Indian SaaS Market Will Clock 76% CAGR by 2011

by CXOtoday Staff    Jan 15, 2009

Ease-of-use and convenience are the top two reasons for Software as a Service (SaaS) adoption in India, while a high level of comfort with on-premise applications and lack of adequate awareness about the availability of suitable SaaS applications emerged as the biggest barriers for the same, said a recent survey on SAAS usage among Indian IT decision-makers from small, medium and large enterprises.

The report forecast that SaaS market will register a CAGR of 76% in India between 2007-11 and reach $260 million in revenues by 2011. The Indian SaaS market is poised for high growth with 76% of survey respondents, who have not adopted SaaS, planning to do so within the next 12 months.

SaaS-based ERP and CRM solutions are likely to see highest demand in the country. "As CRM is a fairly new concept in India, an on-demand mode makes it easy for Indian businesses to adopt CRM applications without investing huge amounts of money. Similarly, on-demand ERP offers a viable alternative for many organizations, as many small organizations are either unable to afford expensive ERP solutions or have already deployed point solutions," said Balaka Baruah Aggarwal, senior manager of (emerging software) of Springboard Research.

SaaS customers and prospects in India do not significantly recognize the value addition provided by local resellers and agents as 69% of SaaS users indicated that a reseller or partner is not necessary to make a SaaS purchase. Resellers contributed to just 1% of SaaS purchases, while the largest number of SaaS purchases was made during interaction with a representative from the vendor.

"As the consumer base grows and gets more scattered geographically, developing local channels and base of partners is a key challenge and likely to emerge as an important differentiator in the market. Vendors will have no choice but to ramp up partner/reseller channels to keep up with demand," said Aggarwal.

Application penetration in Indian enterprises is low. "There is still a long way to go before the full range of SaaS benefits becomes well known as the current demand for SaaS applications is confined to just a few applications. Vendors need to push applications like email, security/compliance and human resources which have been adopted widely in other regions, even within Asia," said Aggarwal.

Among the vendors, the report states that WebEx commands an estimated 69% market share in web-based collaboration tools, while, Citrix Online, Microsoft, and Ramco On-demand are other key players with a significant presence.

(Inputs from "Software as a Service in India: An Overview" by Springboard Research)