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Executive Summary: SaaS Landscape in India

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Executive Summary: SaaS Landscape in India

Zinnov Confidential

Agenda

SaaS Market Overview

Key Trends and Highlights

Executive Summary: SaaS Landscape in India

Zinnov Confidential

The domestic market for SaaS is estimated to be about USD 50 million and is
currently dominated by Collaborative Applications and CRM workloads
SaaS Collaborative Applications Market in India, 2009 (USD million)

Workload-wise Distribution of SaaS Market in India, 2009 (USD Million)


Total Market: USD 47-53

million

20
15

2.3

0.06

2.94

10

Security
1.5 2
ERM
45

Others**
45

18.9
13.6

Collab.
Apps*
18 19

Company A

Others

Total

E-Mail
45

SaaS CRM Market in India, 2009 (USD million)


20

CRM
16 17

15

5.2

10
5

1.8

1.6

16.2

7.6

0
Company A

Nascent Market-With Couple


of Early Movers

Others

Total

The SaaS market in India is extremely nascent with a total market size of USD 47 - 53 million. Three key
workloads, Collab. Apps, CRM and ERM together contribute 80 percent of the market. With the market
being so nascent, there are a couple of early movers who have cornered a large share of the market. These
include Salesforce.com and Webex

Note: Confidence Level for Market Size is 85 90 percent, * Collab. Apps include web conferencing, productivity suites etc. ** Others include workloads such as storage, remote access, DBMS, BI, content apps. Etc.
Source: Zinnov analysis

Executive Summary: SaaS Landscape in India

Zinnov Confidential

The market is still in an exploratory stage and is witnessing a multitude of


offerings at varied price points
Price Point Trends Across ERM & CRM, 2009

Two largest players have 500+


User Base

customers each. The rest of


the players have less than 50
customers
Ramco (ERP)

About 80 percent of the

Synage (PPM)

customers and 70 percent of


the users for ERM and CRM
are SMBs

Price Point (INR Per User Per


Month)

SaaS Security Market in India, 2009 (USD million)

SaaS ERM Market in India, 2009 (USD million)


5

1.2

1.5

0.5

0.2

0.8

4.8

2
1

2.3

1
0.5

0.2
1.6

1.2

0
Company A

Note: Confidence Level for Market Size is 85 90 percent


Source: Zinnov analysis

Others

Total

Company A

Total

Executive Summary: SaaS Landscape in India

Zinnov Confidential

A variety of constraints have hampered the growth of SaaS solution providers in


India

Focus of companies in Indian


market is relatively new and
lacks scale
Most of these firms dont have
the commitment/money to bank
roll and scale these experiments

Broadband penetration & reach


is relatively low. The active
broadband subscribers in India
was only about 5.5 Million as on
Dec 2008

Broadband
Penetration
Reseller partnerships are critical
since they have the bandwidth
to effectively promote a product
Majority of the SaaS providers
are unaware of mechanisms to
effectively leverage the channel

Leveraging
Resellers

Constraints

Product
Localization

Most MNCs products in the


market are global products with
minimal R&D spend for India
market requirements. There
exists a lack of clarity about
Indian workflows

Note: *Broadband is defined as an internet connection with speed equal to or greater than 256 kbps
Source: Interviews with Company Stakeholders, TRAI, Zinnov Analysis

Lack of
Scale

Pricing

Companies have not been able


to arrive at a comfortable price
range for their offerings
Piracy is also a major cause of
concern for many of the solution
providers

IT Support/
Training

Majority of the SaaS providers


dont have the bandwidth to
provide IT support/ training for
their users

Executive Summary: SaaS Landscape in India

Zinnov Confidential

However, a convergence of a variety of drivers can potentially enhance the


growth of SaaS adoption in India, going forward
With the cost of the high-end mobile phones/ smart
phones decreasing Y-O-Y, there is a high probability
that this mobile revolution would facilitate increased
adoption in India

Mobile
Revolution

With lower total cost of ownership


(TCO), companies can access
solutions such as ERM, CRM thus
providing them a competitive
advantage
Pricing &
Support
Innovations

Drivers for SaaS


adoption in India

Competitive
Advantage

Session/time-based pricing and


innovative IT support through remote
access has further incentivized the
companies to adopt for SaaS
Solutions
Development
of Supporting
Ecosystem

Source: Interviews with Company Stakeholders, Zinnov Analysis

With rapidly evolving reseller networks such as


Jamcracker etc, SaaS as a trend in India is picking up at
a fast pace

Executive Summary: SaaS Landscape in India

Zinnov Confidential

Increased SaaS adoption will help SMBs optimize on their IT investments going
forward

IT System Spending Breakup in percent

Discussion

SMBs share of IT spending in India is


forecast to grow from 38% percent
currently to over 50% by 2015
19%

65%

16%

Professional services have higher PC


penetration. A major chunk of their IT
spending is contributed by PC, networking
equipment, peripherals and productivity
tools

Some of the issues that constrained most


SMBs from investing in IT infrastructure
were cost considerations, inability to afford
technical experts, and lack of awareness of
the value of IT
Software

Source: Zinnov Analysis

Hardware

Services

Executive Summary: SaaS Landscape in India

Zinnov Confidential

Agenda

SaaS Market Overview

Key Trends and Highlights

Executive Summary: SaaS Landscape in India

Zinnov Confidential

The diverse Indian market landscape has presented a unique set of challenges
that need to be addressed
A significantly large base of
SMBs present a huge opportunity
for SaaS solutions in India

India has 35 million SMBs whose IT spend is between 0.4 to 3 percent of their total
revenues
This limited IT spend makes SaaS, with its low total cost of ownership, an easy
solution to offer to SMBs in comparison to on-premise solutions
Also, there exist limited levels of IT purchase decision makers in SMBs, (less than 3)
which reduces the sales cycle time for SMBs

Broadband penetration in the top 10 cities in India is 2.56 million, with strong
growth potential in the future
Power downtime in most of the cities is a key challenge, with average restoration
time of 71 minutes in the metros ; this challenge is more prevalent in sub-urban and
rural India

Customer awareness is critical for SaaS


adoption; Effective Sales & marketing
strategy can help address this issue

Globally, sales and marketing (S&M) spend is about 50 percent of the overall budget
for key SaaS players
The need to create IT awareness through events, demonstrations and other offline
modes (as compared to globally accepted online modes), will substantially increase
the spend on S&M to acquire clients

Innovative pricing models such as free to premium membership are being used to
attract customers. For example, ZOHO has only 60 paid customers but a lot more
free users of its solution, which helps create an awareness on the product and
enables a try and buy model
Global peer companies are finding it difficult to push solutions at their global price
points because of the paying propensity of the Indian customer (Micro, SMB) is less
compared to the global average. Hence they offer discounts on large user bases or
offer entry points with reduced prices
Source: Zinnov SMB Report, MAIT, Emerson Downtime Study, MSME, Zinnov analysis

Market Penetration amongst peer


companies is currently restricted to
the tier-1 cities of Bangalore,
Mumbai, Hyderabad, Pune, Chennai
& National Capital Region (NCR)

Unique price points & pricing


models are critical to address the
price sensitive market

Executive Summary: SaaS Landscape in India

Zinnov Confidential

The Indian market also has certain unique requirements that need to be
addressed
Delivering Tech Support and
training on products is essential

In a SaaS model , which is relatively new to most of the users, peer companies are
grappling with ways to provide tech support and training in the market while
keeping costs down
For example, Tally, an on premise F&A solution provider has a 120 FTE dedicated inhouse support team and close to 500 Tally Authorized Service Centers that offer
services ranging from post sales implementation to support. This system supports
its huge base of 400,000 Tally customers

Indian small businesses do not follow global best practices in business processes,
and hence global products without customization may not fit their business needs
For example, most Indian companies have a hierarchical sales force reporting
structure; however, this is not a standard feature in many Sales Force Automation
products currently in the market. ZOHO charges USD 10 per user per month to
enable its users with this feature

Mobile devices are not being used


as a primary access device for SaaS
solutions currently, however SaaS
suppliers predict an increased
activity in this space in the future

Source: Interviews with company stakeholders, TRAI, Zinnov analysis

Product customization mapped to the


need of the Indian businesses is a
customer expectation and hence is
critical

Though a few peer companies offer solutions enhancements on smart phones,


mobile devices are currently being used only for point functionality SMS alerts
India currently has 415 million mobile subscribers, however there were only
114,000 blackberry users (as on May, 2008), This disparity is constraining solution
providers to restrict their offerings to point functionalities and not complete
solution access

Executive Summary: SaaS Landscape in India

Zinnov Confidential

Ecosystem engagement is essential in a price-conscious domestic market

The initial market leaders have a significant partner eco-system focus and this has
helped them to build an early mover advantage
India has a business landscape that requires a business to communicate with clients
in at least 8 major languages. This requires a strong local channel partner ecosystem to scale effectively in the market

Telecom players could play an


important role in the ecosystem for
growth, payment collection and
client servicing

Peer companies have mentioned that clients prefer to pay via Demand Draft,
Cheque or wire transfer and tracking payments is a challenge.
Peer companies such as TCS (for ITaaS solution) are looking to leverage telecom
players as a payment channel to increase efficiency and reduce overall cost of
service delivery

ISPs are being leveraged by peer companies to push commoditized IT solutions such
as email, security etc. The ISPs provide broadband access and are able to offer
solutions that require limited value selling as an add on. This in turn reduces cost of
sale.
For example, F-Secure has partnered with Sify, Airtel, Reliance and Tata Indicom to
offer its security products to consumers and SMBs

Source: Interviews with company stakeholders, Zinnov analysis

Reseller & Channel Partners are


critical for achieving scale in the
market

Leveraging local ISPs to push low


touch commoditized solutions is an
effective strategy

10

Executive Summary: SaaS Landscape in India

Zinnov Confidential

Channel partners and online marketing strategies are of paramount importance


in a nascent market such as India
1 Direct Sales Team

Online Marketing Strategy

Channel Strategy

Extension

Channel partners have been predominantly leveraged to extend reach of the direct sales team
The partners are carefully selected to utilize their already existing distribution network, to provide the
bandwidth for live demonstrations for customers and offer tech support/ training
Some of the channel partners have been given the flexibility and freedom to rebrand and perform minor
customization for the suppliers products for better market acceptance as the partners have a deeper
understanding of the customer needs

Rebranding &
Customization

Clustered
Approach

Some companies have adopted a clustered approach and have targeted specific geographic regions and
have leveraged the local channel partner networks

Training

Companies regularly conduct training and workshops to acquaint the channel partners with the product
offerings and aid them in selling SaaS offerings

SEO

Search engine optimization is looked upon as a very effective strategy to acquire customers. Customers
through this route have exhibited better loyalty (stickiness) when compared to other marketing channels

Viral Marketing

Webinars

Source: Zinnov Analysis

Viral marketing has yielded good results in India and companies have noticed increasing referral
customers though there is no formal referral bonus incentive

Some companies have focused largely on customer acquisition through webinar and other online events

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Executive Summary: SaaS Landscape in India

Zinnov Confidential

Companies have employed innovative channels to reach and engage their


prospective and installed user base

Strategic Alliances

Salesforce.com and Google have formed a strategic alliance


for SalesForce Group Edition featuring Google Ad-words, which
provides every element of the customer lifecycle, from
advertising, creating leads, closing business and retaining
customers in one integrated solution
Zoho partnered with Google to enable Google users to access
all Zoho services with their single Google ID

Integration with
Social Media

Zoho has launched Zoho applications (Zoho Writer, Zoho


Sheet and Zoho Show) on the Facebook platform, enabling
users to chat and work together through the social network

Partnerships with Telecom


Companies and ISPs

SugarCRM has partnered with Tata Communications to


offer its solution to SMBs and large enterprises
Several companies such as F-secure, have partnered with
Tata Indicom, Reliance, Airtel and Sify to provide on
demand hosting, backup and security solutions to
consumers and SMBs
Indian gaming company Indiagames has tied up with
several ISPs such as Airtel, MTNL, Tata Indicom to deliver
Games On Demand

SalesForce has launched an application on Twitter which


enables SalesForce users to engage with their client base
faster and more efficiently, either individually or en masse

Source: Zinnov Analysis

12

Executive Summary: SaaS Landscape in India

Zinnov Confidential

Disruptive models such as those offered by Schoolmate and TCS are likely to
drive SaaS adoption

Payment
IT +
manpower

ITaaS Stack
L1
Hardware

Parents

L2

L3

Networking
Email
Equipment Office Apps

L4
Business
Apps-HRMS

L5
Custom Apps
Inventory
Management

L6
Business
Intelligence

Information

Discussion
Since the launch of Tally ERP 9 with sync
feature, 85,000 of its total user base of
400,000, have downloaded the updated
version
Tally is leveraging its Tally Academies for tech
support and creating awareness
Tally has launched an Auditors ERP for the key
influencer market of CAs

Source: Zinnov Analysis

Discussion
SaaS

Support

Discussion
Man power

Schoolmate will deploy a technical person in


each school, who will work fulltime on
Schoolmate implementation in the school

TCS Single point contact for SMB


TCS will provide both IT infrastructure
and software on Subscription model
Remote IT support is currently being
offered.
Aggressively looking at Education,
Healthcare and professional services
market

13

Executive Summary: SaaS Landscape in India

Zinnov Confidential

A strong partner ecosystem enables access to the right target audiences, critical
for workloads like ERM & CRM
1
200

Access to critical mass

Swipe a credit
card model not
likely for
purchases in
these workloads

A larger number of partners can enable


reach to a larger audience

Customer Base

160

SaaS, as a model, is viewed as a business


of volumes; reaching critical mass of
customers is important for long-term
sustainability

120

150
Company C

80
50

40
0

Comp B

3
Comp A
0 CRM

10

20

30

40

50

60

Channel Partners

Depth of Channel Partner


Ecosystem

Ramco has established a network of 55 partners


who provide sales, implementation and support
services

Breadth of Channel Partner Ecosystem

Training & Certification


Ramco invests in regular training &
certification of its partners

Source: Interviews with Company Stakeholders, Company Websites , Zinnov Analysis

Ramco has focused on creating a varied


channel partner base that can enable access
to different sizes and types of customers

Company
A

Large IT services companies, companies


having cluster focus and companies with a
wide sales network are some of the types of
Ramco partners

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Executive Summary: SaaS Landscape in India

Zinnov Confidential

Marketplaces like Jamcracker, have been successful in sales of solutions such


as web conferencing & security

Easy access to
prospective
customers

Lower cost of new


customer
acquisition

customers who are actually looking out for solutions to their problems and are open to SaaS as a
model

Resellers on the marketplace can up-sell/ cross-sell to the existing customers accessing the
marketplace, more cost effectively than acquiring new customers through other marketing
channels

Support & Training

Market places like Jamcracker & Sparx provide easy access to a larger pool of prospective

Resellers get added benefits such as L1, L2 end-user support from the India center, sales
training, technical support, and marketing support programs, automated billing and settlement of
subscription-based services

Source: Interviews with Company Stakeholders, Company Websites , Zinnov Analysis

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Executive Summary: SaaS Landscape in India

Zinnov Confidential

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Executive Summary: SaaS Landscape in India

Zinnov Confidential

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