The True Meaning of "Mission Critical" Vertical Software

"Software is a great combination between artistry and engineering." - Bill Gates

In today's rapidly evolving technological landscape, software solutions have become the backbone of businesses across various industries. One significant development in the software realm is the emergence of vertical SaaS (Software-as-a-Service). Unlike its horizontal counterpart, vertical SaaS is purpose-built to cater to specific industries, empowering businesses with tailored tools and functionalities. While many people tend to associate vertical SaaS with small and medium-sized businesses (SMBs), its reach extends far beyond local merchants.

Vertical software refers to software specifically designed for a particular industry. This industry can encompass various characteristics. Many people often confuse small and medium-sized businesses (SMBs) with vertical software because, most of the time, the end users of such software tend to be local businesses like restaurants, hotels, and retailers.

This generalization is generally accurate, but there are also larger industries that fall under the vertical software umbrella. For instance, there are companies like BluePrism that sell software to auto insurance companies, which are some of the largest companies in the United States. So there is a broad range from SMBs to enterprise-level organizations, although the focus is primarily on SMBs. In the realm of SMB vertical software, we have typically observed that there is usually one system that holds more importance than the others, perhaps two at most.

At Define Capital, we look to acquire profitable B2B software/SaaS companies that are mission critical in nature.

What do we mean by "mission critical"?

Point #1: Companies that have "Control Point" software

In vertical SaaS, businesses rely on a crucial software system known as the "control point." It includes a front office system for generating revenue and a back office system for financial tasks like reconciliation, bill payment, and tax filing. The control point captures the concept of data gravity, where large datasets attract smaller ones and associated services.

This system stores critical data, supports daily tasks, and fosters workflow efficiency. By optimizing the control point, companies streamline operations, enhance collaboration, and access valuable data insights for innovation. Recognizing its importance enables businesses to focus on its capabilities and adaptability, establishing a strong foundation for growth within their industry vertical. The control point is the catalyst for success in vertical SaaS.

Point #2: Companies also have "Account Gravity" software

In the realm of vertical SaaS, there is another crucial aspect to consider: "account gravity." This concept serves as an indicator of a control point within a business. Imagine a scenario where you have to shut down all systems because your company is ceasing operations. The system that you would turn off last holds the key to your account gravity.

Account gravity software encompasses the core functions that are vital to the financial stability and overall well-being of an organization. It is the system that houses critical financial data, facilitates billing and payment processes, and ensures compliance with tax regulations. By pinpointing the software that bears the highest account gravity, businesses can identify the linchpin of their operations—the system they simply cannot function without.

Understanding account gravity not only provides insight into the critical role a specific software plays within a company but also allows organizations to prioritize investments and allocate resources effectively. By acknowledging the significance of account gravity software, businesses can make informed decisions about enhancing and optimizing this essential control point.

In essence, account gravity software acts as the heartbeat of an organization, keeping its financial pulse steady and facilitating day-to-day operations. By recognizing and nurturing this vital software, companies can establish a strong foundation for growth and resilience, ensuring their long-term success.

In the realm of vertical SaaS, account gravity serves as a reminder that while multiple software systems may be in place, there is often a single system that carries the weight of a company's financial stability, operations, and compliance. By acknowledging and optimizing this account gravity software, businesses can fortify their foundations and unlock the potential for sustained success in their industry vertical.

Conclusion

As businesses increasingly recognize the advantages of specialization and industry focus, the demand for vertical SaaS continues to soar. Vertical software offers a targeted approach that empowers companies to streamline their operations, enhance customer experiences, and stay ahead of the competition. Whether it's a local restaurant managing its reservations or a multinational auto insurance company streamlining its claims process, vertical SaaS delivers industry-specific solutions that drive growth and efficiency.

In this era of digital transformation, embracing vertical SaaS unlocks a world of opportunities for businesses. By harnessing the power of software purpose-built for their industry, companies can elevate their capabilities, deepen customer relationships, and expand their service offerings. The future of business software lies in the vertical, where industry-specific solutions pave the way for unprecedented success.