SaaS: The bright spot for India’s tech business amid market downturn

Software-as-a-service is projected to be valued at $50 billion in India by 2030, according to a report by Bessemer Venture Partners. The report also noted that the market has now reached a critical inflection point as venture dollars deployed in the region reached $4.8 billion in 2021.

Livemint had spoken to Indian SaaS players to understand what drives SaaS as a business, fuelling VC interest amid a slowing demand and how the sector could evolve in the coming years.

“Increase in digital adoption, need for agility in time to market strategies and transnational market opportunities are the key factors that’s driving the SaaS business in India,” Praval Singh, Vice President – Marketing and Customer Experience at Zoho Corporation said.

There has been a solid demand for SaaS witnessed irrespective of the size of business and Praval points out how it works. “For larger companies it’s the ease of using SaaS and the value they see in unified systems while for small businesses, the technology could help them start easily without a heavy capex,” he says.

India having been at a nascent stage of SaaS adoption, the potential for the industry to grow in the longer run has become enormous. As per industry estimates, India SaaS market is expected to reach $20-25 billion by 2025 from $4-7 billion in 2020.

“SaaS revenues in India are growing at an average of 20%+. At Zoho, we grew at about 77% in India last year and while the growth has slowed down a bit, we’re still quite optimistic about India being a growth driver for our business over the next few years,” Praval said while he talks of the industry’s outlook.

VC interest in Indian SaaS is another interesting aspect while looking at the sector’s growth potential especially when there’s a bit of a slump in demand largely due to the macro-economic pressures. VC funding for SaaS startups in India stood at $4.2 billion in 2021 and it was estimated to go beyond $6.5 billion this year, according to a report. 

Access to good talent, an attractive proposition where there is an opportunity to have consistent revenue growth over rapid digitisation, the resourceful nature of SaaS firms in India owing to multiple founders and peer networks that enable effective knowledge sharing and nurturing of a massive talent pool over the years by older SaaS companies, wherein many of those employees have turned founders and launched new startups are the factors Praval points out for the rising VC interest in the SaaS space.

The offerings from SaaS firms built out of India is pivotal in making India the SaaS capital of the world in the future. There are key differentiations with their global counterparts in terms of building a culture of efficiency and the product strategy.

“The software offerings of Indian SaaS firms have matured over the years and have, in several cases, been localised for regional needs across the world. For example, we offer Zoho Books in 14 editions across the world,” Praval says.

“Indian SaaS companies stand out as they are known to go to market with a near final version of their product rather than a minimal viable product, burning less money than their counterparts. Many companies build multiple products, with each product earning $5-10 million ARR and generally with lesser capital investment,” Saravana Kumar, Founder and CEO of Kovai.co said.

When asked of key technologies to keep an eye out for 2023, Saravana Kumar says that there’s a lot of scope in healthcare technology, supply chain management, delivery services and B2B because of the rising internet penetration paving the way for the easing of payment systems.