SaaS cos to benefit from global recession

Economic uncertainties in North America and Europe are likely to raise demand for SaaS solutions, with companies laying off thousands of employees globally, industry experts said.

According to a June report by research firm International Data Corp. (IDC), SaaS startups offering applications and systems infrastructure softwares earned $249 billion in revenues during 2021. Revenues may grow at a brisk pace from hereon, as more companies plan to migrate to Cloud and adopt tech-enabled services to cut costs, they said.

Neha Gupta, vice president, team manager at Gartner, said softwares directly contributing to sales and marketing initiatives and performance have grown during past downturns. “Enterprises will accelerate adoption of cloud solutions giving them flexibility to pay just for the capacity and consumption they need.”

Industries such as education and healthcare, and governments, which were forced to digitalize to cater to consumer needs will further adopt cloud SaaS, Gupta said. “Consistent with prior cycles, it is likely that solutions such as customer experience, digital commerce, analytics, collaboration, automation, and marketing will witness growth during the downturn.” However, enterprise asset management applications and manufacturing have suffered during downturns.

Anand Jain, co-founder and chief product officer of CleverTap, a SaaS-based mobile marketing company, said customers have been looking to consolidate their growth stacks into single unified platforms instead of using multiple solutions. “Companies are evaluating their SaaS contracts, and cutting down on spends where they do not see a clear correlation between the utility and improvement in business metrics,” he added.

According to Jain and Gupta, chief financial officers (CFOs) and chief information officers (CIOs) will prioritise effective management of cash flows, as many companies have missed their earnings targets.

Sanchit Vir Gogia, chief executive officer of Greyhound Research, said the cost structure of SaaS companies in the US and Europe is far more expensive than Indian firms, which are leaner, and with readily available manpower for management and implementation of services. This makes them “more likely to sustain this difficult phase, and grow”, Gogia said, adding that SaaS companies offering performance-based metrics for business operations will continue to attract funding.

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