The recent pandemic has changed the way in which we work. Organizations have been forced to rethink business models and how they serve customers. With the pandemic investments in technology have undergone a massive paradigm shift. Technology is no more an enabler but an integral part of survival and the ability to thrive in a rapidly changing business environment. Increasingly technology and digitization strategies are becoming key priorities for boards to deliver on.
Pandemic has hastened technology investments in most global companies. Companies have been launching digital transformation initiatives, new workplace access models or enhancing consumer experience etc. Remote working/digital economy/automation and supply chain enhancements have made accelerated spends in technology a reality and these trends are here to stay for the next decade. We are entering an era where technology enabled businesses and companies will drive larger value creation for all stakeholders.
Beyond new application areas emerging technologies like Cloud, data and analytics, artificial intelligence, machine learning and industry 4.0 are rapidly expanding the horizon of opportunity. The technology infrastructure in enterprises which underwent a large refresh with Enterprise Resource Planning is also ripe for change. While India has emerged as a global leader in outsourced IT services and the industry is poised to grow to $350 billion in the next five years, the opportunity arising from many of the areas outlined above will be much larger and can easily be a $1 trillion market opportunity for Indian companies in the next decade.
Adoption of new technologies is enabling easier customer acceptance and hence technology is being democratized enabling much faster adoption. This augurs well for many smaller and midsize companies who can build unique solutions and reach the relevant markets through cost effective digital marketing initiatives. So overall the competitive landscape for technology solutions is becoming far more a level playing field with a diverse set of solution providers serving varied customers.
Adoption of technology by small and medium enterprises worldwide is also creating a new set of demands which is being primarily serviced by SaaS (Software as a Service) companies.
The global opportunity which is evolving is being embraced by entrepreneurs and investors and this has led to a very strong positive momentum in the Indian startup ecosystem. According to the Hurun Index, India today ranks as amongst the third fastest growing startup ecosystem in the world and recently replaced the UK as No 3 country with 54 unicorns. Investment in SaaS companies increased 170% in 2020 and it's expected to reach $ 4.5 billion in 2021. This interest spans across early stage companies with deal size increasing by 85% in the seed stage and later stage companies. Bain India SaaS Report 2020, says the number of deals which are beyond series D have also gone up by 20%.
The opportunity is large and spans across a wide spectrum. The areas which hold promise are as follows
Horizontal SaaS solutions: This covers areas like CRM, enterprise collaboration, HR tech, application and developer productivity. Many Indian companies have built solutions which have been built for companies in India, scale the business and subsequently started addressing the global market. Some examples in this space are companies like Zoho,
Postman, Freshworks , Browserstack etc. Freshworks is a great example of not only addressing global markets but also gaining acceptance in overseas capital markets and was the first Indian SaaS company to be listed in NASDAQ and currently commands a market cap of close to $10 billion.
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