By Ravi Srivastava
Indian SaaS industry has transcended borders, offering cost-effective and scalable solutions across sectors. This rise has been fueled by several factors – prowess of Indian tech talent, increased digital adoption, and a global shift towards cloud-based services.
McKinsey estimates the Indian SaaS market to hit $50-70 billion by 2030, up from $7B in 2022, growing at nearly twice the rate of the global SaaS market. Nevertheless, that promising trajectory would still leave India to be under 5% of the global SaaS market, which is expected to go from $450B to $1.3-$1.6 trillion in the same period.
Unless a significant emergent factor changes this trajectory – like the genAI boom we’re currently witnessing.
GenAI focuses on creating algorithms that can generate new content such as text, images, and code. This has a wide range of potential applications in the SaaS industry – it can be used to personalize user experiences and support, automate tasks and workflows or even generate new product & campaign ideas to be tested in the market.
Often these applications are geared towards boosting productivity, freeing up precious time and resources, and even boosting creativity cycles. GitHub estimates that developers that use its coPilot coding assistant are about 50% more productive than those who don’t.
This boost is not only limited to product but also equally, if not more, applicable to go-to-market motions. For instance, SaaS companies are increasingly using AI-based personalization in prospecting customers and driving sales more efficiently or accelerating time to market for new products.
One of the leading indicators of the impact of any technology is the fraction of competitive talent that are engaged and working within the space. OpenAI’s “ChatGPT moment” has captured the imagination of consumers, businesses and entrepreneurs alike. As a seed stage VC with a large focus on SaaS, we see hundreds of new businesses and teams every month and our own data are showing that nearly half of all new teams are now utilizing GenAI tools in some way shape or form.
Another characteristic of the GenAI boom is the breakneck speed of iteration and adoption. Often in the tech startup world there is a question of whether incumbents would be able to innovate fast enough or whether disruptors would be able to get distribution first. This cycle is seeing the incumbents innovate rapidly, not only at the infrastructure layer – i.e. openAI or Amazon’s Lex etc – they’re moving rapidly at the application layer as well. Salesforce has already launched their Einstein GPT and Asana has rolled out their GenAI powered tool that helps analyze and build self-optimizing workflows. Not to mention the Bing and Bard genAI search integrations that have the potential to redefine internet search, which has implications across a variety of business models.
Notably, unlike the internet, cloud and mobile cycles, the Indian tech ecosystem is seeing nearly no lag between the time of experimentation & adoption of these technologies in developed markets vs domestically. Freshworks already uses GenAI to personalize customer support tickets and Darwinbox is working on automating tasks like employee onboarding and performance management.
A Goldman Sachs report earlier this year pegged the impact of GenAI on global GDP to be up to 7%. For comparison, this is several times the estimated impact of the PC adoption cycle and has the potential to double productivity growth rates, which could reflect in the SaaS sector as much, if not more!
So both a top-down and bottom-up look is indicating an intertwining and acceleration in growth for SaaS with GenAI and this convergence can unlock unprecedented opportunities. By nurturing an ecosystem that values innovation, inclusivity, and responsible AI practices, we can pave the way for a SaaS industry that exceeds the top end of projections by a fair bit.
The author is partner, Leo Capital
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