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India poised to become next global SaaS capital, says EY-CII study

The Indian IT sector continues to charge ahead on its trajectory of growth and transformation, with SaaS (Software as a Service) setting the stage for the next wave of disruption, according to a study.

India is home to about 100-plus unicorns across different segments with an accelerated pace of entrepreneurship and is rapidly emerging as a hub for SaaS start-ups, cited the study by EY and CII, titled “India: The next global SaaS capital.”

Based on in-depth interviews with 50 SaaS promoters and funders from early stage to Series E and beyond, the study highlights operational characteristics owing to which the Indian SaaS industry is growing at an accelerated pace, an EY statement said on Thursday.

Over 80% of the SaaS promoters who contributed to the report feel there is the need to build a robust talent pool; 50% of SaaS providers feel driving greater awareness for SaaS products continues to be a prerequisite for customer acquisition, it said.

India is poised to become the global SaaS capital over the next few years, mainly driven by Small and Medium Businesses with a focus on large enterprises. SaaS providers are also doubling down on their customer acquisition, retention, and success strategies by upselling and cross selling to existing customers.

To enhance customer maturity levels, large delivery teams are being deployed to onboard, train and support customers throughout the product life cycle, it was stated.

One-third of the SaaS providers are being increasingly cautious with their go-to-market strategy and mainly targeting niche segments to acquire marquee clients by understanding new digital buying preferences of the customers, following a digital-first approach and offering innovative pricing models.

Technology Sector Leader, EY India, Nitin Bhatt, said, “Macro-economic environment notwithstanding, the funding activity in the first two quarters of this year surpassed the funding activity in 2021 – which was a breakout year with over USD 4.3 billion in funding for SaaS start-ups.”

The large consumer base in India, coupled with a technology–first mindset is paving way for the emergence of consumer-focused SaaS solutions as adoption levels continue to rise, the statement said.

According to some data points covered in the study based on secondary research, the Indian SaaS market is expected to grow multi-fold by 2025, accounting for almost seven to ten per cent of the global SaaS market from two to four per cent at present.

India now has 18 SaaS unicorns as compared to one in 2018, with the country being the third largest SaaS ecosystem globally, after the USA and China, it said.

The number of SaaS companies in India have more than doubled in 2021 as compared to 2019 and the funding too increased from USD 2.6 billion in 2019 to USD six billion in 2021, the statement said. PTI

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