Mar 16, 2025

The (AI) boom is reshaping the software-as-a-service (SaaS) industry, pushing companies to shift from broad, cross-industry solutions to domain-specific vertical SaaS offerings. This transition allows SaaS startups to integrate AI-driven intelligence tailored to industry-specific needs, enabling faster adoption and higher returns on investment. Industry experts note that over 60% of SaaS revenue comes from large enterprises, with global markets driving the demand for vertical SaaS. Until recently, offering domain-specific solutions was challenging due to technological limitations. However, AI advancements now enable SaaS firms to scale rapidly by selecting industries best suited for tech-driven transformation. Zoho's new CEO, Mani Vembu, recently said that the company's strategic pivot towards domain-specific solutions targeting large enterprises worldwide. Zoho is focusing on BFSI and healthcare in key markets such as the US, UK, and the Middle East. “Vertical SaaS enables startups to embed domain-specific intelligence directly into their products, offering greater value and faster return on investment for clients,” said Milan Sharma, director at 35 North Ventures. The vertical SaaS is on a steep growth trajectory. According to Business Research Insights, the market, valued at $91.19 billion in 2023, is projected to reach $317.49 billion by 2032, expanding at a CAGR of 16.3%. Several SaaS unicorns are capitalising on this trend. LeadSquared has tailored offerings for fintech, healthtech, edtech, and manufacturing, addressing sector-specific challenges. COO and co-founder Prashant Singh highlighted products such as loan origination systems for fintech, patient interaction tools for healthtech, and enrollment management systems for edtech. SuperOps, a SaaS startup catering to managed service providers (MSPs), is also leveraging AI. “Our AI-powered solutions, like advanced ticket classification and triage, are specifically designed to address MSP pain points,” said Parthiban, CEO and co-founder. The company raised $25 million in Series A funding in January to fuel AI innovation and global expansion. One of the driving factors behind this shift is the implementation challenges associated with horizontal SaaS. According to a Zoho-IDC report, 75% of Indian enterprises that adopted SaaS faced implementation delays, with an average timeline overrun of 57% and a cost overrun of 43%. “Vertical SaaS reduces the need for extensive customisation, minimising deployment hurdles,” said Brijesh Damodaran, managing partner at Auxano Capital. Venture capitalists are also backing vertical SaaS startups leveraging AI for competitive advantage. HR tech firm Darwinbox recently raised $140 million, healthtech startup Innovaccer secured $275 million, and fintech company Perfios attained unicorn status with an $80 million funding round. Investors are increasingly favouring SaaS firms integrating AI solutions that minimise manual intervention. “AI is now expected to be embedded in products rather than functioning as a standalone solution,” said Praval Singh, V-P of marketing and customer experience at Zoho.