In one of my earlier newsletter, I made the case for why vertical AI is gaining serious traction. The TLDR: specialized software for specific industries creates better products, stronger pricing power, and more defensible businesses than horizontal tools. AI isn’t just making Vertical SaaS better. It’s completely redefining what’s possible. We’re talking about a fundamental shift where vertical AI models, purpose-built for specific industries, are turning existing software apps into intelligent operating systems that can think, decide, and act like industry experts.
The old vertical SaaS model was simple: digitize manual workflows and charge per user. The new model? Build intelligent operating systems that run entire industries. Here’s how AI is creating a new category I’m calling “Intelligent Vertical Operating Systems” and why this might be the biggest opportunity in enterprise software over the next decade.
Traditional vertical SaaS digitized what humans were already doing. You had paper schedules, now you have digital schedules. You tracked contracts in filing cabinets, now you track them in databases. But AI-powered platforms don’t just track — they think, decide, and act.
This is the shift from workflow automation to decision automation. The software becomes your AI Teammate, not just your digital filing cabinet.
Here’s a truth that most SaaS companies ignore: your users hate your interface. They don’t want to learn your complex dashboard or navigate through seven different screens to file an insurance claim. They want to say “file this claim” and have it happen automatically.
AI agents are replacing traditional interfaces entirely. Instead of clicking through forms, users have conversations. Instead of training people on software, the software adapts to how people naturally communicate.
A medical assistant can now say “schedule Mrs. Johnson for a follow-up next Tuesday and send her the prep instructions.” AI handles everything from checking availability to sending automated reminders.
This dramatically reduces training requirements and expands who can use industry-specific software. Suddenly, tools that used to require specialists can be used by anyone in the organization.
The most successful AI-powered vertical SaaS won’t have traditional software interfaces at all. The software fades into the background and just gets things done. The interface revolution is here—and it’s conversational.
The traditional vertical SaaS model was limiting: charge per user per month and hope they stick around. AI is unlocking entirely new revenue streams, turning software from an app into an engine of outcomes, intelligence, and scale.
The four-stage evolution of vertical SaaS:
Each evolution compounds defensibility and revenue. The winners won’t just sell software — they’ll own workflows, financial rails, AI execution, and the most valuable data in their industry.
We’re still in the early innings of this transformation. Here’s what I see happening over the next few years:
AI is turning vertical SaaS companies into intelligent operating systems for entire industries. AI is creating the biggest disruption in vertical SaaS since the cloud days. Companies that get this right won’t just build better software — they’ll become the intelligent infrastructure that entire industries rely on. For example:
The winners will own entire industry workflows, not just pieces of them.
If you’re building in this space, here’s what matters:
Horizontal software had its moment. The next wave of billion-dollar companies will be hyper-focused on specific industries. They’ll combine deep domain expertise with AI-first thinking to create intelligent operating systems that industries can’t live without.
The opportunities are hiding in every boring, complex, highly regulated industry you can think of. Waste management, insurance brokerage, veterinary clinics, accounting firms — they’re all ripe for AI transformation.
