What is SaaS and why does it promise 5 lakh new jobs for Indian techies?

Digital transformation and automation are driving growth for this cost-effective software delivery model that draws on Indian IT’s strengths

SaaS is a cloud-based software delivery system wherein data can be accessed from any device that has an internet connection and a web browser.

The Indian information technology industry, among the largest employers of white-collar professionals in the country, is set to see a spurt in jobs, thanks to booming business for SaaS companies.

SaaS, or software-as-a-service, is set to offer the IT industry a $1 trillion opportunity, and create half-a-million new jobs by 2030, says a report titled ‘Shaping India’s SaaS Landscape’. The report has been released by SaaSBOOMi, which is stated to be Asia’s largest community of SaaS company founders and product builders.

According to the SaaSBOOMi website, the organisation conducted in-depth research and analysis for the report, in association with knowledge partner McKinsey & Company and supporting partner NASSCOM, the Indian industry body for software companies.

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What is SaaS?

It is a cloud-based software delivery system wherein data can be accessed from any device that has an internet connection and a web browser. The software vendor hosts and maintains the key links in the value chain, such as servers, databases and application codes, and offers the services to customers on a subscription basis.

While on-premise software allows customers to hold possession of it, SaaS leaves the software in the hands of the vendor, and lets its customers use it under various payment models.

Boom time for the segment

According to the SaaSBOOMi report, SaaS is driving about 50% of the value creation in the Indian IT industry, while comprising 20% of enterprise technology spending. Globally, too, it’s a booming market that is expected to cross $500 billion in revenue by 2025, growing 18-20% annually.

Also read: What drives small companies to acquire bigger, formidable rivals?

“Indian SaaS has come of age, with nearly 1,000 funded SaaS start-ups and 10 unicorns,” said the report. “The companies collectively generate $2-3 billion in annual revenue and employ nearly 40,000 people.”

The potential is highly promising, said the report, adding that Indian SaaS could create $1 trillion in value and nearly 5 lakh new jobs by 2030.

“The Indian SaaS ecosystem has the potential to create $1 trillion in value and nearly half-a-million jobs by 2030, owing to digital transformation and automation in organisations across sectors,” said Debjani Ghosh, President, NASSCOM.

Why Indian SaaS is shining

India has traditionally done well in the IT services field, and SaaS offers it an opportunity to tap this strength. The SaaS model is cost-efficient, and requires innovative thinking — the numerous start-ups in the country are prime candidates.

The SaaSBOOMi report pointed to the ‘favourable environment’ for Indian SaaS companies that is driven by disruptions in the market. Digital transformation is happening at a high pace globally, and legacy software firms are quickly moving to SaaS. These trends bode well for the sunrise segment.

“Even at the peak of the COVID pandemic, software and SaaS has been the highest-performing category in the technology, media and telecom (TMT) industry,” the report pointed out.

“India is now a hotbed of innovation with nearly 1,000 SaaS companies and 10 unicorns. I couldn’t be prouder of how far this community has come on the journey to bring India’s SaaS industry to the world,” said Girish Mathrubootham, founder and CEO of Freshworks, and founding partner at SaaSBOOMi.

“While there are challenges ahead, these are not insurmountable and SaaSBoomi is of the view that there is nothing that can stop the Indian SaaS community from building on its strong foundation to make SaaS a preeminent industry in India that employs a lot of talent, contributes significantly to India’s GDP and creates unmatched global products and platforms,” said Manav Garg, founder and CEO of Eka Software Solutions, and founding partner at SaaSBOOMi.

Challenges ahead

SaaS companies do face certain significant hurdles, said the report. For companies to grow from early (start-up) stages “through product and go-to-market excellence and developing talent at scale” can be challenging, it observed.

To overcome these, the companies need to have a sharp focus on growth, and invest in core operational capabilities to scale, it added. In line with this, it pointed to three engines that are critical to drive growth in SaaS businesses – Revenue, Product and Business building.

The report further said the Indian SaaS ecosystem may need to increase funding to 3-4 times current levels to reach its potential over the next decade. “This requires concerted support across all stakeholders – industry associations, government, corporates and investors to scale talent by 3-6 times,” it added.

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