I just got back from a business trip in India. Where I attended the Executive Partner Summit and presented at the Strategic Architect Forum.
[update: link to the powerpoint presentation]
Needless to say that SaaS is getting massive interest there. The drivers and hurdles are quite similar to the one in China nicely described by Fred in this post.
Below are a few things that I learned in my numerous conversations there:
A) Number 1 reason SaaS vendors are struggling in India: Trust.
Here is a sentence that the CEO of a SaaS company in India I talked to, keeps hearing over and over. “I understand that your software is 10x cheaper than my accountant but I’ve known my accountant for 15 years; I have never seen you before…” Granted this is not an India specific problem, but it seems to be exacerbated there as there are no real local references of such model. My recommendation to him is to partner with a large well known local brand and sell his service through that brand. In other words, piggy back on the trusted brand even if it cost him 10% or 15% of his revenue as a fee / commission. I call this transitive trust (which happens to be, I found out recently, a term used by active directory when there is an automatic trust association between parent and child domains. For example, if domain A trusts B, and B trusts C, then A automatically trusts C).
B) Number 2 reason they are strggling: for many local businesses, software, is still a “nice to have” (as opposed to a “must have”)
For example, car dealerships which could be typical SMB customers for a SaaS offering, gladly prefer spending their hard earned cash on things that meet the eye than software solutions. Typical examples are marble floors, army of car cleaners/polishers, rich-looking business cards and brochures. "Software to run my business? No thank you, I have run my business without it for years, I'm doing fine". Even if the all-manual process (which often include double or triple entry) ends up costing them a lot of money in delayed payments, lost invoices, low customer satisfaction etc. To be 100% honest, many of these businesses are growing double digits every year; squeezing inefficiency out (although always valuable) might not be seen as the highest priority.
The good thing for SaaS vendors in India is that time is on their side, with time will come acceptance of the model, once the model is accepted, it's all golden. There is certainly no shortage of talent or resources to make SaaS a big reality in India.
C) Rural India
It seemed to me that every other sentence I was hearing in my conversations, had the words “rural India” in it. Rural India where 70% of the current population lives today is a huge growth opportunity for the country. The two main topic of discussions (at least in my conversations) come very often Education and Health.
Imagine Internet kiosks placed in rural areas where one (or hopefully many) can get access to education and doctor services over the Internet, would not this be a fantastic use of SaaS?
D) Big System Integrator Power Houses Want to SaaS-ify you
As mentioned above, the Indian local software economy although very promising is still in its infancy, however what is not at all in its infancy are the mega system integrator power houses. There are no projects off limits to them anymore. I was told about many multi-year, >$100M projects and this on all continents. The discussion I had with them was less about them productizing their assets as SaaS but more about creating SaaS practices enabling US or Europe based ISVs (or enterprises) move to SaaS. Many place this under the “business transformation enablement” bucket. Interestingly, a few were also very interested in capitalizing on their BPO assets and know-how to move into the SaaS hosting business.
In summary, it was a short trip, but very enlightening. I definitively need to go back, there are too many good things happening.
Next stop Brazil. Brazil is in many aspects similar to India and China, if I was a betting man, I would bet that SaaS will be big there very soon too.