SaaS, or Software as a Service, has a global market value of $272.49 billion in 2021 and has a compound annual growth rate of 20.8%. Needless to say, it is one of the fastest-growing industries at the time. According to research, the Indian SaaS market had shown a growth rate of 170% as compared to 2020 and is rapidly growing.
In this UNICHED article, we will discuss what is SaaS, why is it expanding, the current SaaS market in India, and the predicted growth in the coming years.
Now let's get straight into it.
What is SaaS and why is the SaaS market is growing rapidly
SaaS is a cloud-based software delivery system with a subscription-based payment model. Traditionally, software was installed on the users’ local systems for which they paid a one-time fee at the time of purchase. There were a lot of challenges with the traditional method of software delivery due to which the SaaS market is a big hit. Some of those challenges include:
Investing a lot in purchasing the systems: The hardware had to be of high performance since the processing had to be done locally. With SaaS, the processing was done on remote servers which was a key factor in keeping the costs of computers low.
No access to bug fixes: Bug fixes came as software patches or updates but were quite cumbersome in terms of UX and with SaaS, the software upgrades take place in the backend.
Installing and uninstalling: The whole process of installing and removing any software from your computer was too tiring and difficult for non-technical people. It involved following tedious manuals but with SaaS, it was smooth onboarding flows.
Apart from taking care of the shortcomings of the traditional way of software delivery, the SaaS industry had also a lot of new advantages that made it a great choice. For the developers, the costs were extremely low and the time taken was quite less. Building a SaaS product was quite cheap, in terms of money and time, so as a consequence it became quite affordable for its users too. For the users, they could use the services across multiple devices and often at the same time!
Just because of these reasons (and a lot more investment opportunities), the SaaS market saw growth like no other.
Now, let’s take a look at the present situation of the Indian SaaS market.
The Indian SaaS market
According to a report by Bain and Company, as of 2021, more than 35 Indian SaaS companies have more than $20M+ ARR. More importantly, the founders of these companies are ex-employees of other companies, and currently, the Indian SaaS market employs more than 62000 individuals(Image source: bain.com).
In the same report, it is shown that the number of SaaS companies has doubled in the last five years with more than 60+ companies drawing significant late-stage funding. Due to this trend, a vast number of talented engineers, developers, and leaders are emerging. For instance, 13% of professionals are proficient in AI/ML and 26% of professionals are good with product management. This also paves the path for tremendous future growth potential. Below are some more notable statistics from the same report:
Over 26% of Indian SaaS companies have attracted significant late-phase funding.
Seven to nine Indian SaaS companies have $100M+ ARR, the number was one to two 5 years ago.
The number of unicorns has increased from 1(2018) to 13(2021).
If the above data suggest one thing, it is the fact that the Indian SaaS industry has been going strong so far. Let’s take a look at the predictions by experts on the Indian SaaS market.
Predictions for the Indian SaaS market
By 2030, it is predicted by a report that the Indian SaaS market value might reach $1T and could employ more than half a million professionals in that sector. A decade ago, when the SaaS industry set its foot in India, it was mostly catering to offshore clients. Only a few years ago, Indian businesses have understood its efficiency in enterprise business.
Now, let’s take a look at what makes the Indian SaaS market special.
Why the Indian SaaS market is booming?
There are a lot of great reasons for which India is about to see huge growth in the industry.
Lower overhead costs: Skilled professionals are available in India to run a SaaS company in huge numbers and with lower hourly rates. Furthermore, infrastructure is also available at very lower rates as compared to the west.
Untapped market: It can still be said that the SaaS marketplace in India is quite young. It has a lot of opportunities for innovators and investors alike. A glaring example of this is the increasing number of SaaS companies going public.
A lot of talent: The availability of hardworking and extremely talented Indian professionals in any industry, including SaaS, can hardly be exaggerated. The number of experts is only going to continue to increase.
Suffice to say, the Indian SaaS market is yet to see its brightest day. A lot of investors, talented professionals, and a huge untapped market set the stage for exponential growth. With unbelievably fast growth, only time will tell whether the predictions are valid. Till then, all we can(and should) do is take advantage of this opportunity.