‘Innovation will be key differentiator in SaaS’

livemint.com:

BENGALURU : Amid a downturn in the software-as-a-service (SaaS) market, marked by declining sales and delayed purchases, innovation-led differentiation has emerged as a key challenge for most SaaS firms, globally, including in India, a top executive at Lightspeed said in an interview. Hemant Mohapatra, a partner at Lightspeed, focussing on SaaS, enterprise infrastructure, crypto, and space and satellite investments, said with rising competition, the sector has become crowded with “hundreds, if not thousands, of companies going after the same set of customers". Around 80% of the SaaS market is now saturated, with every category witnessing several alternatives over the past two decades of the internet, he added.

“This is why every single sales cycle has gotten elongated, which is also why loyalty from the customers is a lot harder to find." At the outset of the internet era, many companies prioritized innovation, he said. “When Dropbox came to the market, it was remarkable. It was very innovative.

But over time, Dropbox is no different than, say, Box, or Drive, or Office 365. They all do the same thing. How do you differentiate?" Besides, SaaS companies have been struggling due to extended timelines from customers, impacting growth.

In a June 2023 report, management consulting firm Zinnov and venture capital firm Chiratae Ventures had revised revenue projections for Indian SaaS startups from $100 billion to $26 billion. According to Mohapatra, when interest rates were low, companies sought differentiation through discounts, marketing, branding, and product-led initiatives, rather than innovation, which impacted their profits. “That is what happened with the world of SaaS." “The capital market has changed its attitude.