"As hype around generative AI continues to rattle the software sector, more specialized software companies may be among the most resilient players and the most underappreciated. RBC Capital Markets wrote on Wednesday that vertical software - tools specifically designed for industries such as healthcare, insurance, and industrial design - could weather AI disruption in the near term and benefit from it in the long run."
"Vertical software often supports critical functions and is typically seen as "need-to-have," not just "nice-to-have," the report explained. With high customer retention, it could take years for these companies to be threatened by AI startups, even in a best-case scenario, the analysts argued. One such company, Clearwater Analytics, boasts gross revenue retention (GRR) rates of 98% to 99%, demonstrating the loyalty of its customers to the product."
Vertical software serves specific industries such as healthcare, insurance, and industrial design and often supports critical, need-to-have functions. These vendors possess deep domain expertise, regulatory knowledge, and industry-specific workflows that are difficult to replicate. High customer retention can delay disruption by AI startups for years, as demonstrated by Clearwater Analytics’ reported gross revenue retention rates of 98% to 99%. Many industries served by vertical vendors remain early in technology modernization, reducing near-term willingness to adopt AI-driven replacements. Over the longer term, vertical software vendors could play a central role in shaping how AI is adopted within those industries.
Read at Business Insider
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