Suresh's quote on Slowdown cloud: Value-for-money software is silver lining for India SaaS

The Indian Software-as-a-Service (SaaS) ecosystem faces slowing business growth and longer sales cycles, prompting them to cut costs for sustainable growth, executives said.

Software on cloud, bought by easy-to-engage subscription models, have flown off servers over the last decade, with Indian companies like Zoho, Freshworks, Browserstack and others as well as pandemic-born high-flyers like Spendflo, Rocketlane, and Everstage posting high growth numbers over the years.

Nevertheless, an anticipated slowdown in 2023 could be the first test for most Indian SaaS founders used to steering their businesses through 30-40% topline growth.

"There is going to be some impact on business growth. For example, already, the marketing and sales spends are lower; we see companies like Google and Facebook adjusting to that [layoffs in Big Tech]. Retail buying is going to be slower, and we see Amazon making changes," said Manav Garg, a SaaS company CEO who founded SaaSBOOMi, a community of over 800 cloud software companies.

Garg said the trickle-down effect on the B2B SaaS community - where India has built a strong ecosystem selling software to global buyers - will impact some product lines.

"So, all that will trickle down to B2B businesses too - if you're selling sales and marketing software, it's going to be hard," he said.

Zoho, which is close to completing 27 years in business, will not fire employees though hiring is set to come under greater scrutiny.

The company has witnessed the ripples of the American recession in their books over the last two quarters, besides an industry-wide slowing of sales cycles, said Praval Singh, vice president-marketing and customer experience at Zoho.

"We did phenomenally well last year [2021]. We did see good growth this year too, but in the last couple of quarters growth has been slow, so our overall annual growth is going to be slower than the previous year," Singh said.

Recently, Chennai- and- US-based SaaS company Chargebee said it was letting go of 10% of its workforce, given its accelerated drive towards profitability.

San Mateo- and Chennai-based Freshworks said it was letting go of 60 people in India as it made organizational changes to "fuel business growth."

The Indian SaaS startup ecosystem comprises largely of small businesses with revenue around $25-$50 million barring a few large ones, meaning they are better positioned than majors like the US-based Salesforce (FY22 revenue at $26.5 billion, up 25%) whose sheer size rob them of the nimbleness required to scout for newer, revenue-generating product lines, said Suresh Sambandam CEO of Chennai- and US-based Kissflow and a co-founder of SaaSBOOMi.

Nevertheless, the long-term prospects for Indian SaaS businesses are seen trumping the 12-18 month slowdown phase ahead.

Mumbai-based Netcore Cloud, a bootstrapped SaaS company, believes the on premise to cloud transition is a business growth driver with a lot more wind in its sails.

Founder Rajesh Jain told ET: "India's SaaS companies have a long period of future growth. 2022-23 will be just seen as a blip. Whether 2023 is worse or better than 2022 is hard to tell - much depends on the extent of slowdown/recession in the US and Europe."