The Coming Wave of Software Commoditization

If you look back at the history of software, it often follows the same rhythm. Something new appears, it feels revolutionary, competitors rush in, everyone copies the same best features, and before long the product that once felt magical is just another tool on the shelf. We’ve seen it happen with databases, with video conferencing, with project management, even with CRM systems. In the beginning they were all distinct, expensive, and considered strategic advantages. Today they are largely indistinguishable, easy to swap, and often available for free or bundled as part of bigger suites.

That same feeling is everywhere in 2025. The daily tools we rely on—CRMs, project management boards, note-taking apps—are increasingly interchangeable. I can use Jira, Notion, Coda, or Monday, and while the logos are different, the core experience is the same. You assign a task, you leave a comment, you look at a dashboard. Advanced features like AI summaries or workflow automation, which once would have been premium, are now just baseline expectations. Switching costs are lower than ever because these apps even help you leave. They make importing and exporting data seamless. Portability, which should be a benefit for the user, is also an accelerant of commoditization. If all I need to do is click “export” and “import” to move, loyalty becomes a very weak tie.

This is the trap of horizontal software. Build something broad that appeals to everyone, and eventually it becomes a commodity. The more successful you are, the faster others race to close the feature gap. Before long, you are fighting not on product differentiation but on price, ecosystem lock-in, or bundling. That is why so many horizontal products are now just add-ons inside bigger platforms. The features still matter, but they are no longer the reason customers stay.

Vertical SaaS, on the other hand, plays by different rules. Instead of being broad, it goes deep. It focuses on one industry or profession and solves problems generic tools never quite get right. Lawyers don’t want a project management tool built for everyone; they want one that understands case timelines, evidence handling, and client confidentiality. Accountants don’t want just another to-do list; they want something that maps directly to audit cycles, tax filings, and reconciliation workflows. Biotech researchers need lab management tools that know how experiments are logged and regulated, not just a generic note-taking app.

That depth is hard to replicate. A big horizontal player like Microsoft or Atlassian could theoretically decide to build for lawyers or accountants, but the opportunity cost is high. They would have to learn the industry deeply, invest in specialized workflows, and maintain them at the same pace as their broader products. For most large players, it’s simply not worth it. That leaves the space open for focused companies to compete and thrive. Market caps might be smaller than in horizontal SaaS, but the differentiation is stronger. These companies survive commoditization because they are not just tools, they are embedded workflows.

In the past, one of the strongest moats against commoditization was proprietary data. If you had unique datasets—medical records, transaction logs, case histories—you had an advantage. Competitors couldn’t copy it easily, and the data itself became a lock-in mechanism. But even this moat is showing cracks. With the rise of AI, raw data is no longer scarce. Models can synthesize insights from public and unstructured sources. Metadata that once required armies of humans to create can now be generated automatically. The differentiator will not be having the data, but knowing how to make it useful. A pile of proprietary records won’t win on its own; presenting that data in ways that drive decisions, streamline workflows, or reduce risk is where the real edge lies. Context and usability will matter more than possession.

So where does value migrate when commoditization spreads? It moves away from features and raw data, and toward depth, context, and usability. The future advantage lies in vertical workflows that mirror the real pains of an industry, in AI-native experiences that reimagine rather than bolt-on intelligence, in ecosystems where switching means more than just moving files, and in transforming raw data into insights that people can act on instantly.

Commoditization is not something you can stop. It is the natural outcome of maturity in software. What feels cutting-edge today will feel like table stakes tomorrow. The winners will be those who understand this cycle and deliberately choose to go deeper rather than wider, to specialize rather than generalize, to focus on making data useful rather than simply collecting it. Vertical SaaS will survive and thrive because it resists the flattening effect. It doesn’t try to be everything for everyone; it tries to be indispensable for the few who need it most. In that focus lies resilience, and in that resilience lies the future of software differentiation.