The SaaS Opportunity and Indian SaaS Industry

Impact of COVID-19 on Indian Urban Mobility by Sam Ghosh 19th July 2020

The SaaS Opportunity and the Indian Saas Industry by Sam Ghosh 23rd October 2020
SaaS Opportunity and Indian Advantage
Executive Summary
● As per a recent NASSCOM report, India is the birthplace of more than one thousand pure-play SaaS vendors with 150+
companies generating more than US$1 million Annual Recurring Revenue. There are already at least 6 SaaS unicorns. These
companies generated ~US$3.5 billion in revenue in FY20.
● As per the same report by NASSCOM, the addressable SaaS market by 2025 is expected to be US$400 billion. Indian players
are well positions to tap this opportunity with their lower cost structure, competency in online & inside-sales, large workforce
proficient in SaaS and mobile application development, and role models such as Zoho, Freshworks, Icertis, Druva, and
Postman.
● With the growth of work-from-home culture and rapid digitisation, the future of the SaaS sector looks bright especially for
companies offering collaboration and security services.
● Prospect of rapid digitisation of the Indian MSME sector likely to help Indian SaaS companies grow their domestic revenue
base along with the export market on which the SaaS sector is traditionally dependent.
● Although many SaaS companies may face short-term challenges due to lower IT spending by corporates. As per a Gartner
report, Global IT spending in the year 2020 is expected to be 8% lesser than in 2019. Vertical SaaS companies focused on
sectors such as Travel, Hospitality, Restaurants, etc. may face considerable challenges due to the pandemic.
● As investor focus changes from “growth at all cost” to sustainability and profitability, SaaS offers business models with a clear
path to profitability.
● As Zoho’s Sridhar Vembu suggests, the pandemic may cause the SaaS industry consolidation as SaaS businesses driven by
venture capital money may face challenges in raising further funds and their customers tighten their wallets.
SaaS Market Indian SaaS Landscape Impact of COVID-19

SaaS Market Indian SaaS Landscape Impact of COVID-19
The SaaS Opportunity and Indian Advantage
SaaS Opportunity and Indian Advantage

SaaS Opportunity and Indian Advantage SaaS Market Indian SaaS Landscape Impact of COVID-19
SaaS Opportunity and Indian Advantage : The SaaS Opportunity
● As per NASSCOM, the global SaaS addressable market size by 2025 is expected to be nearly US$400
billion. The growth from current(2019) US$100 billion is expected to be driven by new untapped markets,
new geographies, new verticals, new technologies, and new segments.
Source: NASSCOM
The SaaS Opportunity Indian Advantage SaaS Overview

SaaS Opportunity and Indian Advantage : Indian Advantage
● Low-Cost Advantage: Low-cost workforce, reusable IPs, lower infrastructure costs enable Indian SaaS
products to be priced much cheaper (~4X) than their global counterparts. A 2016 analysis by Google and
Accel shows that lower cost of Inside Sales and lower product development cost gives Indian SaaS
companies a significant cost advantage over their US competitors.
Source: Google + Accel

SaaS Opportunity and Indian Advantage : Indian Advantage..
● Skilled Workforce: India to have the largest developer population in the world by 2024. As of 2019, there
are 3+ million software developers and ~100K SaaS developers in India.
● Some global success stories: Some global SaasS successes such as Zoho, Freshworks, Icertis, and
Druva originated in India. As of 2019, there were 38 India originated SaaS companies with Annual Recurring
Revenue of more than US$10 million.
● Shift to SaaS in Mobile : A Google-Accel report shows that from 2014 to 2016, the number of users
accessing SaaS from mobile devices increased from 40% to 80% (10% use mobile devices as primary
device). This trend is expected to benefit Indian companies as India has one of the largest
mobile-app-developer-base in the world. India also has more than 500 million smartphone users.

SaaS Opportunity and Indian Advantage : SaaS Overview: What is SaaS?
● Oracle: “Software as a service (SaaS) is a cloud-based software delivery model in which the cloud provider
develops and maintains cloud application software, provides automatic software updates, and makes
software available to its customers via the internet on a pay-as-you-go basis.
The cloud provider manages all the hardware, middleware, application software, and security. So SaaS
customers can dramatically lower costs; deploy, scale, and upgrade business solutions more quickly than
maintaining on-premises systems and software; and predict total cost of ownership with greater accuracy.”
● Cisco: “Software as a service (SaaS) is a delivery and licensing model in which software is accessed on the
web via a subscription rather than installed on local computers.
With SaaS, companies need not manage applications or invest in hardware to run their applications.
Instead, a provider hosts and manages the infrastructure to support software, which enables updates and
patches to be applied automatically and universally and reduces the burden on a company's IT team.”
|| Enterprise Software on Subscription based Pricing, Delivered through Cloud ||

SaaS Opportunity and Indian Advantage : SaaS Overview: SaaS Classification
Based on Offerings
● Horizontal SaaS: Industry agnostic SaaS model catering to one of more business functions such as
Quickbooks (Accounting) and Salesforce (Marketing). This model aims to appeal to a broad market and
needs many features and need to be customisable.
● Vertical SaaS: Caters to a single or related industry generally covering multiple business functions. Some
examples are Veeva for Life Sciences and Pharma, Guidewire for Property and Casualty Insurance, and
Toast for Restaurant business.
Based on Target Market
● SaaS For Small and Medium Size Businesses (SMB): These applications target small and medium-sized
businesses. As per Gartner, a small business is a business with less than 100 employees and a
medium-sized business is a business with less than 1000 employees. The sales cycle for SMB is shorter,
lower contract value, and requires no or less customisation
● Enterprise SaaS: Enterprise SaaS target larger businesses. Enterprise SaaS sale involves a longer sales
cycle, higher contract value, and more customisation.

SaaS Opportunity and Indian Advantage : SaaS Overview: SaaS Pricing Models
● Flat Rate : Simplest pricing model. No pricing option or features to choose from. Suitable for a new SaaS product for small
target market especially small businesses.
● Tiered : Different versions of a product (based on features, number of users, etc) are priced differently. This appeals to a
larger cohort of customers than the flat rate. Suitable for products in a new market and/or catering to growing
teams/companies.
● Usage-Based: Customers are charged based on usage in terms of the number of emails being sent, per API, per call, per
transaction, etc. This model is often mixed with a flat rate and the usage-based charges appear beyond a threshold usage
level. Suitable for SaaS products in an established market.
● Per-User or Seat Based: Based on how many users are registered to use the product. This kind of pricing model is
generally suitable for enterprise SaaS.
● Per-Feature Pricing: Type of tiered model in which the tiers are based on features. Suitable for Horizontal SaaS in which
customers from different industries can choose industry-specific features.
● Freemium: Type of tiered model in which the base tier is free to use. Suitable for SaaS products in virgin markets. The free
tier allows gathering user data for understanding user behaviour and refining the product.
● Per Active User: Pricing is based on the number of user actively using the product and not by the number of users enrolled.

SaaS Opportunity and Indian Advantage : SaaS Overview: SaaS Performance Metrics
● Monthly Recurring Revenue (MRR) / Annual Recurring Revenue(ARR) : MRR and ARR are predictable revenue that a
SaaS product is expected to generate successively in a month and in a year. This measures revenue resilience. MRR and
ARR are best measures to understand the the growth of an SaaS company.
● Annual Contract Value (ACV) : ACV measures average annual contract value of a customer subscription. ACV is a sales
and marketing metric and should be compared with Customer Acquisition Cost.
● Customer Acquisition Costs (CAC): CAC measures the total sales and marketing cost on an average for a company to
acquire one new customer.
● Customer Lifetime Value (CLV): Customer lifetime value indicates the total revenue a business can reasonably expect from
a single customer account. It considers a customer's revenue value and compares that number to the company's predicted
customer lifespan.
● CAC Payback: Measures the amount of time a company requires to recover customer acquisition costs.
● Customer churn rate: Percentage of customers or subscribers who cancel or don't renew their subscriptions during a given
time period.
● Expansion MRR: Any revenue that is generated in excess from a customer's initial purchasing price or contract. Expansion
Monthly Recurring Revenue (Expansion MRR) is the additional monthly recurring revenue generated in the current month
compared to the previous month, excluding the MRR contributed by new customers/new MRR.

SaaS Opportunity and Indian Advantage : SaaS Overview: SaaS Success Factors
● Growth: SaaS businesses need to scale quickly to be financially feasible. SaaS is a high fixed cost
business and the unit economics improves drastically over US$5 million revenue (2016).
● Retention: Apart from quickly growing revenue, retention is extremely important. The company needs to
balance CAC with Expansion Revenue over time,
Data: Google + Accel

SaaS Market

SaaS Market: Global Market: Market Size
● As of 2019, the global SaaS market was ~US$100 billion. The market is expected to grow to US$400 billion by 2025 growing
at a CAGR of 26%.
Data: NASSCOM
Global Market Indian Market

SaaS Market: Global Market: Market by Region
● The Americas represent ~60% of the global SaaS market, followed by EMEA and the Asia Pacific.
Data: NASSCOM

SaaS Market: Global Market: Top SaaS Companies
● The Global SaaS industry is highly concentrated. The top 5 players account for more than half of the market share.
Data: NASSCOM

SaaS Market: Global Market: SaaS Verticals
● The biggest SaaS vertical is BFSI with ~20% share, followed by Retail & CPG with ~15% and Healthcare & wellness with
~15%, and Education with ~10%.
Data: NASSCOM
Industry Use Cases
BFSI
Credit Score Analysis, Loan Process Automation, Fraud
Detection, Customer on-boarding.
Retail & CPG
Point of sale, Order tracking, Inventory management,
Ecommerce.
Healthcare and
Wellness
Electronic Healthcare Record Maintenance, Appointment
Scheduling, Patient Monitoring, Patient Engagement
Education
Accessing learning materials, Student Information
Management, Tracking Expenses, Classroom Management
Others
Travel Booking, Vehicle tracking, Route Optimization, Process
Monitoring, Digital Asset Management , etc.(DAM)

SaaS Market: Global Market: SaaS Product Segments
● Product segment-wise CRM has the biggest market with ~25% share, followed by EPR with 23%,
Content-Collaboration-Communication(CCC) with 22%, and BI-Analytics with 9%.
Data: NASSCOM

SaaS Market: Global Market: VC Investment
● The US market attracted more than 70% of 2019 VC investment in SaaS companies, followed by Europe with 20%. India only
attracted 3% of the VC investment.
Data: NASSCOM

SaaS Market: Indian Market
● The Indian domestic SaaS market is a little less than a billion USD. BFSI Industry spends the most on SaaS in India, followed
by Retail & CPG.
Data: NASSCOM

Indian SaaS Landscape

Indian SaaS Landscape: Revenue
● The Indian SaaS industry generated US$3.5 billion in revenue in FY 2020. ~75% of it came from the export markets.
Data: NASSCOM
Revenue Players

Indian SaaS Landscape: Players
● India is the birthplace of more than a thousand SaaS companies, 38 of them generate more than US$10 million ARR in 2019.
Data: NASSCOM
ARR 2019
(US$ Million)
Players
100-500
Zoho, Freshworks. Icertis and
Druva.
50-100
Highradius, RateGain,
BrowserStack, and Tally
10-50
Wingify, Exotel, Postman, Eka and
ZENOTI etc.
1-10
WebEngage, Locus, and Wooqer,
etc.
<1
ERPNext, iZooto and LetX, etc.
Revenue Players

Indian SaaS Landscape: Players: Horizontals
Zoho, Freshworks, Agile CRM, LeadSquared, Cloudcherry
ERPNext, WorkXmate, Deskera
Manthan, Vidooly, Formcept, Capillary, Crayon Data, Latentview
Postman, Exotel, Knowlarity, Ozonetel, MyOperator
ZingHR, EdgeNetworks, sumHR, greyHR
eka, Shipsy, Fourkites, Locus
druva, Kissflow, Zenoti
CRM
ERP
BI & Analytics
Content,
Collaboration &
Communication (CCC)
HCM
SCM
Others
SaaS Horizontals
in India
Data: NASSCOM
Revenue Players

Data: NASSCOM
Indian SaaS Landscape: Players: Verticals
CRMNEXT
Vsoft
Bizome
Eka
Manthan
Zenoti
Innovaccer
Classpro
MindTickle
RateGain
Hotelogix
FarEye
LogiNext
VTion
BFSI Retail and CPG
Health Care and
Wellness
Education
Travel and
Hospitality
Logistics Others
SaaS Verticals in India
Revenue Players

Indian SaaS Landscape: Players: Major Players
Offerings Few Details
Zoho
CRM, Email & Collaboration, HRM,
Analytics and Accounting
Founded in 1996 in Chennai,
Revenue : $350 – 400+ million (2019), 50%+ sales from US SMBs,
Freshworks
Sales CRM, Email & Collaboration,
ITSM and Project Management
Founded in 2010, Total funding $649M
Valuation : $3.5 billion (2019)
ARR (2018) : $100+ million
60% revenue from SMBs
40% sales come from US & UK
Icertis
Cloud-based contract lifecycle
management software provider
ARR (2019) : $100 million
Valuation more than $1 billion achieved in 2019
Druva
Backup & data loss prevention
solution for enterprises
ARR (2019) : $100 million
$1+ billion valuation achieved in 2019
Highradius
Cloud-based accounts receivable
solutions for businesses
Valuation: US$1 billion +
Revenue Players

Indian SaaS Landscape: Players: Major Players..
Offerings Few Details
RateGain
Cloud-based solutions for the
hospitality and travel industry
Tally
Solutions
Training, deployment, software
assurance, data migration, business
advisory, integration, customizing
synchronization and data
transformation, and on-site support
service
Founded in 1986,
In 2018-19, Tally Solutions reported revenue of Rs 500 crore and net profit of Rs 86 crore
Postman
Collaboration platform for API
development
Valuation: $2B Revenue: $40 million in 2019
Manthan
Experience based Personalisation,
Data Platform, Marketing Platform,
and Analytics
FY20 revenue from operations: Rs. 231 crore.
WebEngage
Multi-channel predictive marketing
automation suite
Founded in 2011, Total funding $2.91M
Valuation $21M as of Jan 10, 2020
Revenue of $3.27M as of Dec 31, 2018
Revenue Players

Impact of COVID-19

Impact of COVID-19: Forces at Play
Indian
SaaS
Industry
MSME
Digitisation
Changing IT
Spending
Pattern
Travel
Restrictions
Changing
Investor
Priorities
Slow Industrial
Activity
Work-from-home
Forces at Play Future of Indian SaaS Industry Response

Impact of COVID-19: Forces at Play: MSME Digitisation
● Covid-19 lockdowns brought an existential crisis for the many MSME players. A survey found that nearly 50% of micro, small
and medium enterprises (MSMEs) have witnessed a 20-50% impact on their earnings due to the disruptions caused by the
COVID-19 pandemic.
● At the same time, the pandemic has caused a digital boom.
● The COVID-19 lockdowns may unlock the MSME digitation opportunity for the SaaS players. A survey finds that One-third of
MSMEs enhanced their digital presence during the lockdowns in terms of e-commerce and using digital communication.
● This can prove to be a golden opportunity for the Indian SaaS players. Indian SaaS players focused traditionally on the global
market for growth. Slow technology adoption by the Indian MSME sector was a roadblock to domestic revenue generation.

Impact of COVID-19: Forces at Play: Changing IT spending pattern
● As per a Gartner report, Global IT spending in the year 2020 is expected to be 8% lesser than in 2019. Devices and Data
Center systems are expected to be worst affected.
● As per a survey of CIO.com, IT spending focus is shifting from AI, Data Analytics, and Data Centres to Cloud, Collaboration
tools, Mobility, and Security.
Data: Gartner Source: CIO.com

Impact of COVID-19: Forces at Play: Travel Restrictions
● Covid-19 has caused several travel restrictions around the world. We do not yet know how long it will take the world to be
completely open.
● Future growth of the SaaS companies will depend on online and inside-sales instead of field sales.
● Export focused Indian SaaS players developed their online and inside-sales capabilities for many years.
● “Socially distanced” post-COVID era is expected to give the Indian SaaS players leverage over their developed-world
counterparts who depended on field-sales to acquire customers.

Impact of COVID-19: Forces at Play: Changing Investor Priorities
● The pandemic is expected to change the priorities of the startup investors from ‘growth at all cost’ to sustainability and
profitability.
● This means the focus metric in the post-COVID world will move from Active Users to Capital Efficiency, Revenue, and
Profitability.
● SaaS businesses primarily focus on ARR, MRR, and generally have a clearer path to profitability.
● It is expected that in the coming quarters, SaaS businesses will be in a better position to raise funds than many other sectors.

Impact of COVID-19: Forces at Play: Slow Industrial Activity
● As per IMF World Economic Outlook October 2020, the global real GDP is shrinking by 4.4% in 2020 compared with 2019.
Many industries such as Transport, Hospitality, Energy, Real Estate, etc. are extremely vulnerable. At the same time,
industries such as Pharma, Household Products (cleaning, hygiene) are expected to benefit from the pandemic.
● While both Horizontal and Vertical SaaS players may face a slowdown in the short-term, vertical SaaS players serving the
vulnerable sectors may struggle longer.
Source: IMF
Source: BCG

Impact of COVID-19: Forces at Play: Work-from-home
● Google, Microsoft, Uber, Facebook, Reuters, Twitter, Amazon, and many other companies are allowing their employees to
permanently work from home.
● Before the pandemic, data security concerns held many businesses off using cloud software for core operations. Now, many
companies will be forced to adopt SaaS for core business operations and not only for ancillary processes.
● The primary beneficiary for this trend is expected to be the SaaS players in Collaboration and Security.

Impact of COVID-19: Future of Indian SaaS Industry
● With the growth of work-from-home culture and rapid digitisation, the future of the SaaS sector looks bright especially for
companies offering collaboration and security services.
● Indian SaaS is poised to significantly benefit from the growth prospect due to lower cost structure, competency in online and
inside-sales, large workforce proficient in SaaS & mobile application development, and role models such as Zoho,
Freshworks, Icertis, Druva, and Postman.
● Prospect of rapid digitisation of the Indian MSME sector likely to help Indian SaaS companies grow their domestic revenue
base along with the export market on which the SaaS sector is traditionally dependent.
● Although many SaaS companies may face short-term challenges due to lower IT spending by corporates. As per a Gartner
report, Global IT spending in the year 2020 is expected to be 8% lesser than in 2019. Vertical SaaS companies focused on
sectors such as Travel, Hospitality, Restaurants, etc. may face considerable challenges due to the pandemic.
● As investor focus changes from “growth at all cost” to sustainability and profitability, SaaS offers business models with a clear
path to profitability.
● As Zoho’s Sridhar Vembu suggests, the pandemic may cause the SaaS industry consolidation as SaaS businesses driven by
venture capital money may face challenges in raising further funds and their customer tighten their wallets.

Impact of COVID-19: Industry Response: Zoho
● Introduced home-office toolkit.
● Offered a 3-month subscription fee waiver for up to 20,000 of small business customers (accounts with fewer than 25 licenses).
● Launched Remotely, a suite of 11 business productivity and collaboration apps designed to help organizations transition to remote working. Offering
Remotely for free until November 1, 2020.
● Launched BackToWork which enables organizations to manage the workplace reopening process, by letting them assess facility preparedness and
employee wellness while adhering to specific guidelines. This service will be available for free until December 31, 2020.
● Zoho Checkout extended its existing free plan to allow users to create up to 3 payment pages. Non-profit organizations working to provide relief,
allowed to accept donations or raise funds online using Zoho Checkout for free.
● Free Zoho Inventory training and rapid onboarding for businesses providing essential services.
● Zoho Expense has extended its free trial period to 28 days, and its existing free plan to accommodate up to 3 users.
● The Indian edition of Zoho Payroll has introduced a free plan which will allow businesses to process payroll for up to 10 employees.
● Zoho Subscriptions is introducing a free plan which will allow businesses to manage up to 20 customer subscriptions.
● Introduced Zoho Classes (EdTech), a mobile app to help schools & colleges continue the academic session, by teaching students online.

Impact of COVID-19: Industry Response: Zoho...
● Zoho WorkDrive has increased the storage limits on the Starter and Team plans to 1TB and 3TB, respectively. Organizations with 10+ users will also be
getting additional storage.
● Zoho Recruit is offering free video credits for its online meeting feature until August 31st, 2020. Recruit is also offering premium support—free of
charge—to educational consultancies and NGOs that hire teachers.
● To help NGOs, nonprofits, and public-sector organizations engage with their community during this crisis, Zoho Social is offering free access to the
Premium Plan for 6 months.
● Zoho Bookings has started offering its Zoho Meeting integration in the Basic plan as well. This will help more people conduct online meetings with the
convenience of a schedule-and-meet system instead of back-and-forth emails before a meeting.
● To help government agencies and departments get ahead of challenges during this crisis, Zoho Desk is offering free software licenses for up to 6
months. Those in areas such as public health and administration, first response, disaster management, information dissemination, and law
enforcement, can benefit from this.
● Zoho Commerce increased the threshold limit for transaction fees from $1k to $3k for the Starter plan, and from $6k to $8k for the Pro plan, for 3
months.
● To give new customers enough time to set up their stores, Zoho Commerce has increased the trial period for new signups from 14 to 60 days.
● To help communities look after public health interests, Zoho Survey is providing all NGOs and government bodies with a free 3-month subscription.
Additionally, those who want to run COVID-19-related surveys can get a 50% discount on all plans.

Impact of COVID-19: Industry Response: Other Companies
Few Details
Druva
Free data protection services to secure remote employee data
Icertis
COVID-19 related webinars with Cognizant and Microsoft
Icertis also partnered with Microsoft to offer the Icertis Contract Management (ICM) platform as an application within the Commercial
Marketplace COVID-19 Partner Solution Showcase.
Announced a new partnership with SAP which enables SAP Ariba customers to tap into an advanced set of contract management
capabilities.
Tally Solutions
For existing customers whose annual Tally Software Services (TSS) subscription stands expired as of March and April 2020, Tally
provided an extension of 30-days. This extension has benefited over 1.3 lakh small and medium businesses.
Helped over 1,500 students from less fortunate communities get access to ration needs and emergency supplies during the
lockdown.We are aiding doctors, nurses,
Postman
API Collections to Help in the COVID-19 Fight

Thank You

The SaaS Opportunity and Indian SaaS Industry

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (19)

Similaire à The SaaS Opportunity and Indian SaaS Industry

Similaire à The SaaS Opportunity and Indian SaaS Industry (20)

Plus de Sam Ghosh

Plus de Sam Ghosh (20)

Dernier

Dernier (20)

The SaaS Opportunity and Indian SaaS Industry