- India has nearly a thousand funded SaaS startups and ten unicorns, collectively generating $2-$3b in annual revenue.
- SaaS is expected to generate about 80% of software revenues by 2030, up from about 35% today.
- The report revealed that the Indian SaaS ecosystem may need to increase funding to 3 to 4 times current levels to reach its potential over the next ten years.
- India may likely need to triple or quadruple funding to achieve its full potential in SaaS.
India’s software-as-a-service (SaaS) industry could reach $1 trillion in value and create nearly half-million new jobs by 2030 as businesses around the world transform digitally, according to a new study.
SaaSBoomi, a community of industry founders and product builders, along with consultancy McKinsey & Company and supporting partner Nasscom, revealed that SaaS is driving about 50 per cent of the value creation while comprising 20 per cent enterprise technology spending.
India has nearly a thousand funded SaaS startups and ten unicorns, collectively generating $2-$3 billion in annual revenue and employs nearly 40,000 people.
Of the $3 trillion global enterprises IT and communications market spending, software, including SaaS, constituted $600 billion in 2020, growing at eight per cent per year – almost twice as fast as the overall market.
Most attractive segment
While software comprises only 20 per cent of the global market in terms of spend, it drives 47 per cent of the total value-creation across spend segments, thus representing the most attractive segment in terms of enterprise value.
The Covid-19 global crisis has created an unprecedented push towards SaaS, with companies across the spectrum moving to online and remote work. Legacy software players are transitioning to SaaS, delivering further impetus to the industry. SaaS is expected to generate about 80 per cent of software revenues by 2030, up from about 35 per cent today.
“India has an exciting opportunity to propel itself on to the world stage as a SaaS force to be reckoned with,” Manav Garg, CEO and Founder of Eka Software Solutions and Founding Partner SaaSBOOMi, said.
While there are challenges ahead, he said that these are not insurmountable and SaaSBoomi is of the view that there is nothing that can stop the Indian SaaS community from building on its strong foundation to make SaaS a preeminent industry in India that employs a lot of talent, contributes significantly to India’s GDP and creates unmatched global products and platforms.
The report revealed that Indian SaaS companies face significant challenges around growth in earlier stages through product and go-to-market excellence and developing talent at scale.
Collaboration is need of the hour
“Need to shift to a growth-first mindset with a focus on investing in core operational capabilities to scale and win and Indian SaaS ecosystem may need to increase funding to 3 to 4 times current levels to reach its potential over the next ten years. This requires concerted support across all stakeholders – industry associations, government, corporates and investors to scale talent by 3 to 6 times,” the report said.
To create awareness around the potential of SaaS in India, Debjani Ghosh, President of Nasscom, said that the Government must collaborate with industry associations, investors, and corporates, and drive large-scale training programs by partnering with universities and institutions.
SaaSBoomi expects digital transformations to drive a 60 per cent increase in enterprise tech intensity over the next 10 years. As a result of these broad secular trends, the global SaaS market could be worth about $1.3 trillion by 2030 led by growth in content, collaboration and remote work enablement software.
Six new SaaS unicorns were born during the pandemic: Postman, Zenoti, Innovacer, Highradius, Chargebee and Postman, Zenoti, Innovacer, Highradius, Chargebee.
In 2020, $1.5 billion was invested in Indian SaaS companies, representing a fourfold jump over the last two years.
If Indian SaaS providers execute to their full potential, the report revealed that they could generate annual revenues of $50-$70 billion by 2030 and win 4-6 per cent of the global market.
Need for more investment
Investments in the Indian SaaS industry are rising, with about $1.5 billion in VC funding being invested in 2020 alone. A lot more would be required to keep this momentum going. India may likely need to triple or quadruple funding to achieve its full potential in SaaS.
The Indian SaaS space also has had limited exits via acquisitions, buyouts or IPOs so far only 5-10 per cent of Indian companies had exited in the last decade, compared to 20 per cent of their US counterparts. Significant development of exit routes could drive the virtuous cycle of value-creation.