The Indian software-as-a-service (SaaS) ecosystem is witnessing an increase in activity in terms of new startups emerging and establishing themselves. There’s a belief within the industry that by 2025, India will become the SaaS hub of the world. SaaS is a software distribution model in which applications are hosted by a service provider or vendor on the cloud.
According to a joint research report by Google and U.S. VC firm Accel Partners, by 2025, India is likely to become a $10 billion revenue industry with 8% share of the global SaaS market . The growth witnessed by local startups like Zoho, Freshdesk, KiSSFLOW, Chargebee and Sirion Labs in the past few years makes the India SaaS story an even more compelling one.
Traxcn, a startup intelligence and market research platform, states that since 2010 more than $1.484 billion has been poured into Indian SaaS companies. And just 22 days into 2017, seven more companies have already been funded. So what makes India, hitherto a software powerhouse, a potential global SaaS product hub?
There are multiple factors at play; the first one being that success breeds success. Thanks to local SaaS companies like Zoho and Freshdesk, who have made a mark globally, many more firms have sprung up across the country.
Additionally, with the ‘old world’ of IT going through a rapid transformation, organizations are moving a lot of applications to the cloud and hence providing a boost to Indian SaaS companies who can now deliver their products online around the world.
Unsurprisingly, experts view this as a turning point for the local SaaS industry. According to M Thiyagarajan, cofounder and fellow of M&A Connect at iSPIRT (a think tank dedicated to promoting existing Indian software product companies), the cloud has fundamentally changed the paradigm of purchasing software. “Instead of selling, SaaS providers are assisting in buying and if the experience is good it doesn’t matter anymore whether the software is built in the U.S. or India,” he explains.
Indian SaaS companies have so far been able to remotely facilitate assisted buying way better than their global counterparts. What helps this further are the years of experience Indians have in the BPO and IT services industry. Suresh Sambandam, CEO at KiSSFLOW, a workflow management company, believes that since Indians have been doing high-end B2B consulting work for years, the transition to SaaS industry is easy . “Consultants from Indian IT services companies have deep domain knowledge, a critical requirement of our field. So there’s no shortage of talent as such,” he says.
Similarly, Vijay Rayapati, Co-Founder and CEO at Minjar, a provider of cloud and big data consulting services, thinks that talent in India is not just about engineering. “Apart from world-class engineers, we also have enough skilled product managers. Product learning and insights from the U.S. are seeing quick adoption among current SaaS companies in India,” says Rayapati whose firm clocked $2.5 million in revenue last year without having a single person making sales in the U.S..
The other important factor which contributes to India becoming a SaaS hub is the low cost platform. For instance, to generate $2 million revenue in the U.S., a SaaS company may require a funding between $8 million and $10 million. However, in India, the same company may require only $4 million to generate the same revenue. Indus Khaitan from Sirion Labs, another Indian SaaS company, says that in order to be low cost, a company requires complete reengineering of how to build a product.
“Gaining cost advantage by lowering the price is short lived. We don’t do that. But there’s an inherent advantage we have in terms of quality of entrepreneurs and people in this particular field. And all this is available at probably one third the price of that in the U.S.,” he says.
Source: Forbes
