Indian SaaS ecosystem: Opportunities and challenges in post Covid-19 world

Indian SaaS companies currently employ more than 62,000 people in India, and the talent demand is expected to grow 2-3 times in the next five years. Image: Shutterstock

The Indian SaaS sector has been bustling with activity for the last few years, with horizontal SaaS vendors offering business software at one end to vertical SaaS companies bringing focused solutions for edtech, logistics, healthcare, and so on at the other. There are also fast-growing startups in the infrastructure platform space, including AI, DevOps and APIs. Today, the country is home to 1,000-plus SaaS companies, which bring in over $2.6 billion in revenue. This number is predicted to grow 25x in the next decade.

Emerging SaaS opportunities and challenges

Here are a few prominent trends to take note in the post Covid-19 world as the industry continues its onward and upward journey:

Pandemic-induced B2B digital transformation

The pandemic has revolutionised workplaces. Remote or hybrid work models will become commonplace, making online collaboration and communication tools instrumental for companies. Business success in the future will largely depend on companies' ability to recreate powerful employee experiences (EX) digitally and optimise collaboration for distributed teams. B2B SaaS vendors need to follow suit, amping up their offerings with enterprise collaboration modules. Salesforce's acquisition of Slack is a good indicator of this market direction.

Automation and business intelligence (BI) are also gaining attention as companies strive for operational efficiency and resilience. Easy-to-use workflow automation tools that allow for a shorter time to market with low-code abilities will see increased adoption. Analytics/BI tools will also steadily find their way into companies' IT priorities as senior leaders and managers realise the competitive value of actionable data.

Micro-SaaS will persist with the democratisation of app-building 

Low-code and no-code application building platforms give entrepreneurs and vendors the freedom to build on their ideas and go to market quickly without being bogged down by complex code structures, development costs, and resource dependencies. And ideas are plenty owing to the increased demand among SMEs for niche solutions and customisation options. Distribution is effective and inexpensive if done the right way. All these factors have led to a surge in micro-SaaS offerings.

Growing SaaS adoption in developing markets

While the US and Western Europe account for more than half of the global public cloud services market, end-user spending on cloud (including SaaS) is fast-growing in emerging geographies like APAC and Latin America. In India, end-user spending on SaaS was $1.78 billion in 2021, and Gartner forecasts this year's spending to touch $2.17 billion.

Establishing a stronghold in these markets can assure a longer runway for vendors down the line, but it comes with some significant caveats. Firstly, a deeper understanding of the customer persona is required; for instance, Indian businesses typically expect and need hand-holding when it comes to adopting SaaS for their operations. This necessity to provide dedicated after-sales training and implementation support, along with cost-effective technology in the first place, can drive up customer acquisition costs in developing markets. Not to mention the importance of localisation—in terms of product capabilities, ease of use, and go-to-market (GTM) strategies—to sustain.

The widening talent and knowledge gap

Indian SaaS companies currently employ more than 62,000 people in India, and the talent demand is expected to grow 2-3 times in the next five years. Staying ahead in this talent race means concentrating on retention, rather than acquisition, by building sustainable talent pipelines, conducting regular knowledge transfer/skill-sharing workshops internally, and fostering healthy workplace cultures that put people above processes.

Companies and founders open to recruiting raw talent and training them in-house with industry-ready skills will be able to access wider talent pools across Tier II and Tier III cities. Alternative options include working directly with institutions and universities to help them prepare candidates with vocational training and hands-on projects.

The data protection imperative

Data storage, security, and privacy will be key challenges for vendors as businesses and individuals become increasingly watchful of who they trust with their data. A bold declaration of data collection practices with complete transparency and accountability will become a hallmark of trustworthy brands in the eyes of privacy-conscious end users. SaaS companies with transnational presence should additionally take into consideration country-specific regulations and compliance standards for customer data handling. Gartner predicts that modern privacy laws will cover the personal information of 75 percent of the world’s population by the end of 2023.

Scaling operations globally

Most early-stage SaaS companies out of India struggle with GTM when it comes to scaling globally. A common approach that successful companies rely on when expanding to newer regions is running digital-led demand generation campaigns and eventually building local customer-facing teams. The onus will be on the leadership to hire the right talent across the geographies, who can help with creating locally rooted teams that are globally connected through shared culture and knowledge.

As these trends may indicate, there's still a lot of room for the Indian SaaS ecosystem to grow—in terms of what we can build and how we can serve customers globally. One concern though is about the industry boom turning into a bubble. Profitability doesn't get enough attention while raising money is all the rage. It’ll be interesting to see how things play out when the dust settles.

The writer is VP - Marketing & Customer Experience at Zoho Corp.

The thoughts and opinions shared here are of the author.