Why I’m pessimistic about the SaaS industry in Asia

Photo credit: tykhyi / 123RF Stock Photo.

Imagine a bright future for the Software-as-a-Service (SaaS) industry in Asia, where year-on-year growth in the industry is phenomenal, companies both big and small gain momentum and strength, and it is poised to explode and bring about the next tech revolution.

Sounds rosy, doesn’t it?

However, contrary to what media outlets are saying, my gut feeling tells me that there is more to it than meets the eye. I believe Asia is still a long way from chasing the West in terms of SaaS penetration in the region, high adoption rates, and reaching revenue levels at par with its Western counterparts.

I’m not a pessimistic person by nature, so I dug around to validate my gut feeling and tried to understand why the reality of SaaS in the region is so different from what our thought leaders are espousing.

Everyone agrees that the SaaS market is on the cusp of the next revolution, but for me, the deeper questions lie in the how, why, and where of that assumption. As Asian businesses look to climb further up the value chain, and more people and businesses recognize the value of SaaS, I want to analyze what it will take for the region to bridge that gap.

Current reality

There are a few facts we can use to assess the state of SaaS globally today. According to a FinanceOnline report, we know a few things:

• North America is still the largest SaaS market, but Asia Pacific has the fastest-growing growth rate.
• Salesforce tops the global SaaS market.
• More small and medium businesses are adopting cloud apps with an average of three SaaS solutions per company.

Cloud services, in general, will hit US$244 billion in 2017, according to Gartner analysts. Specifically, global SaaS performance is expected to reach US$67 billion by 2018 with a compound annual growth rate of 8.14 percent. No one is denying that there is high monetary potential in SaaS, but it is likely that this money will continue to be concentrated in the North American and European markets.

We cannot hope to overtake the West on the value chain if we choose to remain slow on the technological front.

That’s because the majority of both producers and consumers of SaaS are largely based in the Western hemisphere, where the market is more mature and both tech and political infrastructure are stable enough to allow critical cloud services to flourish.

In turn, this foundation allows entrepreneurs the space to think and develop futuristic technology (think Hyperloop and SpaceX), and this continues to draw talent and resources to further perpetuate the cycle.

Simply put, the problems that startup hubs such as Silicon Valley, Berlin, and Barcelona are trying to solve are completely different from what Asian startups are battling on a daily basis.

Therefore, SaaS is an essential value multiplier for Asian startups and businesses that are looking to be competitive, but the reality is that many businesses do not recognize this. We cannot hope to overtake the West on the value chain if we choose to remain slow on the technological front.

Asia has a few good things going for it

One step forward, two steps back

How does SaaS grow in Asia then?

Conclusion