Startups will drive the future of SaaS, say experts

Techcircle SaaS Forum 2014, organised in Bangalore on Thursday, was filled to the brim with ideas. Technology entrepreneurs along with their fertile imagination were able to enunciate to the audience that the business of delivering software over the cloud was at best scalable in the western world and not in the home market. However, they said that the Indian market for start-ups will open up in three to four years.

Software-as-a-service has been around for a while but the business model was usually based on selling licences and most often clients complained about using them efficiently. The 20 start-ups that participated the event spoke of how disruptive their business models had become because of the cloud. For instance, on a cloud platform one could charge on the basis of usage or collect an upfront fee and also add an annual maintenance contract on top of the service if the service is hosted on a private cloud. The domestic IT industry is worth $30 billion.

Accounting, human resources and analytics are some of horizontal businesses that have emerged as a sweet spot for start-ups in the software-as-a-service industry. But where is the next wave of growth? "To penetrate the local market one must bring in the local flavor; for example, understanding labour laws and taxation of each state is needed to offer a comprehensive inventory management product," says Alok Goyal, partner at Helion Capital. The next wave of SaaS growth is seen in e-commerce, quick service restaurants, medical and HR.

The panellists also discussed the role of large clients in adopting products of start-ups. Capillary Technologies and Knowlarity spoke about how Indian companies were adopting their software to connect with their customers better. In fact, Capillary has gone on to help several home-grown retailers understand their customer buying habits and in turn help retailers increase customer stickiness.

The audience were thrilled with the panel on pricing models because today the challenge for entrepreneurs is to win new customers without actually getting them to pay for the product first. The panellists were insightful and stated that the checklist would be to build a great product first and then offer it free for the early adopters for a limited period. "Once you have a great product, you can ask your users to pay upfront after the beta phase," says Abinash Tripathy, CEO of Helpshift. He adds that mature market users will pay upfront if they are convinced that the product is good.

The other panels continued to cover a broad range of topics of data sovereignty and security along with building public and private clouds for large clients. The role of Chief Information Officers was discussed and the panellists agreed that today most of the transformational IT decisions were being made by Chief Financial Officers and Chief Marketing Officers. "India is just about opening up to the importance of these technologies," says Sanjay Nath, MD of Blume Ventures.

The role of large IT companies, like Wipro and Infosys, in partnering with start-ups to scale up their services was a key point in most panel discussions. It was also discussed that valuations could be driven high by achieving scale in the western markets and that several of these entrepreneurs could eventually merge with a larger client or entity.

Participants, who were also entrepreneurs, gained a lot more from the panel discussions and many of them exchanged business cards with the several venture capital funds that had graced the occasion.