Indian SaaS firms set to rake in $18-20 billion revenues by 2022: Report

The revenues of Indian software product companies are expected to touch $18-$20 billion by 2022, doubling their share in the global Software-as-a-Service (SaaS) market to around 7-9%, according to a new report.

This growth – of those firms that are based in India or have a majority of their workforce in the country -- is being driven by significantly lower personnel costs, an abundance of engineering talent, round-the-clock customer service and a wide acceptance of products built and managed by Indian entrepreneurs, Bain & Company said in its India SaaS Report 2020.

The report, exclusively shared with ET, found that the number of Indian SaaS companies had doubled to around 7,000-8,000 companies in the last five years, with over 1,200 of them having raised funding.


Moreover, over 40 Indian SaaS firms have raised late-stage Series C and beyond funding, compared to just 10 such firms five years ago, it found.

“There’s a wide appreciation of Indian-founded companies and the impact they’re having on global SaaS is just phenomenal. We talk about the number of companies having greater than $100 million ARR being 4-5, but my sense would be that within a few years we would have two or three that are over $1 billion in revenues,” said Arpan Sheth, Senior Partner at Bain & Company and one of the authors of the report.

According to the report, the outsized advantage for Indian SaaS companies stems from salaries for entry level developers and sales resources being 85% and 74% lower, respectively, in India than in the United States. The country also has over 100,000 SaaS engineers and has a base of 120,000 inside sales agents. Further, companies such as Zoho and Freshworks have around 400,000 and 200,000 customers, respectively, across over 150 countries, making India SaaS more visible.

This success of Indian SaaS, which derives 70% of its revenues from overseas markets, is also driving increased investment activity in the sector. According to Bain’s estimates, funding in Indian SaaS companies grew by 60% to $1.3 billion between 2016 and 2019.

Further, the data showed that investors favoured backing SaaS startups over other sectors even as India went into lockdown due to the Covid-19 pandemic.

Investments in SaaS startups in the January to June period grew 25% to $830 million compared to the year-ago period. The share of SaaS investments also made up 19% of the $4.4 billion invested into Indian startups in the first half of 2020, compared to 16% of all startup investments in the same period in 2019.

“I think there was some discount in valuations of Indian SaaS firms in the earlier stages, but if I look at companies like Postman, Uniphore, Druva, there’s almost no difference between global and Indian firms. I think good performing companies have got very nice valuations because they’re growing strongly, they’ve strong margins and they serve strong aggressive markets,” Sheth said.

As for segments within the SaaS market that are growing well, Bain said that vertical specific SaaS solutions are gaining prominence due to evolving industry characteristics, while companies catering to emerging technologies, especially those catering to developers, are also witnessing huge growth.

(Graphics by Rahul Awasthi)