India is set to emerge as a SaaS (software-as-a-service) powerhouse with companies poised to reach $20 billion in revenue by 2022, says a new report by Bain & Company on the Indian SaaS business.
Aditya Shukla, co-author of the report and partner in Bain & Company’s Mumbai office, says several different types of Indian SaaS companies have emerged. “There are SMB-focused SaaS companies such as Zoho and Freshworks, targeting global markets with horizontal offerings. We also have vertical-specific SaaS companies, such as Locus and Innovaccer, disrupting underserved verticals like healthcare and logistics,” he explained. “There are globally competitive companies in emerging tech, such as Postman in application programming interface (API) management and Hasura that helps in building modern apps and APIs faster. And there are those with products tailored for the domestic market, such as Darwinbox, MyGate and Yellow Messenger.” Shukla said that earlier, many firms found it challenging to monetize in India due to price-sensitive customers. He pointed out that today, the domestic market is turning lucrative.
Experts believe the COVID-19 pandemic has accelerated the pace of realization in enterprises that its difficult to manage their own data centers, thus, leading to faster acceptance of SaaS and public cloud. Remote working has pushed the need for SaaS-based solutions to enable on and off-site presence for businesses without disruptions. This is evident in the fact that over 50 companies have crossed the $10 million ARR milestone, and many more are expected to follow. Arpan Sheth, senior partner in Bain & Company’s Mumbai office, pointed out that $10 million ARR is the tipping point. “These players have a customer acquisition engine. Expanding accounts from freemium to paid models, cross-selling into those accounts and geographic expansion are other business levers,” he explained.
The report highlights that Indian SaaS companies have distinct competitive advantages over their global counterparts. They need to pay about 85 per cent and 74 per cent lower salary for entry level developers and sales resources respectively, it stated.