The path ahead for Indian SaaS companies will be difficult, but the future is very bright, writes Manav Garg, CEO of Eka Software. Illustration: Sameer Pawar There is a sleeping giant in the SaaS industry: India
Thanks to a convergence of long-standing trends and pandemic-driven conditions, the Indian software-as-a-service (SaaS) community is poised for a rapid growth period that could land it in a global leadership position—but only if these companies play their cards right.
The Indian SaaS market has been remarkably active, with roughly a thousand companies launching in recent years. With exemplars like Freshworks and Zoho leading the way, Indian SaaS companies now generate $2-3 billion in total annual revenues and represent roughly 1 percent of the global SaaS market, according to data from SaaSBOOMi/Nasscom and analysis from McKinsey.
These numbers are compelling in a vacuum, but the circumstances of the pandemic
have created unprecedented opportunity. Over the last two years, six new Indian SaaS unicorns have emerged—Postman
, HighRadius, Chargebee
. Any apprehensions on the possibility of building world-class software businesses out of India were put to rest by Freshworks’ initial public offering (IPO).
To realise this unprecedented opportunity, Indian SaaS companies must make a unified effort to emphasise their strengths and address key challenges. With that, I want to outline a few best practices—call it a mantra—for the Indian SaaS community.
Global pivot to digital go-to-market
As enterprises pivoted to remote work, they have become far more comfortable making decisions via Zoom. This shift is solving for what was historically a major barrier for most Indian SaaS firms: A lack of on-the-ground presence in key markets like the US and EMEA (Europe, the Middle East and Africa). This embrace of the digital go-to-market fundamentally levels the playing field for Indian companies in terms of access to customers and markets globally.
In the years ahead, Indian companies can drive digitally-enabled marketing and sales with tailored vectors for target customer segments. We could now see as much as 80 percent of sales functions having a remote component. That said, opportunities to meet and greet the customer in their geography periodically for enterprise-class businesses must not be ignored.
Superior base of developers to build deep tech offerings
Indian SaaS companies
must continue to centre the factors that created this opportunity in the first place. India is home to roughly 3 million software developers, the largest concentration in the world. This privileged access to key market segments uniquely positions Indian SaaS companies to understand the needs of customers and build better products that can win the developer tools market. Therefore, the road to global SaaS leadership may run through the developer tools market, which could be worth as much as $160 billion by 2025.
Customer success: Advantage in serving enterprises post-sale
While Indian SaaS companies have a strong client service foundation, they still spend far less on customer success than their global competitors, and accordingly, they are growing more slowly. Post-sales customer experience is the key to sustained revenue growth.
Research shows that net retention rates of 120 to 130 percent are critical to driving high growth. A study by the Temkin Group revealed that companies can expect to net an additional 70 to 100 percent of revenue on average within three years of investing in customer experience.
India’s track record in post-sales customer experience will be crucial to sustained revenue growth. For SaaS companies, it is not enough to get clients through the door—they must be able to secure renewals. Legacy strengths in IT services and lower cost structures mean the Indian SaaS community is well-positioned to combine robust product functionality with superior client service, unlocking greater scalability.
Additionally, investing in identifying high-risk customers will help ensure SaaS companies are taking full advantage of business they have already won.
The opportunity before the Indian SaaS community is real but realising this potential requires overcoming some key challenges:
Ramping up the talent pool
Roughly 77 percent of Indian SaaS leaders say their biggest obstacle is finding talent.
Companies must cultivate talent in product management, R&D, sales and marketing, investing in mentorship initiatives, industry education, and more inclusive recruiting strategies. And to truly keep pace with global competitors, their product managers must function as “mini-CEOs” who know their offerings
inside-out and can generate excitement and buy-in among clients and prospects.
Pursuing GTM-centric growth strategies
Indian SaaS companies with annual revenues of under $5 million are growing at a rate of 50 percent on average, compared to 150 to 200 percent for their global peers. Global SaaS leaders spend 90 percent more on customer success than Indian SaaS firms.
To fix this underinvestment in a key go-to-market (GTM) component, Indian SaaS firms must implement feature-rich analytics systems including sophisticated demand-generation engines to track return on investment (RoI) and identify high-risk customers.
Another common mistake many first-time founders make is under-investing in sales and marketing.
Having a great product is good, and while it will bring in sales up until a certain point, it is not enough to accomplish scale.
So, when’s a good time to invest in sales?
Most established founders concur that once you have bagged your first five to 10 customers on the enterprise side, that’s the right time to go and hire
Not a winner-takes-all market
There is a huge opportunity to build multiple billion-dollar companies and grow in revenue. Take the CRM market, for instance. Salesforce is a billion-dollar company in revenue that accounts for 19.8 percent market share despite being the leader in this category. It is a clear example of the opportunity for Indian SaaS businesses to create far more billion-dollar companies and continue to grow in revenue as they build their venture.
It is hard to overstate the impact of the SaaS model in today’s business and technology landscape. With principles outlined above as their mantra, Indian SaaS companies can realise the opportunity before them and create an environment of client success, talent incubation and revenue generation that is the envy of the world. And with the pandemic bringing about an increased reliance on digital tools
, they will only grow more important.
The path ahead will be difficult, but the future is very bright.
The writer is founder and CEO of Eka Software
Check out our anniversary discounts on subscriptions, upto 50% off the website price, free digital access with print. Use coupon code : ANN2022P for print and ANN2022D for digital. Click here for details.