Indian software as a service (SaaS) companies are poised to reach $18-20 billion in revenue and capture 7-9% share of the global SaaS market by 2022, as they build new capabilities to drive the next wave of growth, with strong covid tailwinds driving collaboration and productivity tools and remote working pushing enterprises towards digital channels.
SaaS firms such as Zoho, Freshworks, Druva, and Icertis have already broken through the $100 million annual recurring revenue (ARR) mark, with a healthy pipeline of companies well-placed to follow over the next 12 to 18 months, according to a new report by Bain & Co.
The report defines SaaS startups as those founded domestically by Indian founders (or founders of Indian origin) with majority of their workforce in India, serving both domestic and global customers.
The Bain report said first generation founders including Zoho’s Vembu and Freshwork’s Girish Mathrubootham have played a pivotal role in this transformation as they actively engaged in building a community of budding entrepreneurs, resulting in the development of many new ventures and immense job creation.
“Indian SaaS companies have distinct competitive advantages over their global peers – they have access to a wide pool of skilled talent base including 100K+ SaaS developers, significantly lower (75-85%) personnel costs compared to developed countries for similar talent in sales and development, and flexible models like around-the-clock service with a trained service workforce from our IT and BPO industries. In addition, there is now a wide acceptance of world-class products built and managed by Indian founders across the globe,” said Aditya Shukla, partner, Bain & Company and co-author of the report.
The report also said SaaS witnessed significant funding traction in the past two years and will continue to gain investor focus. Investments in these companies have grown by 20% from $670 million in the first half of 2019 to $830 million in the first half of 2020.
In the future, Bain expects four models of Indian SaaS companies to gain further traction. These include SMB-focused SaaS companies, such as Zoho and Freshworks, targeting global markets with easy-to-use horizontal offerings, vertical-specific SaaS companies, such as Locus and Innovaccer, disrupting underserved verticals like healthcare and logistics, globally competitive companies in emerging tech such as Postman and business-to-business (B2B) tech products tailored for the domestic Indian market, such as Darwinbox and MyGate.
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