Back in January we published our take on where vertical software was headed this year. Predictions are easy to write in January. They are much harder to look at again in August after several quarters of results.
Summary
So that is what we are doing here. The first half of 2026 is closed, the second quarter numbers are in, and there is now enough evidence to grade the work instead of guessing at it. Some of what we called has moved faster than we expected. One item we were confident about is still stuck in the demo phase. And one trend that seemed inevitable six months ago quietly slid down the priority list.
If you build, sell, or buy industry specific software, the midyear picture matters more than the January one. Budgets are being reset right now for the fourth quarter and for next year. Here is what the first half actually proved.
We said vertical vendors would become the acquirers rather than the acquired. That call was right, and it was conservative.
Vertical software accounted for roughly 54% of second quarter software deal activity this year, up from about 46% in the same quarter last year, according to a quarterly transaction tracker that follows the software market. Total volume held up too, with 698 deals announced in the quarter, a rise of close to 10% y/y. When a category crosses half of all deal activity, it stops being a segment and becomes the default.
Vertical software crossed the halfway mark of software deal activity in the second quarter of 2026.
What is more interesting is what buyers are paying for. Multiples came down across the board, but the spread between sub segments widened.
Here is roughly where one vertical software deal report puts them:
That spread is the whole story. Buyers are not paying a premium for the word vertical. They are paying for regulatory complexity, proprietary workflow data, and a system of record that is genuinely difficult to rip out. Anything less than that is priced like ordinary software.
Two other forces are feeding this:
For a platform serving a single industry, that combination is an opportunity. Your customers want fewer vendors. Your adjacent competitors are cheaper than they were a year ago. A midyear technology deal review makes the same point from the seller's side, noting that acquisition has become the primary exit path while public listings stay selective.
This is also the practical case for adding capability through partnership rather than acquisition. If your industry needs hiring and onboarding but you have no interest in building or buying an HR product, embedding a white label applicant tracking system closes the gap in a quarter instead of a fiscal year. We wrote about how those partnerships actually generate revenue if you want the arithmetic.
We said embedded finance and embedded services had moved from experiment to expectation. The first half data suggests we understated it.
Look at what the public filings show. According to a study of filings across the category:
These are companies that started as software businesses and became financial services businesses by revenue mix.
When the payments layer earns five times what the software layer earns, the subscription is the customer acquisition channel.
The operators agree. In a first quarter benchmarking study of vertical platforms, roughly three quarters of respondents described embedded payments as very important or a critical revenue driver. This is no longer a strategy debate. It is an execution and attach rate problem.
And most of it is still unclaimed:
The sequence that keeps working is the same one we described in January, and the order matters because each step produces the data the next step requires:
That ordering is exactly why a horizontal platform cannot run the same play at the same depth. It does not own the operational data that step two requires.
Here is the part that gets missed in HR and workforce software. Payroll and hiring sit on the same side of that data flywheel. If your platform already knows who was hired, when they started, what they are paid, and whether they stayed, you are holding the inputs for financial products, workforce analytics, and compliance monitoring at the same time. That is why we treat employee onboarding as infrastructure rather than a feature.
This is the one where the market talked much bigger than it shipped.
We predicted a widening split between AI enabled products and genuinely AI native architecture. That split is real, but the honest first half finding is that very few companies are on the native side of it yet. In a March survey of 650 enterprise technology leaders, 78 percent had at least one agent pilot running while only 14 percent had scaled an agent to organization wide operational use.
The gap between running a pilot and running production is the defining operational problem of this year.
You have probably seen the claim that 88% of agent pilots never reach production. Treat that number carefully. One implementation guide tried to trace it to a primary source and could not, and reported production rates across other surveys this year range from the low teens to above 50% depending on who was asked and what counted as production. The direction is consistent even when the precision is not. Pilots are cheap and plentiful. Production is neither.
What is failing is rarely the model. It is scoping, evaluation, data access, and ownership.
The deployments that survive tend to share four things:
The good news for industry specific platforms is substantial.
A practitioner guide to vertical agents reports two findings worth putting in front of a product team
The explanation is unglamorous. Generic agents handle the roughly 60% of a workflow that looks like every other workflow, then break the moment they touch something regulated, integrated, or financially material. Meanwhile a review of agent deployment patterns notes analyst expectations that around 40% of enterprise applications will include task specific agents by the end of this year, up from under 5% last year.
For recruiting and onboarding, the narrow wins are obvious and unglamorous:
That is also the argument for building on top of a documented API rather than a black box, which is why we keep our developer documentation public.
In January we described the shift away from seat based pricing as a trend. Six months later it looks more like a stampede.
The first half numbers:
Twelve months of movement in software pricing models. The destination is contested. The direction is not.
The most revealing data point of the first half came from an April survey of 300 software chief executives, which produced two findings that sit awkwardly together:
Read those together and you have the real state of pricing in 2026. Almost everyone believes the seat is finished. Almost nobody has found a replacement that survives contact with a procurement team. Hybrid is not a philosophy, it is a landing zone, and analyst forecasts on enterprise software spending suggest the transition runs well past this decade's midpoint before it settles.
There is a hard requirement buried in this.
Outcome pricing only works when all three of the following are true:
If you cannot satisfy all three, usage based billing is the honest answer and outcome language is marketing. In hiring technology the defensible units are hires completed, placements filled, onboarding packets finished, and credentials verified. Logins are not a unit of value. They never really were.
We said the fastest growth would come from industries still running on spreadsheets, shared drives, and clipboards.
That held, and the structural gap behind it is still remarkable:
The largest workforce in the world has historically received the smallest share of software investment. That is the arbitrage. Growth alone is not the lesson.
Adoption is where these deployments live or die, and research on frontline technology adoption points at two specific failure points:
That is a design constraint with teeth. If a new hire in construction, home health, or food service cannot finish onboarding from a personal phone, without a corporate email address and without downloading anything, the workflow does not get adopted no matter how good the back end is. We built construction focused hiring and onboarding around that constraint rather than around the org chart.
Three entries on our January list deserve revisiting.
Sustainability and ESG in procurement has not accelerated the way we suggested it would
It has not disappeared from enterprise and public sector questionnaires, but in the first half it was crowded out by AI governance, model transparency, and data residency questions. Buyers are still asking about compute and energy, just further down the document and with less weight attached. We were early on that one, and possibly early by more than a year.
Customer support as the ultimate differentiator held up, but the definition shifted underneath it
In last year's edition and again in January we framed support as domain fluent humans plus automation. What the first half showed is that the differentiator is now process consulting. Customers deploying agents inside regulated workflows do not need help configuring software. They need help deciding which steps a machine should own, which steps a person must sign off on, and what the audit trail has to prove. That is a materially harder service to staff, and it is closer to what we describe in partner experience than to a traditional help desk.
Trust and security as core product is simply on track
It is now table stakes rather than a differentiator. Encryption, zero trust identity, and continuous audit trails get you into the evaluation. They no longer win it. Our own approach is documented on our security page for anyone comparing notes.
Four things we expect between now and January, offered with the same willingness to be graded later.
Vertical software spent the first half of 2026 proving the thesis rather than debating it:
The gap between the vendors who will own their industries and the vendors who will get consolidated into someone else's platform comes down to the same three things it did in January: depth in one industry, workflows customers cannot easily unplug, and honesty about what your AI actually does in production. The challenges we mapped earlier have not changed. The clock has just moved faster than usual.
If you are working through where hiring and onboarding fit into your platform roadmap, that is the conversation we have every day, and there is more background on how ATS integration pays off for vertical platforms.
HiringThing is a modern recruiting and employee onboarding platform as a service that creates seamless talent experiences. Our white label solutions and open API enable HR technology businesses to offer hiring and onboarding to their clients. Approachable and adaptable, the platform empowers anyone, anywhere to build their dream team.