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Zinnov Confidential
Agenda
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The domestic market for SaaS is estimated to be about USD 50 million and is
currently dominated by Collaborative Applications and CRM workloads
SaaS Collaborative Applications Market in India, 2009 (USD million)
million
20
15
2.3
0.06
2.94
10
Security
1.5 2
ERM
45
Others**
45
18.9
13.6
Collab.
Apps*
18 19
Company A
Others
Total
E-Mail
45
CRM
16 17
15
5.2
10
5
1.8
1.6
16.2
7.6
0
Company A
Others
Total
The SaaS market in India is extremely nascent with a total market size of USD 47 - 53 million. Three key
workloads, Collab. Apps, CRM and ERM together contribute 80 percent of the market. With the market
being so nascent, there are a couple of early movers who have cornered a large share of the market. These
include Salesforce.com and Webex
Note: Confidence Level for Market Size is 85 90 percent, * Collab. Apps include web conferencing, productivity suites etc. ** Others include workloads such as storage, remote access, DBMS, BI, content apps. Etc.
Source: Zinnov analysis
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Synage (PPM)
1.2
1.5
0.5
0.2
0.8
4.8
2
1
2.3
1
0.5
0.2
1.6
1.2
0
Company A
Others
Total
Company A
Total
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Broadband
Penetration
Reseller partnerships are critical
since they have the bandwidth
to effectively promote a product
Majority of the SaaS providers
are unaware of mechanisms to
effectively leverage the channel
Leveraging
Resellers
Constraints
Product
Localization
Note: *Broadband is defined as an internet connection with speed equal to or greater than 256 kbps
Source: Interviews with Company Stakeholders, TRAI, Zinnov Analysis
Lack of
Scale
Pricing
IT Support/
Training
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Mobile
Revolution
Competitive
Advantage
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Increased SaaS adoption will help SMBs optimize on their IT investments going
forward
Discussion
65%
16%
Hardware
Services
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Agenda
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The diverse Indian market landscape has presented a unique set of challenges
that need to be addressed
A significantly large base of
SMBs present a huge opportunity
for SaaS solutions in India
India has 35 million SMBs whose IT spend is between 0.4 to 3 percent of their total
revenues
This limited IT spend makes SaaS, with its low total cost of ownership, an easy
solution to offer to SMBs in comparison to on-premise solutions
Also, there exist limited levels of IT purchase decision makers in SMBs, (less than 3)
which reduces the sales cycle time for SMBs
Broadband penetration in the top 10 cities in India is 2.56 million, with strong
growth potential in the future
Power downtime in most of the cities is a key challenge, with average restoration
time of 71 minutes in the metros ; this challenge is more prevalent in sub-urban and
rural India
Globally, sales and marketing (S&M) spend is about 50 percent of the overall budget
for key SaaS players
The need to create IT awareness through events, demonstrations and other offline
modes (as compared to globally accepted online modes), will substantially increase
the spend on S&M to acquire clients
Innovative pricing models such as free to premium membership are being used to
attract customers. For example, ZOHO has only 60 paid customers but a lot more
free users of its solution, which helps create an awareness on the product and
enables a try and buy model
Global peer companies are finding it difficult to push solutions at their global price
points because of the paying propensity of the Indian customer (Micro, SMB) is less
compared to the global average. Hence they offer discounts on large user bases or
offer entry points with reduced prices
Source: Zinnov SMB Report, MAIT, Emerson Downtime Study, MSME, Zinnov analysis
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The Indian market also has certain unique requirements that need to be
addressed
Delivering Tech Support and
training on products is essential
In a SaaS model , which is relatively new to most of the users, peer companies are
grappling with ways to provide tech support and training in the market while
keeping costs down
For example, Tally, an on premise F&A solution provider has a 120 FTE dedicated inhouse support team and close to 500 Tally Authorized Service Centers that offer
services ranging from post sales implementation to support. This system supports
its huge base of 400,000 Tally customers
Indian small businesses do not follow global best practices in business processes,
and hence global products without customization may not fit their business needs
For example, most Indian companies have a hierarchical sales force reporting
structure; however, this is not a standard feature in many Sales Force Automation
products currently in the market. ZOHO charges USD 10 per user per month to
enable its users with this feature
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The initial market leaders have a significant partner eco-system focus and this has
helped them to build an early mover advantage
India has a business landscape that requires a business to communicate with clients
in at least 8 major languages. This requires a strong local channel partner ecosystem to scale effectively in the market
Peer companies have mentioned that clients prefer to pay via Demand Draft,
Cheque or wire transfer and tracking payments is a challenge.
Peer companies such as TCS (for ITaaS solution) are looking to leverage telecom
players as a payment channel to increase efficiency and reduce overall cost of
service delivery
ISPs are being leveraged by peer companies to push commoditized IT solutions such
as email, security etc. The ISPs provide broadband access and are able to offer
solutions that require limited value selling as an add on. This in turn reduces cost of
sale.
For example, F-Secure has partnered with Sify, Airtel, Reliance and Tata Indicom to
offer its security products to consumers and SMBs
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Channel Strategy
Extension
Channel partners have been predominantly leveraged to extend reach of the direct sales team
The partners are carefully selected to utilize their already existing distribution network, to provide the
bandwidth for live demonstrations for customers and offer tech support/ training
Some of the channel partners have been given the flexibility and freedom to rebrand and perform minor
customization for the suppliers products for better market acceptance as the partners have a deeper
understanding of the customer needs
Rebranding &
Customization
Clustered
Approach
Some companies have adopted a clustered approach and have targeted specific geographic regions and
have leveraged the local channel partner networks
Training
Companies regularly conduct training and workshops to acquaint the channel partners with the product
offerings and aid them in selling SaaS offerings
SEO
Search engine optimization is looked upon as a very effective strategy to acquire customers. Customers
through this route have exhibited better loyalty (stickiness) when compared to other marketing channels
Viral Marketing
Webinars
Viral marketing has yielded good results in India and companies have noticed increasing referral
customers though there is no formal referral bonus incentive
Some companies have focused largely on customer acquisition through webinar and other online events
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Strategic Alliances
Integration with
Social Media
12
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Disruptive models such as those offered by Schoolmate and TCS are likely to
drive SaaS adoption
Payment
IT +
manpower
ITaaS Stack
L1
Hardware
Parents
L2
L3
Networking
Email
Equipment Office Apps
L4
Business
Apps-HRMS
L5
Custom Apps
Inventory
Management
L6
Business
Intelligence
Information
Discussion
Since the launch of Tally ERP 9 with sync
feature, 85,000 of its total user base of
400,000, have downloaded the updated
version
Tally is leveraging its Tally Academies for tech
support and creating awareness
Tally has launched an Auditors ERP for the key
influencer market of CAs
Discussion
SaaS
Support
Discussion
Man power
13
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A strong partner ecosystem enables access to the right target audiences, critical
for workloads like ERM & CRM
1
200
Swipe a credit
card model not
likely for
purchases in
these workloads
Customer Base
160
120
150
Company C
80
50
40
0
Comp B
3
Comp A
0 CRM
10
20
30
40
50
60
Channel Partners
Company
A
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Easy access to
prospective
customers
customers who are actually looking out for solutions to their problems and are open to SaaS as a
model
Resellers on the marketplace can up-sell/ cross-sell to the existing customers accessing the
marketplace, more cost effectively than acquiring new customers through other marketing
channels
Market places like Jamcracker & Sparx provide easy access to a larger pool of prospective
Resellers get added benefits such as L1, L2 end-user support from the India center, sales
training, technical support, and marketing support programs, automated billing and settlement of
subscription-based services
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