SaaS (Software as a Service) has grown in popularity in India in recent years due to its many benefits, such as cost savings, scalability, and ease of use. The SaaS market in India is poised to command 8% of the worldwide SaaS market, generating $35 billion in annual recurring revenue by 2027, a report showed on Tuesday.
With SaaS, customers can access software on demand without investing in expensive hardware or maintaining complex infrastructure. Additionally, SaaS providers handle software updates and maintenance, reducing customer burden. As a result, many organizations are turning to SaaS solutions for various applications, including customer relationship management, enterprise resource planning, and human resources management.
According to the report, investment in India SaaS went up by 20% in 2022, compared to last year, reaching an all-time high of $5.1 billion.
“This ecosystem is being driven by a flywheel comprised of SaaS companies who are successfully executing on their global ambitions and an investor base that believes in the potential of Indian SaaS,” said Arpan Sheth, Partner at Bain & Company and lead of the Private Equity and Alternative Investor practice in India.
“We are now seeing the emergence of a set of Indian SaaS companies who have a right to win not just in India, but globally,” added Sheth.
SaaS firms in India’s future trajectory stays favorable as their total annual recurring revenue of $12 billion-$13 billion in 2022 is up 4 times over the last five years.
Of the 1,600 Indian SaaS companies that have been funded over the past five years, around 14 exceed $100 million in ARR (vs. around 1-2 five years ago). The report mentioned they are reaching this growth milestone as fast as their US counterparts.
Indian SaaS venture capital (VC) investments rose by 10% in the first three quarters of 2022 compared to 2021.
The outlook for Indian SaaS investment stays favorable over the next 12 months, with 90% of Indian SaaS investors expecting to grow or keep their capital allocation to SaaS.
“Over 70% of Indian SaaS investors intend to raise their investment in the sector,” said Prabhav Kashyap, Partner at Bain & Company and co-author of the report.
Buyer view in SaaS will stay broadly positive in the future as well, with around 65% of enterprise software decision-makers hoping to expand their 2023 software spending, said the report.
This growth is driven by several factors, including the growing adoption of cloud computing, the increasing need for remote collaboration tools, and the desire for more flexible and cost-effective software solutions.
Many companies are turning to SaaS solutions to support digital transformation initiatives and improve their operations’ efficiency and effectiveness.