85% Of Indian SaaS Ventures Have Jumped On The AI Bandwagon

If there is one Indian sector that is well-poised to benefit from the advent of artificial intelligence (AI), it is the enterprise SaaS market. The arrival of this tech has been pivotal for the industry in many ways. For instance, many companies now harness the power of this emerging tech to make intelligent decisions, all by analysing significant amounts of data more efficiently and with much ease.

If you are a traditional software company, a software developer, a product startup or a solution provider, you need AI to stay competitive in the market. Interestingly, 85% of Indian SaaS companies understand this and to stay ahead of the curve, have adopted AI, reveals Inc42’s “Decoding India’s SaaS Startup Ecosystem” report. 

While the country today fosters more than 1.5K AI-powered SaaS startups, around 70% of these companies have emerged in just the last three years, thanks to the rapid adoption of AI in the ecosystem, per the report. 

Not to mention, the role of this emerging technology in the evolution of Indian SaaS companies has been multifaceted. Here’s a quick rundown of how SaaS startups are leveraging GenAI to bolster their tech stacks:

• Content Creation: This involves companies offering GenAI solutions for the production of marketing copies, blog posts, and general product descriptions. For example, SaaS unicorn Fractal launched Kalaido.ai to generate images from text in English and 17 Indian languages.
• Personalisation: SaaS companies have augmented their customer care offerings with the use of AI in recent times. Just last week, Nasdaq-listed Freshworks introduced Freddy AI Agent — an AI-powered bot to provide automated customer service online.
• Data Automation: GenAI is also helping with automating routine tasks like data entry and report generation. Startups like OnFinance AI have developed NeoGPT, an in-house LLM that supports financial institutions with tailored AI copilots for functions such as research, relationship management and sales.
• Product development: AI is helping clients streamline technical functions, from generating prototypes to developing mockups and code. Zoho, for instance, recently launched Zoho AI Maker, allowing businesses to build applications using AI capabilities.

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Investor Interest Driving AI Adoption

Besides the augmentation of tech stacks, increased investor interest is another motivation that is driving the AI adoption wave. 

According to the report, the Indian SaaS opportunity is expected to breach the $70 Bn mark by 2030, growing at a CAGR of 31% over the next six years. In this, a large driver of the market would be the utilisation of AI.

“We believe AI is simply taking the value-proposition of Indian SaaS players to a whole new dimension. Such an elevation in the value proposition is making Indian SaaS startups more attractive to both local and global clients. With AI, Indian SaaS companies have been able to explore new business models and take control of the value chain by targeting new stakeholders,” Cornerstone Ventures’ managing partner Abhishek Prasad said.

Meanwhile, Bharat Innovation Fund’s (BIF) cofounder and partner Som Pal Choudhary said that conventional AI applications, such as predictive analytics and machine learning models, have laid the groundwork for more advanced AI-driven solutions.

He added that the firm was on the lookout for Indian SaaS startups that are integrating LLMs as text-based interfaces and leveraging AI agents to improve automation and customer engagement.

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Govt’s Role In Accelerating AI Adoption

While the utilisation of AI is in full swing this year, the Indian government has also taken steps to make India a leader in the AI world. Earlier this year, the Union Cabinet approved the IndiaAI Mission with an allocation of INR 10,372 Cr (to be used over the next five years). 

While the primary utilisation of the funds will be to fuel innovation in the AI ecosystem via a public-private partnership (PPP) model, it will also be used to fund emerging startups. 

In July, the Ministry of Electronics and Information Technology (MeitY) also recently partnered with tech giant Google to upskill 10,000 homegrown startups in AI.

As of now, the government has also been working on formulating an advisory group to formulate a framework to regulate AI in the country. 

The Way Forward

With heightened investor interest and government encouragement, AI adoption is expected to further ramp up in the Indian SaaS ecosystem. Investors and startup founders believe that there are a plethora of other uses of the tech as we move forward.

Cornerstone Ventures’ Prasad believes that there seems to be no limits to the number of innovation areas that AI is capable of touching and transforming further.

He believes that India is poised to be the world’s largest builder of ‘Applied AI’. “We believe the biggest opportunities in such applications of AI will emerge in functions such as customer acquisition, content and marketing, resource management, automation, fraud and security, data management, etc., and the fastest adoption in terms of domains will be in healthcare, financial services, supply-chain management, and marketplace models,” he said.

BIF’s partner Choudhary believes that the AI opportunity will particularly impact vertical SaaS players. Pointing out that the tech has enabled companies in this realm to bolster their workflow automation, he believes that these companies are likely to deepen their customer insights and actionable intelligence moving forward.  

“By leveraging AI to analyse industry-specific data, vertical SaaS companies can create tailored solutions that not only streamline operations but also guide strategic decision-making, opening up new possibilities for innovation and customer engagement across various sectors,” he said.

All in all, a majority of ventures fostered by the world’s third-largest startup ecosystem are either already using or planning to use/leverage AI (in various forms) to supercharge the next wave of growth. Amid the growing fad of AI, enterprise SaaS startups are expected to stay a clear winner in the adoption due to the technical nature of the industry. 

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[Edited By Shishir Parasher]