categories

HOT TOPICS

Subscribe to our Feed

India’s Big Opportunity In SaaS

Posted on Thursday, Jun 16th 2011

It was clear to me way back in the nineties that India’s journey forward as a center of excellence in software would not gain legitimacy without some home grown product companies. Amidst the outsourcing boom, however, it was impossible to gain traction for the idea. Since March 2007, I have often orchestrated discussions on my blog on why India was still lacking in product companies. In June 2007, I interviewed Sridhar Vembu, the now famous founder of Zoho. Soon after, in my Forbes column, I introduced him as the smartest unknown Indian entrepreneur.

Well, Zoho does everything that you would do with Microsoft Office. It also has a hosted customer relationship management service that is free for very small companies and only costs $10 per user per month for larger ones. It competes with Salesforce.com which charges $65 per user per month.

Vembu has a very exciting opportunity ahead of him. What the Chinese have done in manufacturing, he is showing that the Indians can do in software: undercut U.S. and European software makers dramatically. Not in information technology services. Not by body shopping. Vembu has done something few Indian entrepreneurs have been able to achieve–build a true “product” company out of India. This is not a headcount-based business model.

A brief primer would perhaps help put things in perspective. “Product” companies build once and then market and sell the same thing multiple times to multiple customers. “Services” companies that do custom software development have to use “bodies” to do customer-specific development over and over again, with limited leverage. Theirs is a head count-based business model. Recently, popular software-as-a-service companies have come up with the model of “renting” software over the Web, thereby offering “products” as “services” while maintaining the scalability advantage of products.

Vembu has first done a network management product. Then he has done productivity suite Zoho as a software-as-a-service.

True, Vembu is a rare species in India these days. As far as I know, he’s one of the very few entrepreneurs who has been able to execute on the premise of building software “products” and/or software-as-a-service out of India. He has a big vision, and so far, he has executed flawlessly.

Today, exactly four years later, I am happy to report that Sridhar is no longer the only product entrepreneur using this model. In fact, in the SaaS domain, we’re beginning to see similar businesses. What Zoho has done in CRM, other entrepreneurs are looking to do elsewhere. Girish Mathrubootham, a former Zoho product executive and a 1M/1M entrepreneur, has started Freshdesk, a company taking on the customer support software space with a similar strategy. The company has already started gaining paying customers. [Read: The 1M/1M Incubation Radar: Freshdesk from Chennai, India]

Market research firm IDC forecasted in 2009 that “the harsh economic climate will actually accelerate the growth prospects for the SaaS model as vendors position offerings as right-sized, zero-CAPEX alternatives to on-premise applications. Buyers will opt for easy-to-use subscription services which meter current use, not future capacity, and vendors and partners will look for new products and recurring revenue streams. As such, IDC has increased its SaaS growth projection for 2009 from 36% growth to 40.5% growth over 2008.” IDC also predicted that by the end of 2009, 76% of US organizations will use at least one SaaS-delivered application for business use, and the percentage of US firms which plan to spend at least 25% of their IT budgets on SaaS applications will increase from 23% in 2008 to nearly 45% in 2010. All these predictions have held true. SaaS and Cloud have taken over the IT domain all across the business firmament.

To me this also read like a forecast for how the Indian IT services industry would lose significance, as their bread and butter – complex software integration projects at large enterprises – would start diminishing in scope. India, I thought, needed to leverage the SaaS wave, not get washed away by it.

SaaS has quickly become an increasingly crowded space – over 700 companies saturating the sector, addressing various slivers of business functions. Just within CRM, there is Salesforce.com, Zoho, and Netsuite for contact management; iContact, aWeber, and ConstantContact for email marketing; InsideView for opportunity intelligence; LucidEra for business intelligence; Genius for opportunity alerts; Jigsaw for business contact data; Hoovers for business information; Xactly for sales compensation; Apptus for contract management; EchoSign for contract signing; Webex, DimDim, ON24, and Citrix for webinars; Marketo for lead nurturing, and numerous other technologies for sales and marketing organizations to navigate. Look outside of the general CRM space, and there are SuccessFactors and Taleo for talent management, Concur for expense management, so on and so forth.

All of these categories and SaaS applications, however, have one thing in common. An Indian software team applying the Zoho strategy could easily carve out a significant market share by dramatically undercutting the price-point of these products. Take the example of Marketo, which we recently profiled on Entrepreneur Journeys. It’s a wonderful lead nurturing software that costs $1000 a month. I would LOVE to use it for 1M/1M, but $1000 is much too expensive for my purse. Can an Indian entrepreneur give me Marketo at $100 a month? Or $50 a month? Heck, if you can come up with the product, I will let you market it to the entire 1M/1M customer base, because, in some way, shape or form, we ALL need that product.

This, in my opinion, is India’s BIG opportunity in SaaS. Indian entrepreneurs, I hope to see hundreds of such companies emerging out of India, and selling into the Western market, under-cutting existing players, and making esoteric technologies currently unaffordable for small businesses – available, affordable, ubiquitous.

Good luck, and please join 1M/1M. We will do our best to help you become successful in executing on this strategy.

Hacker News
() Comments

Featured Videos

Comments

Saas should stand for 'Software As A Solution' (solving problems of availability, scale, ease of use & innovation and last but not the least..cost).

Manoj Nair Thursday, June 16, 2011 at 10:08 PM PT

LucidEra folded long back. And Zoho has a SAAS BI solution – Zoho Reports :)

Aravind Thursday, June 16, 2011 at 10:26 PM PT

True, but the BI as SaaS opportunity is also one that can be pursued in this mode. I haven’t looked at Zoho’s BI solution, though.

Sramana Mitra Friday, June 17, 2011 at 7:09 AM PT

Interesting ideas of undercutting on prices on software! Unfortunately, what I find is that the younger software engineers continue to be thrilled by the notion of joining larger SI's. The concept of three guys in a garage, inventing something new remains difficult for people there. The funny thing is that they observe and participate actively when the Silicon Valley startups create new products and services but somehow the environment, culture, attitudes etc stifle them when it comes to creating startups of their own.

I am always struck by how much an Infosys, Wipro or equivalent body shop is desired by these young, bright, well educated people. These companies kill innovation, make these youngsters into process people who focus on putting butts on a seat. Very sad to see!

Nimish Friday, June 17, 2011 at 8:58 AM PT

How about running a contest for making such a service in India? …I know from personal experience that young enthusiastic indians ….would love to work on something like this if given in the right format

Ritwik Manan Friday, June 17, 2011 at 11:47 AM PT

We’re looking for entrepreneurs who don’t need to be given any right format. Good entrepreneurs figure those things out themselves.

Sramana Mitra Friday, June 17, 2011 at 2:08 PM PT

It’s changing, Nimish, albeit slowly.

Sramana Mitra Friday, June 17, 2011 at 2:09 PM PT

I agree, its changing. I left my job in US in 2009, moved to India and Started my own company Revolution Next. We are in Education ERP space. Its a huge market but two major issues are – No support from VCs, investors for funding if you are not from IITs or IIMs and no support from Government. I wish to discuss my BP with you soon though.

Rahul Sharma Friday, June 17, 2011 at 10:44 PM PT

Look forward to it, Rahul.

Sramana Mitra Saturday, June 18, 2011 at 10:17 AM PT

Actually we (www.powerstores.in) are about to announce some significant partnerships and hope to do exactly this in the hosted ecommerce space both here in India and abroad.

indrajit chowdhury Monday, June 20, 2011 at 3:51 AM PT

"India cost structure" may help them to control burn rate in the development stage but i doubt it matters when they start to scale. This is because 'customer acquistion' is the biggest expense for any SaaS company and its the same irrespective of the location.

Gopi Monday, June 20, 2011 at 2:13 PM PT

I think, they will be riding on other people’s customer acquisition investments. Customers do their research on functionality, and then use search engine optimization to find the vendors, compare pricing, etc. They will do just fine in that mode. Btw, Zoho did exactly that: they have been able to ride on the customer acquisition and marketing investment that Salesforce.com has put in.

I believe, the entire category would be able to do that if they can drive down the product and support costs sufficiently.

Sramana Mitra Monday, June 20, 2011 at 3:58 PM PT

Right. BI as SAAS is a good opportunity indeed. A bit tech-intensive perhaps, as it need to have a calculation engine, a good UI for creating/showing a variety of charts and scale for giga/terabytes of multi-tenant data. Do have a look at Zoho Reports when you find time.

Aravind Monday, June 20, 2011 at 10:37 PM PT

One SaaS I would love to see from India is a competitor to HubSpot . I hope someone in India is looking at developing a solution for Indian market conditions.

Siddharth

Siddharth Chawla Monday, June 20, 2011 at 11:37 PM PT

With SaaS now we can reach global markets sitting in one corner room, its perfect opportunity to crack the product market.

We are trying to crack the organic search marketing space (can even call first stage of inbound marketing ala what Hubspot, conductor, SEOMoz etc) using our SaaS offering SearchEnabler.

Fully loaded SEO software/platforms in sub 100 dollar subscription was out of reach of small biz/startups as well as individuals & marketers, as it required large amount of crawling, analysis of tera bytes of data, storage, processing & so on….. & most of players in the space use public cloud hosting, expensive software/hardware or 3rd party data which makes it impossible to break the 100$ barrier.
We tried developing private cloud platform using locally available hardware (assembling our own servers to meet crawl/analysis needs) & customized software platform over it to break the cost barrier and remove dependencies. As of now we are in private beta with 30 users spread across 10 different countries and iterating to refine our first offering.

Khadim Wednesday, June 22, 2011 at 10:32 PM PT

To support what you wrote in this article, I would like to share our story here….we were a service company for 10 years. Since past two years, we were working on building our own S-a-a-S e-commerce product (www.39shops.com) and we launched it early this year. Since then, we completely DISCONTINUED our service operations which was very profitable and choose the product path…which is full of difficulties at the moment. We are determined to bring product innovation, right here, sitting in India and make it profitable. One of the biggest problems we are facing right now is not getting support from Angel investors of VCs, which slows down the growth we are expecting….but we are not giving up!

Hrishikesh Tuesday, December 6, 2011 at 4:15 AM PT

Hrishikesh,

Shutting down your services business was a bad idea. We don’t recommend that, because those businesses often provide key bootstrapping cash.

Sramana

Sramana Mitra Tuesday, December 6, 2011 at 11:04 AM PT

[...] Software as a service (SaaS) probably grew in popularity as quickly as it did thanks to Salesforce.com. The customer relationship management (CRM) giant made the lives of sales professionals much easier, and the platform soon gained traction as a handy tool for non-sales professionals as well. But Salesforce.com wasn’t—and still isn’t—affordable for everybody. Enter Zoho, a bootstrapped, India-based company that offers a hosted CRM solution that competes directly with Salesforce’s offering but at significantly lower price. [...]

India vs. Silicon Valley: A SaaSy War | Xconomy Tuesday, September 4, 2012 at 8:28 AM PT
`