Our Predictions For 2022: A Surge in Vertical SaaS Adoption Will Drive M&A Activity
Organizations have spent the last decade migrating their on-premises IT systems to the cloud and adopting horizontal SaaS solutions designed for general business uses across a wide range of industries such as CRM, project management, and accounting. We predict enterprises will spend the next decade migrating away from those horizontal SaaS solutions in favor of vertical SaaS solutions purpose-built for their specific industries. This won’t be a slow and steady ramp up over several years. We expect a spike in vertical SaaS adoption rates in 2022, particularly among professional services organizations.
Catalyst for Change
That’s not to say that implementing vertical SaaS solutions to make business processes more efficient and cost-effective is a new trend. Companies in “early adopter industries” such as financial services firms and legal have been doing it for years. After the onset of the coronavirus pandemic healthcare providers began using cloud-based telemedicine platforms so doctors could meet with their patients remotely.
What will be new in 2022 is the primary motivation for why companies adopt vertical SaaS platforms: improving the employee experience (EX).
People Over Processes
A new report by Forrester Research, “Predictions 2022: Tech Leadership and Innovation,” recommends that companies make the leap from digital to human-centered tech transformation: “Leading firms will unlock the creativity of their employees by using intelligent technologies like automation and predictions engines that focus on outcomes, not just financial results.” There’s no industry where that will be more critical to success in 2022 than professional services.
The primary outputs of any professional services organization — marketing agencies, graphic design firms, architecture firms, etc. — are their employees’ expertise and creativity. They’re people-powered businesses, and effectively managing and motivating them has never been more challenging.
COVID-19 infection rates continue to spike following the appearance of the Delta and Omicron variants, forcing companies to delay their plans to reopen their offices. Apple, DocuSign, Ford, Lyft, and DocuSign are among the companies that recently pushed back their return-to-work dates. DocuSign’s planned Jan. 10, 2022 return was its fourth attempt at setting a date to bring employees back.
“Every time we think we’re coming out of this, and companies go to flip the switch on return-to-work, something comes up,” said Brad Bell, director of the Center for Advanced Human Resource Studies at Cornell, in an interview with Axios. “Then, firms end up having to walk back their words, further frustrating or confusing workers.”
With so many people working outside the office, skilled professionals can now connect with companies across the globe. While that gives organizations access to a broader pool of resources, those firms that have not created a “tech-enabled culture” may find themselves losing top talent or struggling to fill critical positions.
Further complicating matters is that among PS professionals, the Great Resignation trend is more of the “Great Resignation from My Full-time Job to Become My Own Boss.” There are 57 million freelance workers in the U.S. now, and a recent survey by freelance platform Upwork found that 10 million people currently working full time are considering doing freelance work — a 17% increase.
Whether employees leave due to frustration over their companies’ remote work policies (or lack of them), to accept a position with another company, or to hang their own shingles, Forrester warns that “for traditional tech execs, the talent shortage is real.”
Getting ahead of this issue requires new ways of finding, attracting, and retaining skilled resources that enable competitive differentiation. For professional services organizations, that means replacing generalized horizontal applications and “homegrown” workflows built on managing spreadsheets and email archives with purpose-built vertical SaaS solutions.
That leads to our second prediction for 2022: Kantata — the new name for Mavenlink and Kimble w— ill kick off a wave of M&A activity among developers of vertical SaaS solutions for professional services organizations.
Fortuitous Timing
The combination of Mavenlink and Kimble positions the Kantata as the market leader in the vertical SaaS for professional services organizations category. As new Kantata CEO Michael Speranza said in the press release announcing the close of the merger, “Our unmatched domain expertise coupled with our commitment to continued innovation on two distinct best-in-class solutions will provide our clients the capability to dynamically optimize resources – unleashing the creativity and impact of their most valuable asset: their people.”
Vertical SaaS is the path forward for professional services firms, as evidenced by the proof points established by other industries that have embraced vertical SaaS platforms purpose-built for their workflows. As the adoption rate rises among professional services firms, the winners in the already highly competitive market of SaaS solutions developers will be the ones who focus on vertical SaaS as opposed to more generalized horizontal tools. M&A is the fastest route to building a robust vertical SaaS product portfolio.
The demand is immediate and rising. The Forrester report states, “When it comes to accelerating out of the crisis and driving revenue, it’s all hands on deck… (businesses need to) embrace speed, new ways of working, and goals that focus on meeting customer needs.”
Want to learn more about Kantata?
Click here to discover how The Kantata Professional Services Cloud takes professional services automation to a new level with purpose-built cloud software created specifically to solve the challenges faced by services organizations.