.

Vertical Software Solutions Offer Higher Returns On Your Investment

Since vertical solutions are designed to streamline your business operations at a lower cost, they offer a far better return on investment. The way it achieves this can depend on the way your business operates, but here are some of the cost-efficiencies that you can expect with a vertical software solution.

  • Lowered training costs – Since vertical software is designed to be easily implemented into your business, it’s often intuitive to use and requires less or no training. This means that your staff can quickly adopt the software and begin using it in the context of your business instead of trying to adapt the software to your specific needs.
  • Streamlined solutions that don’t require configuration or add-ons – While the price of a vertical software solution can be higher than a general software package, it’s a single solution that doesn’t require additional configuration or purchases such as add-ons and plugins. This means that it works out of the box, providing your business with a streamlined solution that can easily be implemented into your workflow.
  • Easier maintenance – A lot of general software solutions require maintenance in order to keep the software running correctly. For instance, security updates may be necessary to protect your business data and new version updates may break existing add-ons and plugins that are necessary for the way you use the software. Vertical software solutions typically don’t require as much maintenance, meaning there is no drop in efficiency when an update or fix is required.
  • Predictable operating costs – Another fantastic advantage of vertical software solutions is being able to predict operating costs before adopting the solution. Vertical software is typically offered as a service which means a standard monthly cost and no additional payments required. This helps small businesses budget for their expenses and simplifies many of the accounting calculations.

As you can see, there are many cost-saving advantages to consider when you invest in vertical software solutions. Although the monthly subscription costs and additional fees might be higher than that of a horizontal solution, they can help you reduce your operating costs in other ways that more than make up for the asking price. If you haven’t already implemented a horizontal software solution for certain business tasks, then using a vertical software solution could be the best way for you to kickstart your business with the least amount of capital.

When Does a Vertical Software Solution Make Sense?

Understanding when to use a vertical software solution can be tricky as it relies heavily on your circumstances and the context in which you’ll be using the software. For instance, a general software service such as cloud accounting typically doesn’t fall under the umbrella of vertical software as it can be adapted and used by many different industries. However, something more specific such as restaurant accounting software can streamline your operations, requiring far less setup which makes it an easy drop-in solution for new restaurants and food service businesses.

So when exactly should you use a vertical software solution as opposed to a more general software package that might be considered an industry standard? To understand this, we must first look at the disadvantages of using vertical software solutions.

For starters, a vertical software solution cannot be pivoted to solve other issues. An example of this would be using the aforementioned restaurant accounting software. Depending on the software chosen, it may require additional setup, workarounds or plugins in order to adapt it for eCommerce purposes. For instance, you might want to set up an online delivery system with more payment methods, or you might sell merchandise such as cookbooks, apparel or branded cookware. In a situation like this, a restaurant-specific accounting solution may not be the best idea unless additional features can be added with the help of the developer. However, this may incur additional costs that would remove some of the cost-saving benefits of vertical software.

It’s also important to look at the viability of a vertical software solution in the long-term. While it’s perfect for niche scenarios, startups and small businesses, the lack of adaptability in a vertical software solution may result in inefficiencies in the future. This is because compatibility with other general software solutions is up to the developer to implement. Migrating your software solutions to a more general industry standard could be limited if proprietary file formats are used by the vertical software, and reliance on vertical software tools could limit your experience and knowledge with more powerful industry-standard tools. This could result in a need to hire experts and outsource managed technology services once your business starts to grow.

As you can see, a vertical software solution isn’t the most foolproof idea. While it does come with many fantastic advantages, it’s important to remember that there are also many caveats that you need to consider before investing in it. When used correctly, vertical software solutions can be a fantastic way to get your business started, but its real value comes in its highly-streamlined features, interface and use case.

Mixing Vertical and Horizontal Software Solutions

The real power of vertical software lies in its ability to integrate with general horizontal solutions. For instance, if an industry-specific accounting solution helps you operate a certain branch of your business, then it’s worth checking if it’s compatible with a more general cloud accounting solution. You should look for features such as compatibility with other software through general file formats or export options. Certain plugins and software features can even allow vertical software solutions to integrate with larger CRM solutions, resulting in a flexible and versatile software foundation that can help you grow your business.

At the end of the day, software needs to be efficient and helpful to your business regardless if it’s a vertical or horizontal solution. Vertical software should tackle highly-specific tasks and be used in departments where technological skills aren’t a requirement in order to function correctly. However, being able to export the data and analytics of the department so that they can be processed by a much larger and general software solution can make your business run more smoothly. It also means that your workflow can scale in the future to support more advanced software solutions that are considered industry standard.

In conclusion, the goal should be to mix vertical and horizontal software solutions as your business requires it. You should absolutely invest in vertical solutions, but only if it makes sense for your current business and circumstances. If you ever pivot your business and create new departments or revenue streams, then using a vertical solution to kickstart it can be an effective strategy to get them operational in the least amount of time. It doesn’t require nearly as much training and you don’t need to hire specialized employees. However, sooner or later, you’ll want that department to be assimilated into the rest of your business by merging software tools or at least the data they produce.