Indian SaaS companies set to rule the global platform

Editors Note: One of the ways in which you can increase blog traffic is publishing well researched long form articles. This blog article is a small example of such a content.

Editors Note: One of the ways in which you can increase blog traffic is publishing well researched long form articles. This blog article is a small example of such a content.

 

The projected market share for Indian SaaS companies is double their global market share by 8% – 9%. They are touted to reach a compounded annual growth rate (CAGR) of about 30% by 2025.

SaaS has revolutionized the software industry and the numerous businesses it supports in the past decade. With rapid digitization and cloud computing, there has been a paradigm shift, and SaaS has surfaced as the preferred software delivery model. SaaS’s subscription-based and on-demand business model opens the door for startups and enhances the prospect of wealth creation, especially in a growing market like India.  

According to Noshir Kaka, Senior Partner at McKinsey & Company, “This (SaaS) is one of the biggest opportunities in front of India in the next decade. What the tech services industry has done for the country in terms of jobs, exports, value creation, and entrepreneurship, we believe that the SaaS opportunity will actually rival that.”

 

India’s distinct SaaS story 

 

According to founding partner SaaSBOOMi & founder and CEO of Eka Software Solutions, Manav Garg, “For some context, we have about 1,000-plus SaaS companies in India today. We have more than 15 unicorns as of now, and new ones are cropping up every single month. In total, all those SaaS companies are bringing in about $2.6 billion in revenue today, a figure that is expected to grow to about $50 billion to $70 billion by 2030. You’re looking at 25X growth in the next nine to ten years.”

India’s Unique Structural Position & Huge Talent Pool

India is positioned for exponential growth in the SaaS area due to its unique place in the global market scene, where the complete preliminary go-to-market can happen locally within India. Moreover, apart from the SaaS hubs in Chennai and Bangalore, India’s enormous SaaS talent pool ensures that software experts and engineers from smaller cities are capable of creating SaaS-enabled software systems. Additionally, India is equipped with the second largest developers pool (3 Million) for devising infrastructure tools, which embodies approximately 40% of the total SaaS market. Since SaaS is a secular and democratic trend, it can be used in organizations like horizontal market organizations (Finance, Sales, and HR) and even transition to vertical markets organizations (Healthcare). With its vast knowledge and experience in the global IT industry, including vertical and domain proficiency India’s SaaS future looks robust.

Talking about the significance of B2B domain capability in India; Its role in driving Indian SaaS growth, and the structural advantage it has over other countries, Sid Tandon (Partner in McKinsey’s Silicon Valley office) elaborates that

“the level of understanding that exists in the Indian services industry about enterprises’ processes and workflows is just phenomenal, and I think that is a huge advantage. The go-to-market cost advantage is another fundamental point. After all, the biggest constraining factor for a SaaS company is how rapidly you can drive growth, and a lot of that essentially gets down to how many resources, in terms of dollars and people, you need to deploy to drive growth. We are seeing enterprise models where 70 to 80 percent of the sales and marketing workforce is working out of India. Given the broader availability of talent and lower acquisition cost for that talent compared to the North American market, you can drive a lot higher growth with the same investment, which is all that counts in SaaS in terms of value creation at this stage.”

Greater investor interest

The panorama of the Indian SaaS industry has witnessed exponential growth over the last couple of years. This upward trend looks promising with amplified investor attention and increasing scalability of businesses. By 2021, over 35 SaaS Indian organizations accumulated a revenue of $20M over and above their ARR. This accounted for a 7-fold increase in their income in just five years. Giving credence to the SaaS growth prediction is the fact that more than eight SaaS companies reached the $100 M mark in their ARR compared to only about two companies in the past five years. Investment in SaaS reached a whopping $4.5 B mark in 2021 – an increment of 170% compared to 2020. SaaS accounts for 8% of India’s entire venture capital and private equity deals. 

Significant Value Creators

Four significant value creators induce the Indian SaaS revolution: formation of talent pools, greater capital efficiency, rise in exits, and cascading ramifications.

  • Formation of Talent Pools – Indian SaaS businesses are involved in creating SaaS empowered workforce and employs more than 60,000 individuals with SaaS and aligned skills.
  • Greater Capital Efficiency – The SaaS companies in India have enviable funding to ARR ratio, with a few even outpacing International competitors, including the USA.
  • Cascading ramification – Over 250 new SaaS Indian companies have been instituted by ex-SaaS Indian firms who leverage their experience and pass it on to over 5000 individuals they employ 

 

Trends of Indian SaaS companies

 

Partner & leader in Bain & Company’s Global Vector Solutions Group, Arpan Sheth notes, “While the overall growth in funding has been driven by an increase in deal volume across stages, there has been notable growth in the volume of deals larger than $50 million, as investors give a clear vote of confidence in the potential of Indian SaaS companies to achieve substantial future growth,” 

Major segments for SaaS Funding

SaaS funding in India is diversified among three major segments, with horizontal business software factoring for over 50% of the overall SaaS investment. Horizontal business software has witnessed exponential growth by grabbing bigger size of deals. Horizontal infrastructure and vertical business software constitute the other 50%, with vertical business software exhibiting 100% growth success in terms of quality of deals. Both mature and old SaaS firms in the horizontal business software sub-segment have succeeded in events tech, human resource tech, enterprise collaboration, and conversational AI. The flat infrastructure software growth trend in SaaS firms is for DevOps, cyber security, data management, Dev tools, and observability. Healthcare tech, e-commerce enablement, edtech, and logistics tech in the vertical business software sub-segment of Indian SaaS firms has achieved exponential growth.

Diverse investor base

An increasingly disparate investor base has been stimulated mainly by the constant growth in SaaS capital in India. This diversity is evident both in the category of investors and the stage at which they invest. Sovereign wealth funds and corporate venture capitals are examples of the new investors’ category. Later stage investors are breaking traditions and investing funds in the early stages, while conventional investors are making path-breaking investments. 

With the SaaS Indian scene becoming more seasoned and mature, investors are moving beyond their traditional roles of being capital providers. Increasingly, investors are becoming involved in different aspects of the firms like recruitment, operations, product evolutions, and more.

Empowered by top-notch founders and robust backing from investors, the projected SaaS revenue for 2025 is $30 billion, which comprises approximately 9% of the international SaaS market. 

Winning characteristics in SaaS firms

Indian SaaS landscape has shown significant growth, with SaaS firms demonstrating winning traits. Traits like:

 – the right approach to building a product that fits the market demand

 – supporting it with actionable GMT

– pricing competitively and focusing on customer satisfaction

– enabling a culture of innovation and teamwork

– being a visionary to understand the market needs and demands 

– future of the product or service and openness to adopting relevant strategies.

Some of the other elements for a SaaS India success story are the focus on certain vital business areas like:

  1. Packaging and pricing across the different customer sections while keeping a driving profit
  2. Establishing efficient sales channels across various customer segments and geographies; Scaling profit and growth through continual adjacency expansion by constantly exploring new business areas.
A collective endeavor of all stakeholders

India’s SaaS ecosystem is flourishing with global and domestic investors, SaaS enablers, incubators, and accelerators like Upekkha, Tlabs, 500 Startups, and many more. Some of the top SaaS-enabled companies in India, like IBSFintech, Keka, and High Radius, have displayed winning traits through their evolution. From focusing on creating a solid product line to researching the geography and market for the right customer and product fit before expanding to factoring in price meter for more competitive pricing while driving profit. Involving channel partners to drive sales and execution in specific geographies is also key to success. 

The future of Indian SaaS in the global scenario is bright but requires certain ingenuities from various stakeholders to further the robust growth. Facilitating a system of governance minus the restrictive regulations and encouraging incubation and training of talents is imperative. Founders take up the role of enablers by sharing experience and information and aiding in networking. Investors must be more involved in mentorship, product development, strategy formulation, sales, and networking apart from funding. Corporates can fuel the SaaS engine in India by assisting in funding, training, and mentoring. Universities, too, have a significant role to play in developing and training the SaaS talent pool by incorporating relevant vocational training programs.

The demand and supply gap in SaaS organizations can be mitigated by investing time and money to enhance the talent and evolving workplaces to provide an atmosphere of learning through apprentice or internship opportunities. Seasoned SaaS personnel also require training from time to time to upgrade their skill according to the changing market needs. Therefore collective yet targeted intervention from various stakeholders, especially the Universities, corporates, and Government, can guarantee Indian SaaS a formidable place on the global map. With digitization seeping into all aspects of life SaaS industry in India is amplifying its efficiency and responding to the increasing demand in the worldwide market. In the context of the pandemic, it is crucial to drive investment in SaaS to bolster Indian startups, and IT sectors, creating revenue and employment. Providing financial inducements to Indian SaaS unicorns will facilitate further growth. Manav Garg reiterates, “We expect Indian SaaS to grow to about seven percent of the global market.”

Other articles of interest:

Life of business post Covid

A life less Ordinary

One thought on “Indian SaaS companies set to rule the global platform

  • August 15, 2022 at 2:02 pm
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    Nice post. I learn something totally new and challenging on sites I stumbleupon every day. Its always interesting to read articles from other authors and practice a little something from other web sites.

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