Are genAI and China coming for India’s SaaS crown?

“Any sufficiently advanced technology is indistinguishable from magic,” wrote Arthur C. Clarke, the preeminent science fiction writer behind 2001: A Space Odyssey, among other works.

Today, magic may take the form of generative AI, which is casting a spell on the global software-as-a-service industry. The sector’s revenue hit US$167 billion in revenue in 2022, according to a June 2023 report from Chiratae Ventures and Zinnov Management Consulting.

Tech in Asia spoke with several SaaS executive who say that the buzz around genAI is real. Apart from reconfiguring workflows and disrupting whole tech stacks, the way people interact with software is poised to change forever.

But what exactly would this mean for the SaaS industries of India and China?

An unexpected downside of genAI could be the erosion of India’s traditional advantage: tech talent. Other factors at play are China’s strength in fundamental deeptech research and its more aggressive and mature VC ecosystem for SaaS.

A better-positioned workforce

Globally, India is the second-largest SaaS market after the US, followed by China and the UK.

India’s SaaS industry, which generated more than US$10 billion in revenue in 2022, has two traditional advantages: lower costs and an extensive talent pool.

The country has double the IT workforce of the US, Eka CEO Manav Garg tells Tech in Asia. Garg is also the co-founder of industry body SaaSBoomi.

With a wider English-speaking population, India is better positioned than China to service a global client base, according to industry players.

When it comes to cost, setting up software engineering teams in India is up to 3x cheaper than in the US.

Thanks to these advantages, more than 3,000 SaaS companies have sprung up in India, according to SaaSBoomi’s estimates.

This includes listed companies like Freshworks and a host of unicorns including Mu Sigma, Druva, Icertis, Postman, Uniphore, and DarwinBox. The sector is also projected to generate US$50 billion to US$70 billion in revenue by 2030, according a SaaSBoomi report that Tech in Asia viewed but is not publicly available.

Cost advantage may diminish

China’s deeptech edge

Game over for India?