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The Great Indian SaaS Opportunity And How You Can Capitalise On It

The Great Indian SaaS Opportunity And How You Can Capitalise On It

India is in a great position to solve unsolved problems in B2B SaaS–potentially

Practically all the Indian SaaS product creators thrive on the international market, and not India, where they’re actually located

Chennai is the center of gravity for SaaS in India

When an entrepreneur first thinks about SaaS, many questions come to mind:

  • What are the global opportunities?
  • Which verticals should I provide my services to?
  • Where are the different opportunities?
  • How is digital making a difference, in terms of sales, marketing, etc.?
  • What role does digital play in a global marketing context?

And of course: Can it actually work? Are founders making money off the companies they are building?

I’ve attempted to answer these questions both as a SaaS founder who built a global business with KiSSFLOW, and as a big supporter of the startup and SaaS ecosystem in India through major roles in NASSCOM Emerge, NPC, iSPIRT, SaaSx, and having interacted one on one with more than 100 founders across India.

India is a Great Place to Be for SaaS Players

There are three large tech ecosystems in the world: Silicon Valley, Israel, and India.

If you walk around Silicon Valley today, you’ll quickly see that all the new start-ups have moved from SaaS to the next shiny object: Machine Learning (ML) and Artificial Intelligence (AI). The VC game is all about the risk-to-reward ratio.

With new sectors, the risk is high, but so are the rewards. Israeli tech is centred around deep tech, defense, cybersecurity and cryptography, and of-course now with AI / ML.

With all of this evolution, India is in a great position to solve unsolved problems in B2B SaaS–potentially while leveraging AI or ML, or any other new tech!

India has the business domain knowledge because of the IT services boom. We’re competent in different verticals and different segments like banking, financial services, and insurance.

The only problem is that productisation around these areas hasn’t happened. Opportunities around this simply don’t seem sexy, while they are actually loaded with potential. India should latch on to this gap; there is much value to be created, and a lot of money to be made.

While other regions no longer get excited about B2B SaaS products, the opportunities are still strong in India. Just look at some of the success stories that are out there.

The unconfirmed news is that Zoho is clocking close to $500 Mn in revenue per year and 250,000  customers. Freshworks has crossed  $ 100 million ARR with 100,000+ customers. And those are just the big names. Solid products like KiSSFLOW, Chargebee, FourKites, Kayako, and Agile CRM are all serious international competitors.

Breaking Down the Global SaaS Marketplace

Practically all the Indian SaaS product creators thrive on the international market, and not India, where they’re actually located. India can, at the most, work only as a testing ground for SaaS startups, given the resistance to self-service software and long sales cycles.

At KiSSFLOW, 48% of our sales comes from the US, 20% or so from Europe, and 20% combined from Latin America, the Far East, the Middle East, and Australia/NZ. Other SaaS companies would have similar numbers.

Regions like Indonesia, Thailand, and the Philippines show great interest and we see good traction there. We also see similar interest in Latin American countries. But conversion rates are lower than in other regions.

Our best regions have conversion rates at 8-10%. But for these regions, they dip down to 2-3%. On the other hand, the leads are fewer, but the conversion rates from Australia and NZ are up to 12%, which may point to consumers who are clearer about what they want when they sign up for a trial.

The Customer Base: SMB vs. Enterprise

As per a recent report released by Google & KPMG in July 2018, ‘the global SMB SaaS segment is expected to grow at a CAGR of 36% over the 2017-22 period.

The SMB segment of the global SaaS market is expected to outgrow the enterprise SaaS market by 2020. The SMB segment is underpenetrated and has substantial revenue potential.

Emerging markets, such as Asia–Pacific are growing rapidly, at a CAGR of 41.6% from 2012-16 in the SMB SaaS segment[187].’

While 80% of our customer base is made up of SMBs, about  20%  are enterprises. This is where a highly targeted digital inbound marketing model such as ours comes into play. Over 98% of our sales are generated from customers who come to us, not the other way round. Within that mix, it’s difficult to target enterprise or SMB consumers specifically–it’s a broad net.

After we remove junk leads, we have a 5-7% conversion rate on average. Mind you, it is common to get around 30% of leads as junk leads for a scaled-up inbound marketing company. In our current scale, junk leads fluctuate between 18% and 22%.

Talking Verticals and Horizontals

The biggest buyers for us are from what we call the ‘high tech’ sector (IT, ITES, electronics companies, tech-enabled, internet companies, digital companies, ecommerce) and media. Following those are manufacturing or retail. Beyond this are customers from long tail businesses.

User profiles at our SMB client organisations are typically at the C-level like the CEO, MD, CFO, etc. While in startups, the C-level cadre are more hands-on, in bigger enterprises, it is the VPs & dept. heads who use the product.

Insofar as horizontal categories are concerned, CRM and marketing automation are huge. Both are topline-impacting solutions, which is why they grow faster.

A number of categories are emerging: digital transformation and low-code platforms, which enables people to have a platform approach to digitization. The latter is a clear sign of the second wave of digital transformation: the first attempt was 10-15 years ago, when tech couldn’t keep up.

Fixing all problems across a number of verticals can be scary. However, fixing niche issues is easier and more profitable too! Case in point is Zenoti from Hyderabad, a spa management software. They work in a small but sizeable market across the world.

Indian SaaS Companies in the global market

In India, there are not more than 100 noticeable players in the SaaS market, and even that is a high guesstimate.

My guess at the total revenue, from meeting with so many SaaS founders, is around $1 Bn to $1.5 Bn. Roughly a billion dollars of this revenue comes from a handful of companies in Chennai such as Zoho, Freshworks, KiSSFLOW, Indix, ChargeBee, Ramco, and Cloudcherry.

Chennai is the center of gravity for SaaS in India–the city not only generates close to $1 Bn in SaaS revenues alone, it has more than 10,000 employees working in SaaS.

In contrast, the rest of India makes a fraction of this as a whole.

Digital Marketing Makes International Selling Easy, If You’ve Got The Conviction

People talk about the internet levelling the playing field, but I don’t think everyone believes this with conviction and clarity. Small brands can go toe-to-toe with major players because of the power of digital marketing, using tools like paid advertisements, building organic content, and digital display ads. All of our clients (from over 121 countries) were leads generated through digital marketing efforts.

Take retargeting. You can remarket using cookies. A normal user wouldn’t know that this is how the internet works. To them, it would seem like KiSSFLOW is ‘everywhere’ on the internet.

In reality, we’re only following them from page to page and occupying a ‘mindspace’. KiSSFLOW was an unknown entity just five years ago, and is now a recognised global brand because we’ve invested diligently into our digital marketing efforts.

Efforts like cold-calling and Linkedin requests generate only minimal results despite a lot of effort. I advise companies from day one to start working on their SEO rankings and build a great strategy around it.

A word of warning for SaaS companies today, though.

When ‘fishing’ through digital marketing, you can get clients to ‘bite’ through using digital marketing, but they’ll spit you right out if your product isn’t great! For the first time, SaaS delivery model has made the software companies responsible for the quality of their products.

Previously, customers would buy a product and build a sense of ownership, which automatically garnered some loyalty. Today, it’s more like customers ‘rent’ your software. Renters will move out of a bad house the moment the rental period is over. In the same way, if your product is bad, you should be worried when you near the end of your ‘lease period’! People will continue to stay only if the product is good.

Digital marketing is by far the best investment any B2B SaaS company can make. Customer acquisition costs are extremely low, and the lifetime value of a customer on a monthly subscription is incredibly high. For example, using digital marketing with KiSSFLOW, we might spend close to $400 to $750 to acquire a customer, but the annual recurring revenue from even the smallest customer is more than $1,000.

The Myth is Alive and Well

If you are looking for the best business opportunity out there from India, look no further than B2B SaaS. Despite what anyone else might say, the opportunity has not plateaued.

The number of existing companies is still quite small and the opportunities are so great. Many successful companies have bootstrapped their success and are profitable within a few years. There are also many examples of founders who create niche products that have made exits by selling to larger players.

Take the hype seriously. If you identify the right product-market fit, invest in good people who can build and market a world-class product, and double down on digital marketing, then you will quickly find the answer.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

Author

Suresh Sambandam is the Founder of OrangeScape & CEO of KiSSFLOW, a disruptive, SaaS-based enterprise-level workflow and business process automation platform with more than 10,000 customers across 120 countries. He is an expert and renowned entrepreneur on a mission to democratise cutting-edge technologies and help enterprises leverage automation.

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