India’s SaaS Startups Need Horizontal Focus To Cater To SMBs Going Digital, Says Deskera’s Shashank Dixit

Most SaaS and enterprise tech product companies have not made a big impression on small businesses in India and have had to look abroad for business growth. Even though India is home to enterprise unicorns such as Zoho, Freshworks, Icertis and Druva, the market penetration of SaaS products among small and medium businesses is almost negligible. Covid-19 changed these dynamics, with retailers losing access to their physical shops and account books — the only way to continue operations is to sell online, so SMBs also need to figure out how to bill and transact online. 

Joining our ‘Ask Me Anything’ series with Inc42 cofounder and CEO Vaibhav Vardhan, Deskera CEO Shashank Dixit delved into this rising segment in India’s SaaS ecosystem, and the impact of Covid-19 on Indian SMBs and more. 

“Biggest challenge in India is that an SMB SaaS company in India does not compete with any big brand solutions, rather we are pitted against pen and paper. Most of the SMBs in tier 2, tier 3 towns are not using any technology and it’s been the case for years in India,” said Dixit. 

He added that Covid-19 has changed that perception, small retailer are now forced to use SaaS products because asking an employee to physically get a receipt or maintaining a physical inventory is no more a solution in the current times. The question is no longer ‘why’ a SaaS product is needed for SMBs, it’s about ‘what’ and ‘how’.

LogiNext cofounder and CEO Dhruvil Sanghvi had also said earlier that this is the time where SMBs will have to pay for it. They will have to pay for an online inventory system, they will have to pay for an online delivery system, they have to pay for last-mile fulfilment systems. Till now if somebody was building an SMB software for India, Sanghvi admitted that he himself was against it. However, the pandemic is expected to change the scenario.

Dixit compared the current times to be similar to what demonetisation did for digital payments. Before demonetisation, digital payments were not a necessity, but once cash was not available, adoption of digital payments was the only way left to transact.  Further, this shift in consumer behaviour is expected to increase the aggregate market for SaaS companies targeting SMBs. But it’s not that retailers will start paying more for a SaaS product, just that the number of retailers buying the solution will increase exponentially.

“SMB market is about volumes, the earlier 3Mn user market has now become 30 Mn. They will spend less on per unit basis but the aggregate SMBs have increased. My numbers are absolutely 5 to 10 times bigger market but individually these users will not pay more,” said Dixit. 

Horizontal SaaS Works Better In India

In India, the age-old dependence of SMBs on traditional ways of managing operations has made them a very tough market for the vertical SaaS players. “Vertical SaaS works better in the US where they have building blocks with large companies and you are filling in the gaps with small companies. You can only fill the gaps if you have lego blocks ready,” said Dixit. 

In Asia, SMBs are starting on a blank slate. They don’t have the building blocks to support a vertical SaaS company’s product. Dixit noted that there is a reason why Zoho has a suite of products and Freshworks is moving towards that —  there is a demand for horizontal SaaS companies in the Indian market, given the price-sensitive nature of Indian SMBs, who don’t want to pay piecemeal for individual SaaS solutions. So horizontal capability will be a key differentiator and edge for SaaS startups in India.

“Even large enterprise companies like SAP and Oracle have not been able to breach SMB market in India. Every SME is unique, some have problems with payroll, some have problems with CRM. Unless you have the whole gambit of processes, to cater the needs of the customers, you cannot onboard them,” he added.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.