Starting a SaaS Company from India? 5 Essentials You Should Know The abundant IT talent, unsolved opportunities, cheaper workforce and a strong digital infrastructure has made India one of the fastest-growing SaaS markets

The SaaS (software-as-a-service) industry that started as technological innovation has become a necessity for businesses. Used to optimize and automate processes and fast-track operations, organizations now prefer SaaS tools owing to their accessibility and versatility.

The popularity of the SaaS is attributed to the subscription model that offers agility and cost-effectiveness for numerous industries and stages of a company. According to a report by Kahootz, 73% of businesses predict nearly all of their apps to be SaaS-powered by 2020. The plug-and-play model, without the need of installing and running the applications on their computers and data centers, contributes to the successful adoption of SaaS in every industry vertical you can think of.

What makes India one of the top global SaaS ecosystems?

Silicon Valley, Israel and India are the three famous SaaS ecosystems worldwide. In Silicon Valley, the majority of the SaaS has moved to machine learning (ML) and artificial intelligence (AI). Cybersecurity, deep-tech, defense and AI/ML dominate the Israel technology domain.

Amid this evolution, India has a large set of unsolved problems in both B2B and B2C sectors. High population, a large number of unsolved problems, a boom in the IT services and competence in areas such as banking, finance and security makes India one of the most favorable SaaS markets.

With a surge in the number of start-ups bending towards cloud-based solutions, by 2022 India's SaaS market is expected to grow at 36 per cent per annum and reach $3.3-3.4 billion, states a NASCOM report.

One prominent reason behind this growth is the increasing demand for software products in the Indian market. Be it email automation, managing customers or even collaborating with team members, software has been adapted profoundly. Because automation has become imperative for both SMBs and large businesses, SaaS has turned out to be a profitable and scalable business opportunity for budding Indian entrepreneurs.

What is a SaaS company?

SaaS hosts software to serve customers with a service. Such businesses build, develop, host, maintain and update all the services through a central location. The best part is such online tools have immediate access to the entire global market without adding the delivery charges unlike businesses selling physical products.

Major selling points of SaaS

Companies are adopting SaaS over developing in-house and apps because of the benefits such as:

Pay-per-use: While purchasing a SaaS product, there are no upfront costs. There is liberty to pay for a limited period. The subscription can be ended at any moment. You have the liberty to choose the number of accounts you would want, and based on the requirement that can be scaled up or down. SMBs can use SaaS which otherwise would not have been possible due to the high licensing fee.

Access from multiple locations and devices: As compared to a licensed software with limited accessibility, the SaaS can be operated from any device as long as you have an Internet connection. The result being, mobility and independence of working with a software from multiple devices including desktop, smartphone and tablet. As compared to the traditional systems, the SaaS can be easily deployed within a matter of hours or minutes.

Automated updates: Regular updates deployed by the SaaS provider get done automatically. You don't need to download and install them in your system.

Customization: In the SaaS model, the product features can be personalized based on the requirements. You can integrate them with your existing software.

All these advantages made SaaS one of the most lucrative industries to start a business in. Weigh in the pros and cons before giving shape to your idea. Here are the five essentials to know before starting a SaaS company from India.

The bonus points for Indian SaaS players

Pool of talent: As per a report by India Brand Equity Foundation (IBEF), 75% of the global digital talent is present in India. The report states that the IT sector has a competitive advantage over the US counterpart being 5-6 times less expensive. This IT industry is worth $167 billion and is growing at 8% every year. The Indian IT workforce has developed a strong base of expertise in almost every technical verticals including BFSI, retail, telecom and banking to name some.

India is the home ground for expert engineering, programming, designing, sales and product management talent.

Dwelling deeper, in the early stages of the SaaS business, one requires a solid founding team of 10-15 people and not worry about the next 100 hires. The location and size of the team are inconsequential.

The low cost of development: IBM has more employees in India than in any other country, according to the New York Times. The salaries paid to Indian workforce is one half to one fifth as that paid to the counterparts. This globalization is a result of a skilled English speaking workforce that caters to the global needs of the top banks, governments and giant technology companies such as Google, Oracle, Dell, Cisco and Microsoft among the top ones.

The tech resources available in India are performing cutting edge research in the field of visual learning, artificial vision and computer intelligence.

This world-class local talent significantly reduces the budget needs for infrastructural development and maintenance required for SaaS.

A large number of unsolved problems: A vast scope lies in productization of verticals around banking, insurance, payments and financial services. The other emerging ones are digital transformation and low-code platforms that are enabling businesses to adopt digitization. The horizontal categories that can be explored are CRM and marketing automation. Being top-line impacting segments, they grow faster. Apart from them, fixing niche solutions is equally profitable. The market is sizeable across the world.

SaaS is bringing the second wave of digital transformation. The crux lies in focusing on an opportunity where customers are willing to pay for your offering. Does your solution make their life easier? Pay equal attention to customer satisfaction. These values work not just for SaaS but are common to every business.

The Challenges for Indian SaaS Businesses

Acquiring global customers and winning their trust: Since the SaaS market has explored in the last few years, your customers have several options to pick from.

Digital marketing via paid tools, organic content and display advertisements is one way to generate leads. Retargeting and SEO further help in creating brand recall.

Creating a global presence is not for the faint-hearted. Your customers may use your product as a result of digital marketing but if it's not great, they'll instantly move to your competitor. Today's customer is not owning your product. Instead, they're renting it.

Find a product-market fit, assemble a team who can build, market and sell the world-class product and double down on customer acquisition and retention.

Whether to sell to SMBs or enterprise: According to a report published by KPMG along with Google, the global SMB SaaS market is expected to increase at a CAGR of 36% between 2017 and 22. By 2020 it is expected that the global SMB SaaS market will outgrow the enterprise SaaS market.

The ticket size of enterprise deals is much higher than the SMB's. At the same time, those deals take much longer to close.

When your market is small, medium or mid-sized firms, selling to them is not that difficult. When looking into deals in the range of $100,000, you would have to be physically present in that market. For deals below this, you can be anywhere on the globe and sell your SaaS product.

Choosing the right customer segment hugely depends on the product or service you're selling. Before building the product, be sure that your target market needs your solutions.

The SaaS market is evolving before our eyes, as the best business opportunity in India. A joint report by NASCOM and Zinnov foresees 3x growth of the SaaS industry, from being worth $407 million to $1 billion by 2020. Despite all the pros, the market is not getting plateaued.

The number of SaaS players in the Indian market is small and the opportunities are immense. By adapting to the changing market and addressing the needs of the audience, SaaS companies are well-placed for long-term and sustainable growth.