India began its transformation into a global IT powerhouse more than two decades ago, ushering in a period of unprecedented wealth and job creation in the country.
Now, Asia’s third-largest economy is poised to embark on the next big technological challenge: creating a new generation of software companies similar to Zoom or Slack.
The Covid-19 pandemic has forced business around the world to make huge investments in digital infrastructure, furthering the influence of companies providing software-as-a-service, or SaaS. According to a KPMG survey, businesses spent an extra $15 billion per week on technology last year as they scrambled to create safe remote working environments.
SaaS companies create web-based applications that take care of everything from software security to performance. Zoom (ZM), SAP Concur, and Salesforce (CRM), the American behemoth that owns workplace messaging app Slack, are among the most well-known SaaS companies in the world.
According to a recent report compiled by consulting firm McKinsey & Co. and SaaSBoomi, a community of industry leaders, India’s software-as-a-service industry could be worth $1 trillion by 2030 and create nearly half a million new jobs.
According to the report, India has nearly a thousand such companies, ten of which are unicorns, or startups worth at least $1 billion.
“This has the potential to be as big an opportunity as the IT services industry was in the 1990s,” said Girish Mathrubootham, CEO of Freshworks, India’s most well-known SaaS firm. It filed for an initial public offering (IPO) last month, joining a slew of other major Indian tech unicorns to do so this year.
Freshworks was founded in the southern Indian city of Chennai more than a decade ago. It, like Salesforce, provides software to assist businesses in managing customer relationships. It is also India’s oldest unicorn in the sector, having raised funds from Tiger Global and Accel and boasting a customer base of over 50,000. According to data firm Tracxn, the company was last valued at $3.5 billion in a funding round in 2019.
Other Indian SaaS companies have found success by focusing on niche markets. For example, Zenoti is a unicorn that specializes in spa and beauty salon software.
Six of India’s ten SaaS unicorns will reach that milestone in 2020, and investors all over the world will be watching. According to the SaaSBoomi report, investors invested $1.5 billion in Indian SaaS companies last year, four times more than in 2018 or 2019.
According to Mohit Bhatnagar, managing director of Sequoia Capital India, investors are excited about SaaS because of the “massive adoption” of software over the last decade.
Despite its small size in the global SaaS market, investors believe India will eventually dominate the sector due to two factors: its large pool of English-speaking developers and the low cost of hiring them.
Software engineering has become one of the most sought-after career options in India, thanks to the growth of the country’s IT industry.
“India actually has one of the largest developer communities in the world,” Bhatnagar told CNN Business. Many of them have worked for some of the world’s most prestigious tech firms.
Postman co-founder Abhinav Asthana credits his time as an intern at Yahoo in Bengaluru for inspiring him to create his product.
He devised a plan to create a tool that would make API (Application Programming Interface) testing easier. An API is a piece of programming code that defines how two applications communicate with one another, and Postman claims that it has made it easier for engineers to collaborate on API design and development.
“We saw how software was created at these global companies, and we saw API was a key problem,” Asthana told CNN Business.
With a valuation of $5.6 billion, Postman is now India’s most valuable SaaS unicorn.
