Cloud-based solutions are gaining increasing prominence among businesses across the globe. And among these cloud solutions, one that is emerging as a must-have solution for organizations is software-as-a-service (SAAS). The SAAS market has been witnessing exponential growth not just globally but across India as well and holds so much promise for the future. The software-as-a-service industry globally was valued at around $100 billion in 2019 and is expected to touch around $400 billion according to a recent study conducted by a prominent industry body. The increase in cloud consumption, growing need for scalability, and digital technology adoption will be the key growth drivers of the SAAS market. And to throw up an Indian perspective, one cannot deny the fact that software-as-a-service is witnessing soaring popularity among Indian companies. According to Bain & Co.’s India Private Equity Report 2020, along with the Indian Private Equity and Venture Capital Association (IVCA), the Indian SaaS market is forecasted to touch more than $20 billion by 2022 from $6 billion in 2019.
Clearly, the Indian SAAS growth story is earning global attention – it is estimated that the country’s SAAS landscape comprises more than 1,000 companies – more importantly, SAAS funding in India has grown at 15% CAGR over the last 3 years. Interestingly, the Indian SAAS companies are developing and offering solutions that are not just catering to the domestic market needs, but also to the global business needs. This can be gauged by the fact that Indian SAAS firms are deriving 75% of their revenues from global sales – it only reinforces the point that these solutions are not made just for the Indian market but also for addressing the global business requirements.
The country has as many as six SAAS unicorns (companies that have a valuation of more than 1 billion). Freshworks was the first Indian SAAS company to attain the unicorn status in mid-2018, followed by Zoho – one of the SAAS pioneers in India. The year 2019 saw enterprise contract management solution provider Icertis and data management company Dhruva enter the unicorn club. HighRadius became the first enterprise to achieve unicorn status in 2020 and the fifth Indian SAAS unicorn, and in mid-2020 Postman emerged as the six Indian SAAS unicorn.
There is little doubt that the country will produce more Unicorns in the SaaS space. In the Indian context, it is a given that business-to-consumer (B2C) enterprises will continue to top the valuation charts, largely owing to the way software product enterprises function. The good thing about the Indian SAAS ecosystem is that Indian enterprises are carving out a presence across all levels. For example, Druva is serving large enterprises while Freshworks is catering to mid-sized enterprises, and then you have Zoho addressing the needs of less than mid-sized or smaller enterprises. And one thing that comes out to the fore is that the country’s SAAS ecosystem derives its strength from increased maturity, capital availability of capital, and abundant technical talent.
It is important to note that Indian SAAS enterprises started off their journey targeting the US market but over the years our SAAS companies are also catering to small and medium businesses in India and this has been possible owing to an increasing willingness among Indian enterprises to hop on the technology bandwagon as well as pay for it. It is all about having a scale in the domestic market.
There is a general line of thought that the Covid-19 will dent the current valuations of SAAS companies, which effectively means that every player will end up losing revenue and the market will witness consolidation over the long-term. There is another perspective thrown around that heavy investments made in cloud companies has led to inflated valuations. Clearly, there is a need to address this as overcapacity and overfunding in cloud companies could impact the business if it went unchecked. It is also observed that in the current Covid-19 environment enterprises with robust balance sheets and those that are free from too many cost overheads will stay well positioned in the long run.
The Indian SAAS story has oodles of promises and many more frontiers are poised to be conquered notwithstanding the Covid-19 blues.
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