The next great thing in technology is coming out of India, and it might be worth $1 trillion.
India started its metamorphosis into a major player in the global IT industry more than 20 years ago, ushering in a period of unprecedented prosperity and job growth in the nation.
The third-largest economy in Asia is now prepared for the newest technological frontier: creating the next wave of software firms like Zoom or Slack.
The Covid-19 pandemic has compelled businesses all over the world to invest heavily in digital infrastructure, enhancing the power of organizations that offer software as a service, or SaaS. According to a KPMG poll, businesses increased their weekly IT spending by $15 billion last year as they rushed to establish secure remote working environments.
SaaS businesses offer web-based programs that look after everything from the software’s performance to its security. The most well-known SaaS businesses in the world include Zoom (ZM), SAP Concur, and Salesforce (CRM), the American juggernaut that owns the Slack for work chat tool.
According to a recent analysis created by consulting firm McKinsey & Co. and SaaSBoomi, a community of industry experts, India’s software-as-a-service sector may generate $1 trillion in value by 2030 and roughly 500,000 new jobs.
According to the survey, there are close to a thousand such businesses in India, 10 of which are unicorn firms, or start-ups worth at least $1 billion.
This may present an opportunity comparable to that of the 1990s IT services sector.
According to Girish Mathrubootham, CEO of Freshworks, the most well-known SaaS business in India, “This potentially be as huge an opportunity as the IT services market was in the 1990s.” It submitted an IPO application last month, joining a long list of other significant Indian software unicorns that are floated this year.
More than ten years ago, in the city of Chennai in southern India, Freshworks was established. It offers software to assist businesses manage relationships with their clients, much like Salesforce does.
It has more than 50,000 customers and is the industry’s oldest unicorn in India. It has raised money from investors like Tiger Global and Accel. According to data provider Tracxn, the company’s most recent valuation was $3.5 billion in a 2019 investment round.
There are other Indian SaaS companies that have achieved success by concentrating on specialized industries. For instance, the unicorn Zenoti creates software for the spa and beauty salon sector.
Six of India’s 10 SaaS unicorns attained that milestone in 2020, attracting the interest of investors worldwide. According to the SaaSBoomi study, investors invested $1.5 billion in Indian SaaS startups last year, four times more than in 2018 or 2019.
As a result of the “huge adoption” of software during the past ten years, investors are enthusiastic about SaaS, according to Mohit Bhatnagar, managing director of Sequoia Capital India.
Despite being a minor competitor in the global SaaS business, investors believe India might someday dominate the industry due to two factors: its enormous pool of availability of developers who speak English, as well as their affordable hiring rates.
Software engineering has become one of the most sought-after career alternatives in the nation as a result of the expansion of India’s IT sector.
According to Bhatnagar, India is home to one of the world’s largest developer communities. Many of them have experience working for some of the largest global tech firms.
The idea to create his product, according to Postman co-founder Abhinav Asthana, was influenced by his time spent as an intern at Yahoo in Bengaluru.
He had the notion to create a tool to make API (Application Programming Interface) testing easier. A programming language called an API outlines how two programs can communicate with one another, and.
According to Postman, it has made it simpler for engineers to collaborate when creating their APIs.
Asthana told CNN Business, “We saw how software was produced at these big firms, and we found API was a key concern.”
With a $5.6 billion value, Postman is currently the most valuable SaaS startup in India.
foreign customers, Indian engineers
India offers many advantages, including reduced operational costs. According to a survey by the consulting company Bain & Company, entry-level developers in India make 85% less money than their American colleagues.
It is preferable to have a million-dollar customer than a $10,000 client if you are starting a SaaS business in the US because you need to spend for sales.
Prasanna Krishnamoorthy, managing partner of SaaS accelerator Upekkha, stated, “and marketing in that nation. “You may have these little and mid-sized firms, as well as large ones, when you are supplying customers from India.”
Most SaaS businesses prioritize international clientele, similar to the approach used by India’s IT behemoths like TCS and Infosys (INFY). Since the majority of India’s oldest unicorns, from Flipkart to Paytm, have primarily targeted the domestic market, investors view this as a welcome change.
According to Asthana, Postman’s solutions are used by around 98 percent of Fortune 500 organizations, whereas Freshworks’ initial customer was an Australian company.
SaaS businesses are considerably more prepared to expand internationally than, say, India’s Flipkart. Once they build software, they continue to.
According to Mathrubootham, who is also an investor in Postman, “For a Flipkart you need billions of dollars [to go abroad], but for a Freshwork you need much less capital to go global.” This is due to the fact that e-commerce companies need a lot of money to establish physical operations overseas since they need to pay for delivery personnel, warehouse rentals, and inventory purchases.
Sequoia Capital’s Bhatnagar asserted that Indian software business owners “mastered” the technique of “remote sales” at a young age. Since the last two years, everyone in the globe has had to learn how to improve remote sales, he continued.
Despite the excitement, there are significant challenges that Indian businesses must face before they can fulfill the $1 trillion promise.
Indian engineers with IT services experience.
It could be challenging for Indian engineers with training in the IT services sector to gain the discipline needed to launch a product-focused business.
According to Krishnamoorthy, when providing IT services, “you are selling bodies and you say yes to everything the buyer says.” On the other side, SaaS businesses must reject 99 percent of [possible] clients, he continued.
Additionally, in comparison to Silicon Valley, India’s startup ecosystem is still very young. Even while some domestic unicorns are enormous, Mathrubootham claimed that the nation lacks a “global IT powerhouse product brand.”
But he hoped that upcoming SaaS businesses could alter that.
“India being a product nation is my personal desire,” he continued.