What sort of SaaS are you?

The typical aspirational advice we hear for SaaS fledglings goes a bit like this.

Build your MVP (minimum viable product).

Find some early adopters, make a few sales and schmooze some investors.

Scale massively.

Buy an island.

OK, so I made up the last one, but the rest is not so far off the mark.

While you're in the process of doing the above, your offering will be pigeonholed in to one of three different categories which will help external parties better understand your business.

These are vertical, horizontal and service. They share many similarities but they are all notably different, and each demands its own perspective.

Horizontal

Horizontal offerings are the mass market, ‘pile it high, sell it cheap’ platforms that we’re all familiar with like Gmail, Facebook, Calendly and so on. Here the product is very much the software itself, although that may not be how the business makes its money. Both Google and Facebook make much of their revenue from paid advertising. And why not? They have an audience of billions worldwide.

Typically, these platforms are free and fairly simple to use, although there may be additional functionality available for a fee. LinkedIn is a good example. It’s free for everyone, but there are paid options allowing you to search all of its many million users and businesses, as well as providing other benefits.

In all these cases, it’s the people themselves and the data they freely surrender that drives the revenue opportunities for the business. Whether you’re targeting the mass market or not, that’s a concept well worth tucking away in the back of your mind. It’s going to play a big part in our technology future one way or another.

Vertical

Vertical or niche platforms usually solve a specific problem, like Atlassian’s Jira which is used for issue tracking, or WiseTech’s Cargowise, which optimises supply chains around the world. The software is still the product, and its sale and use is the primary source of revenue.

Typically, these products will be more complex, and can be far more expensive to buy. And by that, I mean that some of them are eye-wateringly and buttock-clenchingly pricey, and rightly so. They deliver massive value to a business, and if they’re doing that, the vendor should be getting paid for it.

On top of that, and for the best outcomes, training will nearly always be required. While use of the software generates the lion’s share of income, education and consultancy services provide additional lucrative activities.

Service

More and more businesses are creating platforms to help them deliver their service in a more efficient and effective manner. These can be platforms created to deliver a service, and the Uber app is a great example, but can often start as bespoke systems created for a business. As the platform matures, an increasing number of self-service facilities are added until they get to a point where the customer can do much of, and maybe all, the work. 

While this is in effect just a vertical niche product, the business is still primarily focused on delivering the service. A pure self-service option is just a cheap entry-level variant. As with vertical niche platforms, prices are usually comparatively high, and education may well still be a requirement.

There is a rapidly increasing number of vendors who fall in to this bucket as more and more businesses find they can deliver a superior service to their customer through the provision of a bespoke software solution.