In the late 1930s, Silicon Valley emerged as the world’s breeding ground for digital technology startups. In more recent years, other tech hubs have emerged in places Frederick Terman and Steve Jobs would never have expected. Today, India is becoming one of the leading hubs for technological innovation.
Over the last few years, some of the fastest growing technology startups in the world were launched in India. Indian entrepreneurs are pioneers in everything from nanotechnology to biotechnology to green energy. However, the Software-as-a-Service (SaaS) business model appears to be the fastest growing sector. The Indian SaaS companies are poised to make India one of the leading SaaS providers in the world within the next few years.
SaaS is the Future of India and India is the Future of SaaS
The SaaS industry was born in India in 2001. Nikhil Daddikar, a computer science major from IIT Bombay, met Ravindra Wankar, another computer science graduate while working at a startup in Silicon Valley. They eventually elected to take the entrepreneurial path and launch Celoxis, a revolutionary project management tool. The first such tool made in India, it became a major disruptor that successfully competed with Microsoft Project and Excel – the de facto project management tools at that time. Together with AtTask, Celoxis was the catalyst for the evolution of the project management software field.
Nikhil and Ravindra worked on a variety of projects and observed many inefficiencies that needed to be addressed. Employees squandered many hours on meetings, important milestones fell through the cracks and project specifications often changed without prior notice.
Microsoft Project and Excel spreadsheets were inadequate tools for managing complex projects. The duo realized that these problems could be avoided with a more integrated and collaborative project management system.
“In our early days we needed a task management tool, a collaboration tool, a bug tracking tool, a time sheet tool (for external contractors) and we needed to maintain spreadsheets as well. And there was nothing out-of-box for other businesses processes (e.g. approvals or sign-offs). They had to be done via email. That is when it struck me that what we needed to build was an all-in-one tool with PM as the focus but which could do 90% of everything else as well,” said Nikhil .
The founders realized that they were competing head-to-head with established brands in Silicon Valley and continental Europe. They lacked the brand exposure and financial resources, so they needed to compete by offering unique selling points:
- Celoxis is the most affordable project management platform among those offering similar features.
- It also provides On-Premise deployment, which very few project management platforms provide.
- They compete by consistently exceeding customer expectations. Their motto is “To be in the business of helping companies deliver successful projects and results, every time!”
- Celoxis adapts to the business environment, whereas most other project management tools require companies to take a retrofitting approach.
- It is a very comprehensive tool that offers a plethora of capabilities to deal with common project management problems.
Celoxis was India’s first major SaaS startup and was widely used by some of the world’s largest companies, including KPMG, HBO and The Cheesecake Factory. However, other SaaS companies sooner emerged.
Following closely behind was FusionCharts, a provider of data visualization products, which became the next major SaaS provider in India. In 2011, Girish Mathrubootham and Shan Krishnasamy co-founded Freshdesk in a small office in South Chennai. Over the next five years, the bootstrapped startup grew into a $500 million enterprise.
These aren’t merely anecdotal rags to riches tales of Indian SaaS entrepreneurs. Raja Satish reports that the number of SaaS startups in India will nearly quadruple between 2014 and 2020. Satish cites numerous companies that have generated over $1 million in revenue.
As more SaaS startups emerge, it’s becoming clear that it is a budding industry for India. Suparna Goswami believes they will surpass their rivals in the United States and other first-world countries. “The Indian software-as-a-service (SaaS) ecosystem is witnessing an increase in activity in terms of new startups emerging and establishing themselves. There’s a belief within the industry that by 2025, India will become the SaaS hub of the world.
In the near future, the Indian SaaS market will be valued at $10 billion and account for 8% of the global market.
What are the implications of the growing SaaS market? Several changes are inevitable.
The focus on globalization has changed expectations in unprecedented ways. In prior years, brands seeking SaaS solutions insisted on purchasing services from U.S. suppliers. According to M Thiyagarajan, cofounder and fellow of M&A Connect at iSPIRT, that has changed.
“Instead of selling, SaaS providers are assisting in buying and if the experience is good it doesn’t matter anymore whether the software is built in the U.S. or India,” he told Forbes.
Since Indian developers have proven to be highly robust and efficient, brands are no longer skeptical about the quality of the products they develop.
Attention from investors will be a double-edged sword for the SaaS industry. Ajay Arora, Partner at Transaction Advisory Services, also expects more mergers and acquisitions to take place over the next couple of years. Investors will also be more likely to invest in SaaS startups.
However, additional capital may be temporary if SaaS companies are unable to pay reasonable dividends to their investors. According to Karan Kashyap, a tech startup journalist that covers the South Asian economy, states that three VC firms manage over $1 billion in SaaS capital.
Kashyap states that these firms have not received any return on their initial investment, so they will place more pressure on the companies to boost their net income. If the leading SaaS startups fail to meet revenue projections, investors may be more leery about investing in future startups, which could threaten market growth.
While there are lingering uncertainties in the Indian SaaS sector, there are also many promising opportunities. Over the past month, 7 new SaaS businesses were launched. Brands all over the world are paying closer attention to these budding companies, because they will likely dominate the industry in the years to come.Amidst these conditions, the Indian SaaS startups are still poised to rule the world and Celoxis has paved the path for this revolution.