NEW DELHI: Software as a service (SaaS) product companies in India are expected to generate a combined annual revenue of $10 billion (Rs 68,000 crore) in 10 years as they tap small and medium enterprises in America and Europe with their mobile-first solutions.
Currently, there are around 500 SaaS companies, with a total revenue of $600 million (about Rs 4,000 crore). According to a joint study by internet giant Google and venture capital firm Accel Partners, the value of SaaS companies coming out of India will grow from around $3 bn today to $50 bn by 2025, about eight per cent of the overall global opportunity.
A majority of today’s Indian SaaS companies have a yearly revenue of $1-2 mn on average. However, some large ones such as Freshdesk, Capillary Technologies, CRMNext, Zoho, BrowserStack, Wingify and Manthan Systems are competing with global leaders such as Salesforce.
“We are seeing the developed markets and the rest of the world shifting from desktop to mobile. This gives Indian SaaS companies an advantage, as they are building products for the mobile-first market that is India,” said Rajan Anandan, managing director of Southeast Asia and India at Google.
The study estimates the global market for SaaS will reach $132 bn by 2020, largely driven by small and medium businesses (SMBs) in the developed markets of Europe and the US. India’s SaaS sector has the potential to touch $2.5 bn in revenue by then.
While India’s appetite for SaaS products will grow, most of the short-term potential will come from global markets. Before local SMBs begin to adopt cloud solutions, the growth would be driven by large Indian companies that are looking to adopt these.
With around 36,000 product managers, 25,000 SaaS engineers and 100,000 other engineers with the skills for building SaaS products, “the talent horsepower (for the SaaS industry) is already available in India”, said Shekhar Kirani, partner at Accel India.
Comparing a typical $10-mn SaaS company from the US and India, the study found Indian ones can be four times as profitable as their US counterparts, with 40 per cent profit margin. These high margins are a driving force for growth of the SaaS market in India.
“The era of licencing software is over. Now, every single large company globally is shifting to the SaaS model. Indian companies have an advantage of building great products at lower cost,” added Kirani.
