Get All Access for $5/mo

SaaS In 2022: The Wins And the Woes As SaaS companies step into another year of supply chain troubles, geopolitical tensions, and continued inflationary pressure, customer retention should remain at the core.

By Kushal Nahata

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Kushal Nahata (CEO & Co-founder, FarEye)

Every year software-as-a-service (SaaS) products move the world. The year 2022 was no different. From logistics to healthcare to manufacturing, companies are using SaaS for communications, project management, sales and marketing and a host of other things.

The use of SaaS-based products is up by 18 per cent from last year with companies worldwide using nearly 130 SaaS apps on average: this despite a slowdown in adoption rates as companies worldwide look to trim their expenditures.

Not a smooth ride for SaaS setups

However, economic slowdown and recessionary fears have had their impact on global SaaS financial growth. Valuations have dropped. Funding has been considerably reduced. Global VC funding fell 33 per cent quarter-over-quarter in Q3 2022 and was down by $90 billion, a slide of 53 per cent year-on-year.

With VCs pressurising SaaS enterprises to increase their cash runway, companies have taken to cost-cutting with some of the biggest names in the SaaS industry announcing job cuts and hiring freezes.

Every year software-as-a-service (SaaS) products move the world. The year 2022 was no different. From logistics to healthcare to manufacturing, companies are using SaaS for communications, project management, sales and marketing and a host of other things.

The use of SaaS-based products is up by 18 per cent from last year with companies worldwide using nearly 130 SaaS apps on average: this despite a slowdown in adoption rates as companies worldwide look to trim their expenditures.

Not a smooth ride for SaaS setups

However, economic slowdown and recessionary fears have had their impact on global SaaS financial growth. Valuations have dropped. Funding has been considerably reduced. Global VC funding fell 33 per cent quarter-over-quarter in Q3 2022 and was down by $90 billion, a slide of 53 per cent year-on-year.

With VCs pressurising SaaS enterprises to increase their cash runway, companies have taken to cost-cutting with some of the biggest names in the SaaS industry announcing job cuts and hiring freezes.

Efficiency: Indian SaaS companies are more efficient than their global counterparts. They can scale their business with much less capital. The funding that these SaaS companies receive lasts much longer as they approach the market, mostly with a final version of their product rather than a minimal viable product. Their sales efficiency is much higher even after touching $100 million ARR.

Faster builds: SaaS companies in India build products faster. In the US, companies wait for a higher ARR for their product before launching a second one. In India, companies start focusing on other products even before their first one has touched $5 million ARR.

Wide range of products: Having a multi-product strategy has proved beneficial for SaaS companies in the country. The report highlights that SaaS companies have started small and then expanded to serve and own an entire domain, or have broadened their product offerings and expanded their business.

What does 2023 look like?

The International Monetary Fund (IMF) predicts turbulent times for the global economy in 2023 with its global growth forecast dipping from 3.2 per cent in 2022 to 2.7 per cent in 2023. This means that SaaS companies will need to adapt and innovate to weather the economic storm next year. They'll need to stand out as a:

Cost-effective solution that delivers savings for their customers. SaaS companies should continue to deliver competitive advantages that range from saving upfront costs on purchase, installation, maintenance and upgrades.

Optimise processes and deliver operational efficiency by improving workflows. SaaS companies must continue to simplify complex data and make it actionable through business intelligence.

They must deliver on the promise of ease in scalability, giving their customers the bandwidth to expand their business even during tough times.

In Conclusion

A Bain & Co. report says that a 5 per cent improvement in customer retention can generate up to a 95 per cent improvement in overall revenue. With funding shrinking and VCs demanding that SaaS companies accumulate longer cash runways, it's a percentage that SaaS companies must strive for.

As SaaS companies step into another year of supply chain troubles, geopolitical tensions, and continued inflationary pressure, customer retention should remain at the core of their business strategy.

Kushal Nahata

CEO and co-founder, FarEye

Kushal Nahata is the co-founder and CEO of FarEye, whose cutting edge logistics technology stack is delivering never-seen-before efficiencies for hundreds of customers across the globe. 
News and Trends

"45% of All Ongoing Hydropower Projects in India are Ours": Patel Engineering

Patel Engineering reported a turnover of INR 4,400 crore in the last fiscal year, with a projected 10 per cent growth for the current year.

Living

70% of Small Business Owners Experience Monthly Burnout. Follow These 3 Rules to Avoid the Same Fate.

Here are three guidelines to help entrepreneurs achieve balance, growth and success in both their professional and personal endeavors.

Side Hustle

'Hustling Every Day': These Friends Started a Side Hustle With $2,500 Each — It 'Snowballed' to Over $500,000 and Became a Multimillion-Dollar Brand

Paris Emily Nicholson and Saskia Teje Jenkins had a 2020 brainstorm session that led to a lucrative business.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Science & Technology

5 Rule-Bending AI Hacks to Make Your Mornings More Productive and Profitable

By 2025, AI will transform productivity by streamlining workflows and cutting costs. Major companies like Microsoft, Google, and OpenAI are leading the way, advancing AI into "Phase 3," where tools act as digital assistants. Discover 5 AI hacks to boost efficiency and redefine your daily routine.