India’s Software-as-a-Service (SaaS) industry has the potential to be valued at $1 trillion and employ 500,000 people by 2030, rivalling the country’s large IT services industry, according to a report by SaaSBoomi, a collective of SaaS and product company founders. The report predicted that Indian SaaS companies can rise to revenue levels of $50-$70 billion by the end of the decade.
Around 1,000 SaaS startups in India, including 10 unicorns, generate $2-$3 billion in revenue annually, said the report for which McKinsey & Company conducted third-party research and analysis.
The Indian SaaS sector raised $1.5 billion in 2020, representing a 4x jump over the previous two years despite the Covid-19 pandemic. The country has also created six SaaS unicorns – Postman, Zenoti, Innovaccer, HighRadius, Chargebee, and BrowserStack. According to SaaSBoomi, Indian SaaS firms could capture 4 to 6 per cent of this global market, but to do so investments in product businesses must grow 3 to 4 times and talent accessibility must increase by 3 to 6 times. In addition, there needs to be 10x more Indian SaaS unicorns by 2030.
The report also pointed out four obstacles that SaaS startups must overcome in order to realise their full potential.
Indian SaaS companies face significant challenges in scaling up through product and go-to-market excellence and developing talent at scale. It also highlighted the need to shift to a growth-first mindset with focus on investing in core operational capabilities to scale and win.
Indian SaaS companies have also had few exits through acquisitions, buyouts, or IPOs. So far, only 5-10 per cent of Indian companies have exited in the last decade, compared with 20 per cent of their US counterparts. A report stated that significant development of exit routes could drive the virtuous cycle of value creation.
