Application software consists of horizontal and vertical systems. A horizontal system is a system such as an inventory or payroll application that can be tailored for use in different types of organizations. Shelly & Rosenblatt (2011) on the other hand says that a vertical system is designed to meet the exceptional requirements of a definite business or industry such as a web based retailer, architectural design or a supermarket chain.
According to Shengbing (2005), horizontal systems are widely used across the functional divisions of organizations. They are general purpose programs that address the needs of many people such as word processing, working with numbers and keeping track of information. As a result they are not as expensive as vertical systems. Vertical systems are designed for a specific line of business to meet the needs of a particular market sector. Shengbing (2005) says that since vertical systems are designed for professional and business use they are more expensive than horizontal systems. Research shows that some vertical applications cost $10,000 or more. The high price is as a result of the small size of most vertical markets.
Due to their limited market, vertical systems are relatively expensive because they are designed to service the needs of that segment. For example a banking system used for controlling customer accounts would be useless in a retail outlet, a hotel or basically anywhere else (O'Connor, 1997). When compared to vertical systems, horizontal systems are more flexible and can be applied largely. O'Connor (1997) says that a word processor could be used for writing reports in a bank and typing menus in a hotel. Because of their wider potential market, horizontal systems are relatively cheap and they are designed to cater for as wide market as possible. Horizontal systems may not have all the functionalities an individual needs but may have hundreds of superfluous features.