Indian SaaS segment set for quantum leap

A report by Google reveals that the country’s Software as a Service (SaaS) sector is expected to touch $50 billion in 10 years from the present $3 billion

Here is good news for all those Indian software companies who are working in the area of Software as a Service (SaaS). A recent study by Google and Accel Partners has revealed that the country’s SaaS segment whose size is currently pegged at $3 billion is expected to reach a whopping $50 billion mark in ten years time or by the year 2025.

SaaS is a software distribution model in which applications are hosted by a service provider (vendor) and made available to customers over the internet and licensed on a subscription basis. As on-demand software, customers avail the service using a web browser for business applications spanning diverse verticals. The service helps enterprises to reduce IT support costs by outsourcing its software and hardware maintenance to its vendors.

Interestingly, small and medium enterprises (SMEs) from the US, Europe and other parts of the world which are increasingly adopting SaaS services due to their affordability are projected to drive the phenomenal growth of the sector in India.

In a market with demand fulfillment largely led by US, India’s competitive advantages will help Indian SaaS companies see strong growth and create $50 billion in value over the next 10 years, the report said, The report is based on interviews with Indian SaaS firms across segments, investors, system integrators and institutes during October-December 2015. It also includes data from Google India primary research for SME consumers and its search trends data since 2013.

Globally, SaaS sector is projected to reach $132 billion in total revenues by the year 2020 from $68 billion in 2015, contributing over 75 per cent to the total public cloud revenues worldwide. And SMEs will account for nearly $76 billion of the total global SaaS revenues.

Indian SaaS companies are at an advantage position to tap this huge opportunity, scale up quickly and turn profitable given the country’s capabilities in software engineering, product management and mobile technologies.

Furthermore, Indian startups in SaaS space will be able to corner nearly eight per cent of $75 billion worth of opportunity to be provided by the SMEs by developing innovative solutions useful for their use globally. The report estimated that the demand for SaaS products from the US SMEs will double in the coming years while there will be visible increase in demand from the small and medium businesses in Europe.

"Cloud computing is one of the top technology investment trends of this decade with venture funding for purpose-built SaaS solution exceeding $18 billion in the last four years. Indian startups have an edge, as mobility is also becoming a key requirement by SMEs for SaaS," said Rajan Anandan, VP and Managing Director, Google Southeast Asia and India. Indian startups are already building world class solutions for the mobile first users, this strength combined with easy access to global customer base online will help India become a very strong player in the global SaaS industry, he added.

India is home to over small 500 SaaS firms which generated combined revenue of $600 million last calendar year. These companies are expected to clock $2.5 billion in total revenues by 2020 and $10 billion by 2025, growing at 30-35 percent annually.

“With smart entrepreneurs, local talent, favourable unit economics and a vibrant venture capital community in this space, we anticipate many billion-dollar firms in this segment in the next decade,” Shekhar Kirani, partner, Accel India.