Indian SaaS industry is gearing up to move onto global platforms
With digital transformation boosting enterprise tech intensity, Indian software-as-a-service players have gained immensely
India could well be on the cusp of unlocking a $1 trillion opportunity.
The global SaaS market is expected to cross $500 billion in revenues by 2025, growing at 18-20 per cent a year, and to reach $1.3 trillion by 2030. But the question is, why is the Indian SaaS …
Over the last one year, Indian SaaS companies leveraged Covid tailwinds and in 2020, $1.5 billion was invested in SaaS companies, representing a 4x jump over the last two years. The sector also minted six new unicorns including Postman, Zenoti, Innovacer, Highradius, Chargebee and Browserstack.
Girish Mathrubootham, founder and CEO, Freshworks, said that the ability of Indian product companies to sell to global enterprises from India remotely is the SaaS industry’s biggest strength. “More than half of our revenue [at Freshworks] comes from remote selling,” he added.
However, with majority SaaS companies, especially B2B SaaS startups, choosing to set up holding companies in the US or Singapore to tide over India’s tight regulatory environment, value creation largely occurs outside India even though job creation happens here.
the enormous growth potential that remains, and describe a few areas we are seeking to capitalize on for client portfolios.
The flexibility and agility provided by SaaS solutions is also expanding the total addressable market (TAM) for software vendors, enabling them to target new customers and end-markets.
From an investment perspective, SaaS vendors who have reached scale operate a highly attractive business model characterized by steady recurring revenue streams, low marginal costs, and high incremental margins (operating margins of 30-40% are not uncommon).
The days of downloading software to your desktop or a local server now seem like a distant memory. Today, software is increasingly hosted in a remote datacenter (aka the “cloud”) and accessed on the Internet via a web browser or mobile app.
Instead of the customer investing in servers and networking gear, the hardware running the software resides in a remote datacenter managed by the SaaS provider. The software application is then delivered “as-a-service” to the end-user in exchange for a monthly or annual subscription fee.
This new cloud-based SaaS world is a win-win. Customers win by always having access to the most up-to-date software, increased security, and a lower total cost of ownership (by virtue of outsourcing hosting and maintenance). For vendors, SaaS improves the consistency and visibility of revenues while simultaneously enabling them to generate more revenue over the life of a customer.
Small businesses who historically couldn’t afford the relatively high up-front costs associated with building data centers and buying software licenses can now subscribe to a wide variety of SaaS applications online without any up-front investment. These purpose-built, easy-to-use SaaS apps are increasingly replacing heavily manual and/or labor-intensive processes that historically relied on emails and spreadsheets. As a result, software is experiencing a ‘Cambrian explosion’ that is dramatically increasing the breadth and diversity of vendors and applications.
Our investment teams will continue to monitor the entire enterprise software space for emerging opportunities and rising risks