Why SaaS will dominate the Indian IT industry in the next decade

The three Indian SaaS unicorns came as a huge and pleasant surprise to the Indian startup ecosystem in 2019. We now already have more than two dozen in 2021 alone.

India’s SaaS industry has the potential to grow revenues to as much as $75 billion by 2025 and create market capitalisation of more than $1.3 trillion, capturing around 19% of global demand for software products by then. (Pixabay)

Over the years, India has witnessed a surge of businesses embracing cloud-based models to successfully run their operations. While Software-as-a-Service (SaaS) has been around for a few decades, the Indian SaaS ecosystem has more recently evolved with an early wave of category-leading companies positioned to service larger enterprise customers. Although SaaS is already gaining tremendous momentum, the near and foreseeable future will see higher growth rates. In fact, based on a 2021 SaaS study by Chiratae-Zinnov, India's SaaS industry has the potential to grow revenues to as much as $75 billion by 2025 and create market capitalisation of more than $1.3 trillion, capturing around 19% of global demand for software products by then. This has been fueled by three key ingredients: 

1) The taste of success of building from India for the world has fueled young Indian entrepreneurs aspiring for more

2) The availability of experienced talent that has broken risk thresholds to create or join startups 

3) The pandemic that has enabled venture money, made it incredibly easier to sell from India in a remote world that has prioritized digital transformation over everything else.

Digital transformation is the new wave

The Covid-19 pandemic has driven tech-savvy companies to significantly engage in enterprise SaaS solution adoption to accelerate IT modernization and scale their businesses. The IT overhaul will enable organizations to not merely stay afloat but experience incremental growth in operations. This does not come as a surprise – self-service, workflow automation, and workforce enablement have been key in a remote world – moving even traditionally conservative Indian companies to new levels of digital transformation investments! The famous quote by Satya Nadella, CEO of Microsoft at the beginning of the pandemic – “We've seen two years' worth of digital transformation in two months” – has taken on new meaning in India – we have seen 10 years' worth of digital transformation in 10 months.

The phenomenal growth of Indian SaaS start-ups

The start-up revolution in India and its rapid strides in digital adoption have seen the demand for SaaS products scale to new heights. In fact, over the past five years, India has become the global economy's emerging SaaS powerhouse, growing from a modest SaaS ecosystem to more than 1,000 SaaS startups in 2020. According to the 2021 Shaping India's SaaS Landscape report by SaaSBoomi, India currently has around 1,000 SaaS startups, including 10 unicorns, which generate a combined $2-$3 billion in annual revenue and employ nearly 40,000 people. The number has more than doubled since the report was published, and we have seen Indian enterprise SaaS companies like Freshworks (formerly Freshdesk) successfully IPO on NASDAQ. The next 12 to 18 months look bright given the pipeline of start-ups that are attracting increasing investment from Indian and international funds and angel investors.

A young population that is willing to take risks

The Indian IT services industry blossomed in the late 90s and early 2000s on the back of the dot-com boom and the perceived Y2K demons. The huge English-speaking population, willing to work hard, savvy in all things IT, and ready to take a bold leap into a new era fueled a change in the country not seen since the Indian independence struggle. 20 years later, a young India (India is one of the youngest countries in the world with the world's largest youth population) cushioned by money and experience flowing in from previous generations from the IT services industry, is discovering global entrepreneurship. The effervescence of youth is combining with the experience of an older generation – that is a potent combination for market dominance.

A market that is ready

Everyone who is anyone is now in India – manufacturers, financial institutions, software companies, insurance, retail – they are all in India. And they need IT solutions that are the best they can buy and at the same time are tuned to the Indian psyche. That is the opportunity for Indian SaaS to grow locally and scale globally. It is still incredibly affordable to test products in India, release them locally, and then scale to a global, more lucrative market. The decades-long “Do I have to pay for software? Really?” is long gone. There are more companies in India now that are built on software – Amazon, Flipkart, Practo, 2mg, PhonePe, Firstcry – they are all businesses that are built on software. And traditional businesses are pivoting – everyone needs SaaS. This local demand does two things – one, it pushes more people towards entrepreneurship as they see opportunity around them and two, it pushes companies to push startups to attain real business outcomes. Two ingredients that are necessary to build a Silicon Valley.

An economy that is igniting

India has changed subtly and spectacularly at the same time. A Unified Payments Interface (UPI) has transformed payments in India in a way most countries would find impossible and even magical. The unique identification (Aadhar) system has brought in transparency in the economy at an incredible speed, jumping generations of license raj. Even contact tracing and vaccination certification through the Aarogya Setu app has shown the application of technology at scale and extremely rapidly – these are the hallmarks of an economy that is ready to take on hyper-growth amid global disruptions like the pandemic. The Indian economy is ready for SaaS – both to Build and to Buy – a combination that is heralding the coming of the SaaS revolution – not just in India but led by India.

Why will SaaS dominate the Indian IT industry?

Not just that – Indian SaaS is poised to lead the world. The forces that have been unleashed in India and globally and catalysed by the pandemic have created an opportunity in India the likes of which we have rarely seen. It all depends on Execution now – as Icertis employees would say – Execution - with Focus, Follow Up, Follow Through, Fast!

This article has been written by Monish Darda, Co-founder & CTO, Icertis