One of the biggest themes in the post-pandemic world is the automation of operations and adoption of digital tools by smaller businesses that have so far remained away from tech solutions. The digitisation of Indian SMB and MSME sectors has been a top priority for the government for decades. One major obstacle hindering the adoption of digital tools and technology products among the small and medium-sized enterprises is the lack of awareness regarding the value creation of digitalisation to their business.
With the outbreak of Covid-19 in India and the rise in social distancing measures, the need for an online presence along with the adoption of digital tools such as remote workplace management systems, digital payments and enterprise tech applications have become of utmost importance today. Which means that the long-standing reluctance towards digitisation by the SMBs in India is quickly slipping away, opening up the opportunity for tech startups.
India is home to approximately 63 Mn SMBs as per the government of India’s estimate for 2015-16. Out of these, 44 Mn (or 70 % of the total) are unregistered whereas the remaining 19.5 Mn are officially registered. In recent times, multiple SaaS companies from India and around the world have shown confidence in India’s vibrant SMB ecosystem and have been offering solutions to help them manage work and operations. Some of these key companies include Zoho, CleverTap, Wingify, Freshworks and Deskera.
In brief, despite increased interest from established SaaS adopters, the market opportunities in the SMB segment will remain high. But it all depends on finding the right product-market fit and optimal capitalisation of the target audience. This is where SaaS startups need to study the market and find the right niches.
The Maturity Of Horizontal SaaS Tech Among Indian SMBs
The low technology adoption makes SMBs less efficient compared to tech-adoptive businesses despite their significance to the economy. Besides operational inefficiency, the informal status of much of the SMB sector and the lack of organised markets in many segments also makes it difficult to leverage the benefits offered by formal financial institutions such as access to cheaper credit and other financial products.
The primary reason why accounting software has managed to reach a critical mass is because of higher efficiency of processing and features such as GST integration. When the GST was introduced on July 1, 2017, the complexity of maintaining accounts for the small and medium-sized enterprises increased significantly. Therefore, having an integrated solution was the need of the hour.
Similarly, when demonetisation was imposed on November 8, 2016, the scarcity of cash in the market forced businesses of different scale of operations to adopt digital payment solutions. This implies that in order to facilitate the adoption of digital solutions among the SMBs and external push either by the government or due to natural causes is a must.
Decoding The $8.7 Bn Opportunity For Horizontal SaaS Among Indian SMBs
The total market opportunity for horizontal SaaS solutions in the SMB space is estimated to be $8.7 Bn, as per DataLabs by Inc42+ analysis on the various sectors that make up the overall SMB market. Out of which 22% — the single highest individual contribution worth $1.9 Bn — is from the retail segment. India is home to over 21 Mn retail outlets which are classified as SMBs, with social distancing norms in place and more people opting for home delivery the opportunity in areas such as contactless checkouts and payments and delivery order management, is poised to increase.
Also when we plot all the potential SMB sectors which have a significant market opportunity for horizontal SaaS solutions, retail turns out to have the right balance of digital influence as well as the market opportunity.
In addition to retail, education and manufacturing also have lucrative opportunities for horizontal SaaS products. For instance, in the case of manufacturing, we are witnessing growing interest from both the government as well as the people for domestic manufactured products, as well as a stronger push for industry 4.0 solutions and other technological enhancements.
The SaaS solutions will play a pivotal role in advancing the “Make In India” mission seeing as automation and digitisation will increase the overall productivity of the manufacturing sector. Therefore, increasing the contribution of the manufacturing sector to the overall Indian GDP should be a major point of action for the government and businesses. As per the World Bank, in 2018 the manufacturing sector contributed only 15% to India’s total annual GDP, compared to China’s 29% and Bangladesh’s 18%.
Similarly, the education sector which was another SMB-heavy sector with plenty of coaching classes and training institutes, had been very reluctant about adopting tech in their operations. The pandemic has changed this reality and in order to continue operations remotely, these businesses have also had to adopt an O2O (offline-to-online) strategy. B2B edtech products and services are in great demand as schools and colleges are gearing up for virtual classrooms until the coronavirus is contained.
Overall there is no doubt that the business opportunity for horizontal SaaS solutions among the SMB sector is at its peak, but the question remains how intense the competition will be and whether SaaS startups will be able to offer the right bouquet of solutions to convince SMBs across the board about the value proposition?
To know more such insights read the latest release from DataLabs by Inc42+ — Opportunities For Horizontal SaaS In India’s SMB Market Report 2020.
The post Inside The $8.7 Bn SMB Opportunity For India’s Horizontal SaaS Startups appeared first on Inc42 Media.
Author: Sandeep Singh
Source : https://inc42.com/datalab/inside-the-8-7-bn-smb-opportunity-for-indias-horizontal-saas-startups/
Date : 2020-08-01T07:34:41.000Z