{"id":16753,"date":"2023-05-05T23:56:00","date_gmt":"2023-05-05T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=16753"},"modified":"2025-08-07T11:24:21","modified_gmt":"2025-08-07T03:24:21","slug":"vertical-software","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/","title":{"rendered":"Vertical software is expensive, but worth the investment"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Whats_vertical_software\" >What&#8217;s vertical software?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Comparison_of_vertical_software_companies\" >Comparison of vertical software companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Characteristics_of_Industry_Vertical_Software\" >Characteristics of Industry Vertical Software<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Wide_moats\" >Wide moats<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Dream_investment_target\" >Dream investment target<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Market_valuations_are_high\" >Market valuations are high<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Market_capitalization_is_lower\" >Market capitalization is lower<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Product_is_expensive_the_right_to_hike_the_price\" >Product is expensive, the right to hike the price<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/#Related_article\" >Related article<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Whats_vertical_software\"><\/span>What&#8217;s vertical software?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The official name of industry software should be vertical market software, which is software developed for a niche industry or for the needs of a unique customer group. The most famous example is Adobe (ticker: ADBE), almost all of its software is aimed at customers in the multimedia industry.<\/p>\n\n\n\n<p>Its opposite is, in short, horizontal market software. A horizontal market is one that caters to a wide range of consumer markets. In other words, it&#8217;s a mass-market solution designed to satisfy the needs of as many people as possible. The most famous example is Microsoft Corporation (ticker: MSFT). Almost all of its software belongs to this category, and it does not limit the user&#8217;s identity or industry attributes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Comparison_of_vertical_software_companies\"><\/span>Comparison of vertical software companies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Company <\/td><td>P\/E<\/td><td>Industry<\/td><td>Market cap ($ billion)<\/td><\/tr><tr><td>Microsoft<\/td><td>26.36<\/td><td>horizontal <\/td><td>1820<\/td><\/tr><tr><td>Alphabet<\/td><td>18.27<\/td><td>horizontal <\/td><td>1170<\/td><\/tr><tr><td>Meta<\/td><td>11.29<\/td><td>horizontal <\/td><td>316.67<\/td><\/tr><tr><td>Salesforce<\/td><td>462.28<\/td><td>horizontal <\/td><td>128.27<\/td><\/tr><tr><td>Oracle<\/td><td>24.86<\/td><td>horizontal <\/td><td>214.57<\/td><\/tr><tr><td>Adobe<\/td><td>33.38<\/td><td>multimedia<\/td><td>165.39<\/td><\/tr><tr><td>Autodesk<\/td><td>67.86<\/td><td>engineering<\/td><td>41.51<\/td><\/tr><tr><td>Fair Isaac<\/td><td>41.66<\/td><td>credit rating<\/td><td>14.75<\/td><\/tr><tr><td>Veeva<\/td><td>60.55<\/td><td>life science<\/td><td>26.2<\/td><\/tr><tr><td>Synopsys<\/td><td>52.31<\/td><td>semiconductor<\/td><td>50.16<\/td><\/tr><tr><td>Cadence<\/td><td>57.44<\/td><td>semiconductor<\/td><td>44.77<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\">as of 12\/16\/2022<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Characteristics_of_Industry_Vertical_Software\"><\/span>Characteristics of Industry Vertical Software<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wide_moats\"><\/span>Wide moats<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Because the barriers to entry are too high, the moat of industry software is very wide, and even most industry software companies are oligopolistically occupying the entire market, and it is not uncommon for them to monopolize the market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Dream_investment_target\"><\/span>Dream investment target<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In other words, large-scale industrial software companies are dream investment targets that investors dream of. But the premise is that it must pass the test of time. It is not easy for the very few companies that can survive. The main reason is that the market is small, and there are actually not many companies that can survive the early difficulties and years of continuous losses.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Market_valuations_are_high\"><\/span>Market valuations are high<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>No matter what kind of software, there is almost a switching cost, so the valuation of software companies will be inherently higher than that of hardware companies; as for why, please see the explanation in my previous article &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/30\/software-pe-ratio\/\">Software PE ratio is about twice that of hardware. What is the basis?<\/a>&#8220;.<\/p>\n\n\n\n<p>Industry software companies already have inherent valuation advantages, coupled with their monopoly scarcity, the valuations of such listed companies are very high, and there are few times when the stock price is cheap. It is rare that the stock price is &#8220;slightly&#8221; (please note that my wording is slightly) more friendly to the people. It usually only happens when the stock market crashes once in ten years. Even in a bear market, the stock prices of such companies are the same It is unattainable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Market_capitalization_is_lower\"><\/span>Market capitalization is lower<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Industry software Because it is software developed for niche industries or for the needs of unique customer groups, the number of customers is inherently limited, not too many. This makes it difficult to compare the total revenue of successful horizontal market software giants.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Product_is_expensive_the_right_to_hike_the_price\"><\/span>Product is expensive, the right to hike the price<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>But don&#8217;t underestimate them, because the barriers to entry are too high; almost all of them are monopoly manufacturers with oligopoly or monopoly in the market, so the unit price of their products is very amazing, because customers have no choice, and it is impossible to have alternatives. In short, they all have the right to raise prices unilaterally.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"158\" height=\"85\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2022\/12\/v-1600x1200-2.jpg\" alt=\"\" class=\"wp-image-16758\"\/><figcaption class=\"wp-element-caption\">credit: crunchbase<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_article\"><\/span>Related article<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/08\/06\/how-figma-makes-money\/\">How Figma makes money? What is the value of Figma?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/06\/14\/eda-synopsys-cadence-mentor\/\">Three EDA oligopoly vendors: Synopsys, Cadence, and Mentor Graphics<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/01\/22\/how-cadence-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does, the EDA oligopoly, Cadence make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/12\/22\/how-synopsis-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Synopsis, the EDA oligopoly, make money?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/06\/how-autodesk-make-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Autodesk make money? Why is the stock price so amazing?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/15\/how-adobe-makes-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">How Adobe makes money? irreplaceable undocumented standard<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/17\/adobe-without-competitor\/\" target=\"_blank\" rel=\"noreferrer noopener\">Adobe, a listed company with no strong competitors in its main business for a long time<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/18\/adobe-buy-figma\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why Adobe&#8217;s Figma Acquisition Caused Upheaval<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/05\/05\/vertical-software\/\">Vertical software is expensive, but worth the investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/30\/software-pe-ratio\/\">Software PE ratio is about twice that of hardware. What is the basis?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/08\/22\/salesforce-crm-cloud\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Salesforce make money? Why is it so successful?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/13\/veeva-systems\/\">Veeva, the king of industry systems in the lifescience industry<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/08\/29\/fair-isaac\/\" target=\"_blank\" rel=\"noreferrer noopener\">Fair Isaac, one of the most important listed companies in the US consumer finance industry<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/13\/there-are-indeed-monopoly\/\">There are indeed monopoly in this world<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/26\/software-underperforming-ai\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why software underperforming amid the AI craze?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/30\/software-pe-ratio\/\">Software PE ratio is about twice that of hardware. What is the basis?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Vertical software, The official name of industry software should be vertical market software, which is software developed for a niche industry or for the needs of a unique customer group. <\/p>\n","protected":false},"author":1,"featured_media":16758,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[122,693,548,485],"tags":[328,602,418,379,156,97,95,721,3,339,419,817],"class_list":["post-16753","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-software","category-duopoly","category-monopoly","category-oligopoly","tag-adbe","tag-adsk","tag-cdns","tag-crm","tag-fico","tag-goog","tag-googl","tag-meta","tag-msft","tag-orcl","tag-snps","tag-veev"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/16753","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=16753"}],"version-history":[{"count":23,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/16753\/revisions"}],"predecessor-version":[{"id":37659,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/16753\/revisions\/37659"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/16758"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=16753"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=16753"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=16753"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}