With rapid digitisation during the COVID-19 pandemic, India’s software-as-a-service (SaaS) industry has been one of the biggest frontrunners in topping the growth charts. According to a recent report by SaaSBooMi, McKinsey and SaaS NASSCOM, the industry in India can reach a $1 trillion valuation and create about 5 lakh new jobs by 2030. About 1,000 SaaS-based companies in India, including ten unicorns, generate about $2-3 billion in total revenues and employ nearly 40,000 people.
The SaaSBooMi, McKinsey and SaaS NASSCOM study found that the global SaaS market is expected to grow at an annual rate of 18-20% with a turnover of over $ 500 billion by 2025.
Indian SaaS Industry Insights
Last year, Indian SaaS companies took advantage of the favourable digital wave due to COVID and saw $1.5 billion invested in them. The sector also added six new unicorns, including Postman, Highradius, Chargebee Zenoti, Browserstack, and Innovacer.
SaaS contributes to approximately 50% of a company’s digital value in today’s time, even though a business typically spends only about 20% of its total technology budget on SaaS. This indicates its potential for value. The ability of Indian product companies to sell to global enterprises from India remotely is the SaaS industry’s biggest strength.
Growth Drivers and Inhibitors for SaaS Start-ups and SMEs
Most SaaS companies, especially B2B SaaS start-ups, choose to hold companies in the US or Singapore to get rid of strict Indian rules. As a result of this, the sector’s employment occurs here, yet most of the value creation takes place outside India. The Reserve Bank of India’s regulations for two-factor authentication are helpful for security, but they hinder start-ups’ ease of functioning. These rules do not allow SaaS companies to regularly bill global customers, which is a key reason they look outside India for listing.
Still, industry leaders are actively working with the government and NASSCOM to address SaaS value creation in India. These regulations will take time, but the government is very open to solving this issue, as per recent public records.
The Job Market – Creating half a million jobs by 2030
While the recent report shows that India’s SaaS sector could reach $1 trillion in value over the next nine years, it also indicates that it could create half a million new jobs. There are currently over 1,000 SaaS compliant companies and over ten unicorns in the Indian market employing around 40,000 people per year.
The Indian ecosystem supports the development and growth of SaaS. This is due to the country’s strong commitment to software implementation like customer relationship management (CRM), enterprise resource planning (ERP), collaborative applications, real-world monitoring tools and a better understanding of requirements.
High profile entrepreneurs back Indian SaaS start-ups – the $85 million fund
Top Indian entrepreneurs have set up a fund with an initial budget of $85 million to support SaaS start-ups in India. ‘The Together Fund‘ is set up by Girish Mathrubootham of Freshworks Inc., Manav Garg of Eka Corporation, and Shubham Gupta, who heads the SaaS investments at VC Matrix Capital.
In addition to the fund, more than 150 innovators and developers from India and Silicon Valley, including product/engineering heads and designers, have pledged to help start-up entrepreneurs focus on building and selling SaaS businesses worldwide.
Suggested ‘Plan of Action’ for the SaaS industry and aspiring entrepreneurs
For new entrepreneurs in this space, things might get a bit smoother with support from existing players and VCs, and a possible ease up in regulations. Most SaaS start-ups face significant challenges in the earlier stages of growth regarding talent development for scalability. These challenges will be eased up with the new initiatives and support by the business community.
As new entrepreneurs explore the industry and its change-making revolutionary aspects, it is expected that they might have cohesive support from industry associations, government, corporates and investors going forward.