Bessemer Venture Partners, a leading global venture capital and private equity firm, released its flagship “The Rise of SaaS in India 2024” report today, analyzing India’s Software-as-a-Service (SaaS) market. The report highlights the burgeoning growth potential of the Indian SaaS industry, driven by the rapid adoption of AI, increasing focus on cybersecurity, and increasing cloud adoption in the BFSI and Manufacturing industries.
As per the report, India’s dynamic startup ecosystem is set to attract $1 billion in new venture funding in 2024, which is 25% higher compared to 2023. A significant portion of this investment will be directed towards AI-focused companies, which are offering significant growth opportunities. Indian SaaS unicorns and centaurs have collectively added $5.9 billion in revenue during 2023 alone. Additionally, India’s SaaS market is projected to reach $50 billion by 2030, with a possibility of an upward revision given the rapid advancements in AI and its integration into SaaS solutions. The survey findings also reveal that 60% of startups, previously pure SaaS companies, are now evolving into AI-enabled SaaS providers.
Anant Vidur Puri, Partner, Bessemer Venture Partners, said: “2024 is the year artificial intelligence goes mainstream, marking a pivotal shift from emerging technology to a cornerstone of business and industrial operations. AI is the next revolution in software, and we expect all software to transition to AI native, AI enabled, or AI infused in some way over the coming months. India is also in a unique position with its large base of AI developers and global leadership in business and professional services. We believe AI will be a big boost to this industry by enabling better margins and higher customer value delivery. In addition to AI, we believe cybersecurity, wealth tech, and industrial software are 3 other key trends that will lead the next leg of software growth in India. We’re particularly excited about cybersecurity as this is a domain in which India has rapidly growing skilled talent and a potential to serve a large domestic as well as global market”
Key Predictions from the Report:
Prediction 1: AI-enabled Software Will Emerge Alongside SaaS
The lines between traditional SaaS and AI-enabled software are blurring rapidly. The survey shows that more than half of companies identify as AI-enabled SaaS and 34% as native SaaS. This transition is driven by the need for more advanced, intelligent solutions that enhance business operations and customer experiences. The adoption of AI features by 92% of early-stage software startups in India underscores this trend. The integration of AI technologies such as machine learning, natural language processing, and advanced analytics into SaaS platforms is creating a wave of innovation, making software more intuitive, adaptive, and capable of automating complex tasks.
Prediction 2: AI Will Grow India’s Dominance in the Professional Services Market
India has as always been a pivotal player in the global services market accounting for 19% of the $400 billion industry and is set to increase to 28% by 2030. Bessemer predicts that this growth will be further fueled by the increasing adoption of AI technologies that improve service delivery and efficiency across various sectors. AI-driven automation and analytics is streamlining back-office operations and enabling data driven decision-making. With AI-first service companies achieving over 65% gross margins, there is huge potential for higher profitability and building a competitive advantage in the global market. The integration of AI into professional services is expected to create new opportunities for innovation and solidify India’s position as a global leader.
Prediction 3: India’s Cybersecurity Companies Will Emerge to Serve Domestic and Global Markets
Cybersecurity is becoming increasingly crucial for businesses today with the rising cyberattacks in India. The domestic cybersecurity market reached $6 billion in 2023, driven by a growing talent pool and increasing investments. With 99% of Indian organizations expected to increase their cyber budgets, the market is poised for rapid growth. With increasing sophistication of cybercrimes, the demand for robust cybersecurity solutions is growing, and Indian companies are well-positioned to meet this demand both domestically and globally. The new laws mandating stricter data protection and cybersecurity measures will further boost the demand for advanced cybersecurity solutions. Cyber insurance is a key part of building resilience and is set to grow to 50% year over year over the next 5 years to get to ~$800M by 2030.
Prediction 4: Cloud software Providers Will Power the Next Unlock in the Indian Wealth Landscape
India’s wealth management landscape is transforming, driven by a rapid growth in demat accounts and assets under management. Total demat accounts reached 114 million in 2023, with AUM of $405 billion. The rising wealth and financialization of assets are driving demand for sophisticated, tech-enabled wealth management solutions. These solutions simplify wealth management and offer new investment opportunities. The integration of AI and machine learning into financial platforms enhances predictive analytics, personalize investment strategies, automate advisory services, making it more accessible and efficient.
Prediction 5: Industrial SaaS Will Transition from On-Premise to Cloud Deployments
The industrial sector is rapidly adopting AI and cloud technologies, driven by growth in manufacturing and global ESG regulations. Over 60,000 businesses are regulated to publish ESG reports from 2024, which is expected to grow by 50% over the next 3-4 years. The transition to cloud-based industrial SaaS solutions facilitates real-time data analytics, predictive maintenance, and enhanced supply chain management, crucial for achieving higher productivity and sustainability in industrial operations.