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India becoming the cradle for tomorrow’s global SaaS giants

With the pandemic hovering over our lives for the past two years, more changes in the way we live, eat, grow and conduct business have emerged. Increasing number of businesses have moved to cloud, which has created a whole new playing field for adoption and innovation of technology. The biggest beneficiary has been the providers of Software as a Service or SaaS as we known it otherwise. This trend is estimated to go upward and SaaS will continue to play a leading role in businesses in particular and our life in general for the next couple of years too.

It is natural to be inquisitive about how did this happen. By using cloud computing as the primary service model, Indian companies are becoming hot picks for international corporations to invest in managing their critical back-end operations. Adding to the same, India’s already established advantage in offering back-end support through its IT and ITES sectors is helping companies and associates bring down overall costs of operations significantly. Amidst all the development is SaaS, which has been driving businesses, big and small, to adopt technologies intelligently and cost effectively.

Analysts reckon that the overall growth for SaaS has also been driven by its inherent cost advantage. Lower overhead costs and easily available, inexpensive and skilled workforce in India are found to be the factors. India is estimated to have over 100,000 SaaS developers as of 2021. Moreover, technical talent is abundantly available in the country at almost a third of the cost than what is available in the USA, as a reference.

So, why is India an attractive option for not just the Fortune 500 companies, but also to the aspiring entrepreneurs who are building products and services around SaaS? Apart from the technological talents that exist in abundance, India has also witnessed the growth of a multitude of Indian SaaS companies that have sprung up to provide ease-of-doing-business solutions to the micro, small and medium enterprises (MSME) segment.

In the SaaS model, the software is licensed on a subscription basis to clients and it is hosted on cloud. It is managed digitally and centrally, reducing the dependence on human resources. It helps enterprises save on capital investment and the need for setting up an entire technology team.

There are many other factors that have fuelled the growth of the SaaS sector in India.  Whilst, on the one hand, the SaaS business model helps move high capex (capital expenditure) to opex (operational expenses) from a business perspective, it also offers a more predictable and recurring revenue for software companies. Moreover, the flexibility it offers to businesses in functionality, scale, and remote productivity, has made SaaS the first choice for MSME and start-up entrepreneurs alike.

According to a report by McKinsey and SaaSBOOMi, the country’s SaaS industry is projected to generate revenues of USD 50 to 70 billion, and win four to six percent of the global SaaS market by 2030, creating as much as USD 1 trillion in value. The Bain & Company has predicted that India would see two to three SaaS companies with a revenue of USD 1 billion each in the next few years.

Let’s examine this context further. Recent statistics show that currently India has around 1,000 SaaS start -ups, that generate a combined revenue of 2 to 3 billion US dollars annually, employing nearly 40,000 people. The answer lies in the various competitive advantages that the country offers when it comes to launching new B2B tech start-ups and serving clients globally.

  1. Scale – Between the years of 2010 to 2019, the Indian IT industry witnessed the formation of 7,864 Indian SaaS companies, of which 1,373 were funded with USD 2.35 billion. This is testimony to the commitment and trust investors have placed in the Indian SaaS space.
  2. Talent – It has been proven over the years that India has enough IT talent and the highest potential talent for inside sales engines.
  3. Cost advantage – Inside sales model cost is less than half for firms with operations set up in India as against those in the USA.
  4. Mobile-first – As SaaS starts looking at mobile to develop and customise its applications, SaaS companies in India will have an edge, as India is already on the path to being a mobile-first country. For SaaS start-ups that serve businesses, mobile seems like an obvious path.
  5. Internet connectivity – India is gradually achieving penetration of internet connectivity, coupled with the rapid spread of mobile broadband across the country. It will further support and augment the popularity of cloud-based solutions like SaaS.

The coming couple of years will be worth watching whether India will continue to surge ahead as a great market for SaaS companies to set-up a base and also to compete with their global peers. One thing looks certain that India will lead the way as a SaaS solution provider. But, can the country emerge also as a leading SaaS consumption market?


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