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Indian Software Product Ecosystem – Accelerating Growth
Indian Software Product Ecosystem – Accelerating Growth

March 30, 2022

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Indian Software Product Ecosystem – Accelerating Growth

Software product sector has evolved substantially over the past few years. Growing at >10% CAGR from 2019-22 to reach $13.3 Bn the growth has been propelled by cloud shift and global market penetration. Software product industry has outperformed the overall industry growth in FY2022E and has grown by 18.7% compared to the tech industry which has grown by 16.3% in the same period. 

SaaS, Enterprise Digitization, and SMBs are the key enablers for this growth with SaaS global market share alone growing by 2X - indicating strong acceptance of Indian products globally. If we talk about horizontals, customer relationship management, and enterprise resource planning continues to dominate software product business accounting for ~50% of the revenue, new emerging horizontals like DevOps, Dev Tools, content/data, management, etc also getting traction. Software products see high acceptance in verticals like BFSI and Hi-Tech accounting for ~65% of the revenue, other verticals generating revenue are manufacturing, retail, telecom etc.

Software Product 1

There are certain trends that have been driving software products over the years:

  • Global enterprises are embracing Indian software products like SaaS, digital banking, cloud enterprise solution, etc. with high adoption seen across sectors like mid-size BFSI, Retail, Travel/Tourism, and Pharma/Healthcare
  • Digital acceleration among Indian enterprises aiding the penetration of software products. Spending towards digitization has also increased across large, mid-size, and SMB companies.
  • Deeptech penetration is increasing among software products with 20-24% of software products leveraging deeptech. Horizontals like HCM, cybersecurity, analytics, hybrid cloud solutions, and other niche segment see high deeptech penetration and observed substantial revenue growth
  • Verticalization - an area of increased focus for companies to develop vertically focused solutions will help them to tap into $15 Bn opportunities e.g: Entertainment, Energy & utilities, TMT, sports etc.

Software Product 2

 

  • Over the years Indian tech firms have increased their interest towards the software product business by building out their own software products. Over the years their market share has increased from <5% to >30% in a time frame of 2 decades.
  • Talent continues to play a key role in software product areas, firms have built a strong workforce for product engineering/development representing >40% of the total workforce. Sales, marketing, global business development employee a strong workforce of over 35%.
  • SaaS – an evergreen sector that continues to emerge stronger with time. With the shift of workloads to cloud, deeptech competitive products and growing SMB segments, SaaS continues to spread its wings. We have also seen that Indian SaaS Product Firms are partnering with SI’s and Managed Service Providers for strategic tech partnership and GTM.

 

India’s software product unique value proposition has helped the growth of the sectors substantially.  India software product companies managed to tweak their products to adjust to the market needs. They customize prices and offer different pricing models to its customer. The solution developed by these companies is cloud-ready which makes them scalable and easy to deploy. Another uniqueness they have is the majority of products offered by Indian firms are easily extensible through native integration and open APIs. Another important value proposition is easy implementation where all maintenance activities can be done over the air (OTA) via the cloud.

Positive outlook for the industry with SaaS product expected to dominate with $30-40  Bn revenue potential of B2B SaaS players by 2030, Deep tech penetration in software product expected to reach 40-60%, verticalization to become more prominent with >50% products to be vertically focused by 2030. Emerging areas like low code no code, APIs etc. will further amplify the software product ecosystem growth.

Many more such insights are available in our recently released report on India’s Software Product Ecosystem – Accelerating Growth. To read, click on the link below:

https://community.nasscom.in/communities/productstartups/indias-software-product-ecosystem-accelerating-growth


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