Why Google and Accel see hyper growth for Indian SaaS startups

Cloud-based software-as-a-service (SaaS) products are seeing hyper growth as small and medium businesses (SMBs) take to them in a big way. And Indian SaaS startups are well-placed to capitalize on it, says a joint report by Google and Accel Partners released today.

The report says SaaS for SMBs will generate US$76 billion in revenues globally by 2020. Indian SaaS startups have the opportunity to grab a sizeable slice of this pie by creating innovative solutions for SMBs around the world.

Source: SaaS report by Google-Accel.

Currently, the Indian SaaS industry is at a US$600 million annual revenue mark. This is expected to hit US$2.5 billion by 2020, which would be 3.3 percent of the global SMB SaaS market. But by 2025, this will rise to US$10 billion as Indian SaaS startups scale up and corner 8 percent of the global revenue, according to the report. “And this is a very conservative estimate,” said Shekhar Kirani, partner at Accel in India.

Indian edge in mobile first solutions

Source: SaaS report by Google-Accel.

“Cloud computing is one of the top technology investment trends of this decade with venture funding for purpose-built SaaS solutions exceeding US$18 billion in the last four years. Indian startups have an edge, as mobility is becoming a key requirement by SMBs for SaaS. Our startups are already building world class solutions for mobile first users. This strength, combined with easy access to a global customer base online, will help India become a very strong player in the global SaaS industry,” said Rajan Anandan, Google’s managing director for India and Southeast Asia, while releasing the report in Bangalore today.

The report expects demand for SaaS products from SMBs in the US to double in the next 4 years, along with an explosion of demand from European SMBs.

“With the sizable SMB market opportunity, increasingly high quality entrepreneurs, availability of local talent, favorable unit economics, and a vibrant VC community in this space, we anticipate several billion dollar companies will be created from India in the next decade,” Shekhar Kirani said.

Customer relationship management, data visualization, human resource management, marketing, healthcare, and education are the sectors in which big SaaS companies can emerge out of India, according to the report.

The likes of Freshdesk for customer support, Zoho for productivity tools, LeadSquared for marketing automation, and FusionCharts for data visualization are already showing the way by becoming global leaders in their space.

The report relies on analysis of interviews conducted in the last quarter of 2015 combined with Google India’s primary research on SMB consumers, Google search trends, Accel’s benchmark metrics, and secondary research by Zinnov.