BENGALURU: India’s decade-old software-as-a-service, or SaaS, sector that has traditionally catered to overseas clients is experiencing a reversal of sorts with a surge in domestic demand. A bunch of young SaaS startups, including customer analytics platform CloudCherry, web optimisation firm Zarget and enterprise assistance platform Vymo, raised venture capital funding in the past year to expand globally. These startups had secured their initial validation and revenue from Indian customers including large banks, ecommerce companies and retail brands, a market that, according to industry experts, did not exist in India until a few years ago.
“There’s a growing market in India for cloud-hosted services. Retail players to highly-regulated bodies like banks are increasingly opening up to SaaS solutions,” said Vinod Muthukrishnan, chief executive of CloudCherry , a three-year-old startup that counts Titan, HDFC Bank and travel website MakeMyTrip among customers. The startup recently set up an office in Salt Lake City to expand in North America.
A recent survey by Signal Hill and software product think-tank iSPIRT showed that 59% of early-stage startups declared India as their highest revenue-generating market. While this is true for early-stage client deals, big-ticket deals still come from the North American market.
This geographic segment contributed to more than half of the total SaaS market share in 2016, according to research firm Gartner. A Transparency Market Research report, however, indicates that the Asia-Pacific region presents the most promising opportunities for SaaS companies with demand fuelled by a rising number of established networks and infrastructures. The region is expected to register the fastest adoption of SaaS at an annual growth rate of 32.1% from 2015 to 2022, the report said.
The emergence of a local market has allowed many small startups to win large customers and earn significant revenue from India before expanding to larger markets. This has helped companies build and test multiple iterations of their products locally before introducing these in the highly competitive and unforgiving US market.
“It makes a lot more sense for an enterprise company to be coming out of India. We have an increasing domestic market so companies can get some customers here and then go sell globally,” said Shailesh Lakhani, managing director at Sequoia Capital, who is on the boards of Vymo and Zarget in which Sequoia invested $5 million and $6 million, respectively, last year.
Indian SaaS startups also have a price advantage that works well in the growing domestic market. India being a price-sensitive market helps early-stage startups make a product market fit for a highly sensitive mar ket, resulting in higher margins when selling globally .
The local market, a result of the higher degree of internet penetration and enterprise willingness to bet on cloud technologies, did not exist un til about five years ago, said Avinash Raghavan of iSPIRT.
“While various factors have contributed to the growth of a local market, resulting in the spur of activity in the SaaS ecosystem, a number of vertical SaaS startups (focused on sectors such as healthcare) are also doing well in niche areas,” Raghavan said.
Read More: economictimes.indiatimes.com