Most of us are familiar with the most common types of horizontal business software, such as productivity suites or accounting packages, but many small firms are also using software that is tailored specifically for their type of business. We have all experienced some of the more commonplace vertical-specific software – for example, every time we make a purchase at a retailer point of sale (POS) software is used to “ring up” the sale or when a visit to the doctor entails our healthcare provider updating our medical information in an HRMS (medical records management) system. As many different types of businesses exist, there are specialized software applications to help run them, many of which we might not be aware of.
Small businesses spent a lot of money on software to help them run their businesses more profitably. In the US alone, SBs are expected to spend over $20 billion next year on software, of which over $2.9 billion will be for Line of Business (LOB) or vertical-specific software. SB spending on LOB software is expected to reach $4 billion by 2023… a fair chunk of change. The Professional Business Services, Other Services and Retail sectors are leading spenders on LOB software.
As with every other innovation, vertical software has evolved in basically two ways. Some have been formed organically. For example, back in the 1980s, Self Service Furniture was just a furniture store in the Pacific Northwest. They found that they needed to replace their outdated software to help them run their business, but nothing off-the-shelf really worked for them. So, they developed their own software, in-house. Word got around to other furniture dealers and the rest is history. Today they are a software vendor (Genesis Software Systems) selling their proprietary application to other furniture stores in the U.S. and Europe.
Other vertically-oriented software has been specially developed by large vendors, such as SAP and Oracle. Both vendors offer a broad spectrum of vertical-specific software tailored for a wide variety of industries. Each vendor offers software for about 30 different verticals, such as energy, financial services, manufacturing, public sector services and services sector. Both companies originally created software for larger firms. Recognizing the need and business opportunity within smaller companies, each offer scaled down versions of their enterprise-level software suites.
Because business needs differ based on industry, vertical-specific software can be augmented by horizontal apps, such as CRM, that are geared towards specific industries. Examples include ApparelMagic which offers CRM, ERP, and accounting integrated with solutions strictly for the fashion industry, such as apparel inventory control. Another example is AgencyBloc, software which performs functions such as CRM and marketing automation with integrated commissions processing for insurance agencies only.
Going forward, software vendors need to bear in mind that businesses, particularly small businesses, need software applications that closely align with their business and “speak their language.” Firms want and need software that requires as little training and customization as possible. Vertical/LOB software is expected to grow significantly, particularly cloud-based, and the most successful software vendors will partner with hardware manufacturers and services providers to offer complete packages for small firms.
~Eileen Zimbler, Vice President