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Desi demand spices up the Indian SaaS story

A recent NASSCOM report said that the Indian SaaS market is estimated to hit $3.3-3.4 billion by 2022. This will be largely on the back of talent availability, a lower cost workforce and adoption of emerging technologies like AI.

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Typically, industries have been slow to adopt digital products, but that is changing as MSMEs become more tech-savvy and look to improve efficiency through software.
Indian Software as a Service (SaaS) companies are seeing demand for their products grow locally, following years of focus on the United States and European markets.

Improved cellphone connectivity, increased digital solutions for Goods and Services Tax (GST) and digital payments are supporting the growing demand.

Typically, industries have been slow to adopt digital products, but that is changing as micro, small and medium enterprises (MSMEs) become more tech-savvy and look to improve efficiency through software.


Large conglomerates, which have been serviced by global software leaders, are also becoming more open to adopting solutions of Indian SaaS companies, experts and industry watchers say.

Software industry lobby group Nasscom said in a recent report that the Indian SaaS market was growing at 36% every year, and is estimated to hit $3.3-3.4 billion by 2022.

This will be largely on the back of talent availability, a lower cost workforce and adoption of emerging technologies like artificial intelligence and machine learning to build products, it said.
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The demand for SaaS from India is not only fuelling growth at companies like Druva, Knowlarity, Icertis and Zoho — which have traditionally focused on the West — but it has also given rise to SaaS startups focused on serving the Indian market.

In fact, marquee investor Tiger Global, which has backed consumer firms such as Flipkart and Ola, made its first India investment in the sector in May.

Druva, an Indian SaaS unicorn, says it is looking to double headcount in the country to better service local customers.

“To keep pace with rising demand, we opened a new innovation centre in Pune in September 2018, and (we) are continuously expanding our sales team,” said Bakshish Dutta, country manager-India and Saarc, Druva.
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Druva, which offers cloud data protection, is seeing increased growth thanks to Indian companies starting to host their applications on the internet or Cloud.

Companies in traditional sectors such as retail, manufacturing and tourism — under pressure from newer tech-savvy companies — are now using technology solutions to remain competitive.
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Knowlarity Communications, a cloud telephony firm, said it was on track to earn Rs 100 crore from its India operations this year. Its India business had grown by 50% in the first half of the year, CEO Yatish Mehrotra said.

Ozonetel, which has always been focused on the domestic market, offers a similar service.

“In the past year, there has been an upsurge of interest with more B2B companies coming up,” said Chaitanya Chokkareddy, CIO, Ozonetel.

Indian customers, however, need more hands-on support, he said, adding that managing cash flow was the other key challenge since getting payments on time was always a problem for smaller firms.

However, another Indian firm that focuses on the call centre contact market, Helpshift, said local demand has not grown all that much.

“People don’t see much value in spending on automation of customer service given the easy availability of labour here, so we continue to remain focused on the more mature markets,” said Abinash Tripathy, founder, Helpshift.

Be that as it may, the growth in the number of B2B startups, aided by additional investments in the space, has been a key factor driving local growth for SaaS firms.

“The change you’re seeing in the last few years is SaaS companies being built to serve the Indian market. Typically, India has not been large for software and even today, I don’t think it pays a fair price for software, but this is evolving,” Naren Gupta, co-founder and MD of Nexus Venture Partners, one of the earliest Indian investors in SaaS, had told ET in a recent interview.

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The Indian SaaS market can be divided into three segments, said Suresh Sambandam, CEO of Kissflow, a SaaS platform for enterprise workflow, which has customers in India.

One, the really small enterprises with an annual revenue of less than Rs 25 crore, which have limitations in adopting technology due to it being owner-driven businesses. Two, the medium-sized companies of up to Rs 100 crore, and last, those that are bigger, which can invest in software to improve business and that is the real market in India, according to Sambandam.

“This market is a small number,” he said. “You can’t go and sell to them. It is a painful process. We do marketing and they come to us. They look at pricing, reach out to us and use our software”.

In the past few months, two Indian SaaS startups — Druva and Icertis — have raised funds at a valuation of more than $1 billion. Both these firms have large teams in Pune, and have been growing their domestic presence aggressively.

“Icertis opened two new offices in the Apac region – Singapore and Sydney – to accommodate the rapid growth we are seeing among companies throughout Asia. We don’t expect that to slow down anytime soon,” said CEO Samir Bodas. In India, the company works with brands like Airtel, Infosys and Cognizant, and local operations are driving growth within the Apac region. Small firms first made the transition from pen and paper to software with the rollout of the Goods and Services Tax (GST), said Hyther Nizam, VP-product management at Chennai-based SaaS firm Zoho.

The GST Network allowed small businesses to download free software from select vendors, including Zoho, for their GST-filing process. “India is currently the number one fastest-growing market for the company, growing at 2.5 times the average global growth. While new revenue growth is in triple digits, the contribution of India to the overall revenue has gone up two times in the last two years,” Nizam said.

However, Indian customers need a lot more hand-holding, and the evaluation cycles also tend to be much longer, he said. Other homegrown companies also feel the India growth story could increase visibility and help them target a large base of potential users. “For us, reaching out to every nook and corner and to three million taxpayers who have a turnover of Rs 1.5 crore and below would not have been easy. So, we thought it could help us get more visibility,” Nitin Patel, director, Relyon Softech, which offers Saral Accounts, a GST software, had said in a recent interview.

Zoho has also created a separate programme to work with local SME bodies as well as government-incubated startups, to further broaden its presence in that segment. Zoho said it will work to tap companies in tier-2 and tier-3 towns starting next year.
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