Robust security measures go hand-in-hand while building and deploying SaaS solutions

The SaaS industry in India is experiencing rapid growth and evolution, driven by emerging technologies and changing market dynamics. In this interview, Rajesh Sabhlok, Managing Director- Asia Pacific at Vymo, shares valuable insights on the future landscape of the SaaS industry, discussing the impact of AI, edge computing, and blockchain, strategies for staying ahead of the curve, challenges and opportunities for SaaS companies, and the role of government policies and industry collaborations in fostering growth.

In your view, how will emerging technologies like AI, edge computing, and blockchain shape the future landscape of the SaaS industry in India?

The SaaS landscape is evolving, and we’re seeing the emergence and adoption of concepts such as Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), or even Desktop-as-a-Service (DaaS). As solution providers compete in such a dynamic landscape, it becomes imperative that they sharpen their solutions and services with cutting-edge technology like AI, edge computing, and blockchain.

- AI is helping applications become smarter and more intuitive. It is being used to automate repetitive tasks, making things a lot more efficient. ML-based algorithms are being used extensively to get a broader and deeper understanding of customers, their likes, and preferences, which helps in better customer profiling and hence, segmentation. This results in hyper-personalization of solutions/services offered to customers in a manner they prefer and through a medium of their choice.   

- Edge Computing, which would enable insurance companies to process data closer to the source, thereby reducing latency, enhancing security, and enabling faster and real-time decision-making, can become a game changer for an otherwise traditional industry. With several IoT devices [connected devices] now available and being integrated into our daily lives - sensors in cars, wearable tech for monitoring health, etc. insurers can get bespoke information about customers, their behaviours, their physical activities, and their health markers, which would enable the companies to design hyper personalised insurance policies for them - usage-based and on-demand insurance policies. The availability of real-time data from connected devices can also help insurance companies to reduce the incidence and veracity of claims by using early warning signals based on data coming from these sensors, and where claims have incurred, the settlement of claims can be instantaneous as the need for claim verification is mitigated because the information from sensors is reliable, thereby significantly enhancing customer delight/experience - companies have launched smart contracts, which operate at a cross-section of Edge Computing and Blockchain, with such contracts programmed to self execute on occurrence of the risk event without the insurance company’s involvement.

- Blockchain - the value of blockchain for insurance companies is in ensuring different stakeholders and their respective databases containing specific information can be connected in a manner that is highly secure, transparent, and immutable, which helps companies improve efficiencies due to real-time sharing of data/information about a customer/risk incident leading to faster and correct actions being taken; reduction in the incidence of frauds; structuring & execution of smart contracts, on-demand insurance, etc.

Several Saas Companies leverage one or more of these technologies and provide several bespoke use cases for players in the broader BFSI sector, including Vymo, a sales engagement platform designed to help sellers in banks and insurance companies become more productive. Studies suggest that sellers spend only about 30% of their time selling. The remaining time is spent doing repetitive, mundane, non-revenue-generating tasks. A tool like Vymo leverages AI/machine learning technologies to drive sales force productivity by automating the repetitive & mundane tasks on one hand while providing them with prescriptive guidance on next best actions they could take to achieve better business outcomes.

For established SaaS companies, how do you see your role evolving in the face of industry maturation, and what strategies will be crucial for staying ahead of the curve?

Until now, most SaaS organizations have had to overcome the ‘build versus buy’ conundrum faced by client organisations. With clients now realising, depending upon their own life stage and maturity with respect to digital technology/adoption as well as the ability to discern which technology needs to be owned versus what can be leveraged through available SaaS platforms, the battle field has now shifted to other aspects - continuous product innovation, value creation, customer success, and convergence [reducing the need for multiple point solutions if the entire journey can be managed by a single solution thereby reducing the number of integration [fault] points in the digital architecture & providing a more seamless, single pane of glass experience to the users]. For SaaS companies looking to grow aggressively in this decade, they should focus on three things to stay ahead of the curve:

a. Find your niche & strive to be a leader in that niche. As a business leader in one of the few verticalized SaaS companies in the world, I know that verticalization - or focusing on a specific industry [BFSI] and a specific domain [Activity and Performance Management of Distributed Field Teams - Sales/Collections] can prove to be a real differentiator and game-changer in this market. This allows companies to build expertise in their Niche with no distractions whatsoever when it comes to allocating capital, senior management bandwidth, investments in R&D, and building high-performance teams with relevant industry & domain experience. As noted earlier, being singularly focused on a specific industry/domain enables the company to extend its solution across the entire value chain and become a full stack, verticalised solution which is comprehensive and provides an end-to-end seamless experience to the users as well as helps clients stay ahead of the innovation curve at all times due to investments in R&D to continuously improve the existing solution by adopting new emerging technologies.

b. While convergence and verticalisation would help reduce the need for other point systems when automating the identified user journeys, the client organisations would still expect the SaaS solutions to be embedded into their digital architecture/design, which may need seamless integration with their middleware or other systems or sometimes with their core systems as the case may be. It is a huge plus if your product/solution can integrate seamlessly with their existing tech stack.

c. Self-serviceability of the tech platform - Clients expect Product-led SaaS solutions to give them the flexibility to configure the base product to meet their specific, nuanced requirements as they evolve without engaging costly engineering resources from the SaaS providers to make custom changes. Everything being equal, companies with a platform that provides flexibility to clients through self-service capabilities would benefit.

d. Build around the customer. Understanding the customer and the biggest challenge they are facing and solving it may not be anything new. Still, it continues to be a cornerstone for a SaaS organization to survive. Strong post-deployment customer support, onboarding hand-holding, quicker resolution of queries etc. can set you miles ahead of your competition.

To the startups in the SaaS space, how do you envision contributing to the next chapter of SaaS innovation in India, and what unique perspectives do you bring to the table?

The Saas industry is on a rapid growth curve, and if there is one piece of advice from a mature start-up like Vymo, it is for emerging SaaS start-ups to spend as much time as needed to identify & pick the right ‘Arena’ - where they would like to play? [Industry/Domain/ICP] based on the nature of the business problem that their tech is aiming to solve [Size of Business Impact/Replicability across the Industry/Long term sustainability of the proposed Tech Solution]; consider how would they ‘Play to Win’ in this space - disrupt and create a new category vs. compete [challenger] vs. co-optetion [compete and co-operate/collaborate with other tech solutions as needed] etc.; balance speed to market with perfecting the solution - it is always better to test and learn in the market with friendly clients and enhance the MVP solution over time rather than spending years of R&D in building the right solution only to realise that the goal post has shifted during the said period.

There are enough and more business problems that are yet to be solved and considering the pace at which the overall business environment - customer needs, buying behaviour, preferences; legal and regulatory; competition etc. is changing, there could be newer business use cases that would emerge in the future, and hence the future for customer-centric, innovative & flexible SaaS companies in India is very bright.

What challenges and opportunities do you foresee for the SaaS industry in India, and how can stakeholders collaborate to overcome obstacles and foster sustainable growth?

We know that the India SaaS market is projected to touch $50 billion ARR by 2030 so there is a plethora of opportunities and room for everyone. What we should increasingly focus on include,

a. Building the talent base that will enter the industry as a workforce. Training programs and structured learning in colleges and universities can help students become industry-trained and move into their roles faster.

b. Closely monitor the regulatory landscape and continue to comply with changes both globally and locally.

c. Strengthening the guardrails for data privacy and customer safety. Especially with the adoption of AI and generative AI, it becomes vital for SaaS organizations to implement robust security measures, participate in frequent audits and get the necessary certifications.

d. Collaboration with other SaaS companies offering solutions that are solving an adjacent use case for the same client base rather than wanting to build everything inhouse - it would be a win-win model for all parties. The SaaS companies could share Customer Acquisition Costs to improve their respective EBITDA margins. They can also improve their sales win rates by offering a more comprehensive solution; they could also save operating costs by having their respective engineering resources focus on enhancing their core solution rather than spending time and effort on extending their solution to cover the adjacent use cases; for clients - they would benefit in terms of getting a comprehensive solution [deeply integrated] - both in terms of reducing the number of point solutions needed as well as on getting better pricing & reduced operational overheads.

In the context of data security and privacy concerns, how are SaaS companies preparing for and addressing potential challenges to ensure a secure and compliant future for their users?

Robust security measures go hand-in-hand while building and deploying SaaS solutions. Customer safety and information security should be the foundation of a solution blueprint for the customer. Here, I strongly urge that organizations follow and align with international data protection standards and remain very transparent about their information security practices with their customers.

The subscription-based model has been a key feature of SaaS success. How do you foresee pricing models evolving in the future to cater to diverse user needs and market demands?

The payment models for SaaS are evolving as we speak. Customer expectations are shifting, technological advancements are evolving, and therefore, we will see more flexibility in the subscription models.

The most common SaaS Pricing models are Volume-based per user per month [PUPM] license pricing, with PUPM values reducing as the volume of users increases.  A variation of this model is to link a certain portion of the License Fees to success metrics, thereby both parties having their skin in the game to drive necessary outcomes.

There are a few forms of EULA agreements that are prevalent in the market - where companies may either agree on a much lower fixed PUPM across the organisation for a guaranteed minimum user base or agree on a fixed TCO for the deal with provision to add unlimited users, subject to some high-level user cap.

We are also seeing modular pricing being introduced, where companies can pick and choose modules at the user level and are charged accordingly. This approach gives flexibility to companies in not having to buy/pay for standard product solutions for all users, wherein some components of the solution may not be relevant to a cross-section of users.

In some cases, companies are also happy to structure deals on a capex structure, which allows them to treat the SaaS TCO for the duration of the contract as a depreciable asset in their balance sheets instead of structuring it as an operating expense where the annual expenses would flow through their P&L.

I am guessing most SaaS companies would continue to be flexible in designing pricing models based on the structure that works for their clients, which in most cases would point to a hybrid structure with some part of the fees that covers the infrastructure & operating costs for the SaaS & a part of the fees which are linked to measurable outcomes. Clients are happy to pay the SaaS providers for the value they have generated by using the SaaS platform. As such, some pricing models which are structured on a low fixed license fee plus a hockey stick curve for success fee payouts linked to outcomes [uncapped and significantly higher payouts if success metrics are exceeded] may become more prevalent in the future, especially for companies having a very large user base where, although at the unit-economics level, the PUPM may seem attractive, when considering the actual size of the cash flows, it may become untenable for companies.

With the globalization of businesses, how do you envision SaaS companies adapting to and influencing international markets, and what role might India play in shaping the global SaaS landscape?

India is already immensely contributing to the global SaaS landscape through a skilled talent pool and through the numerous innovative start-ups like Vymo who are building out of India, for the world. India currently ranks third, behind USA and China, in terms of the number of Unicorns as at end of last year. However, it is amongst the leading countries in terms of new unicorns that are being added to the list. In the coming years India will take the lead in,

a. Building a large base of highly skilled technical experts with deep focus in emerging technology domains;

b. A lot more collaboration to further the innovative work happening in deep tech space across the world;

c. A vibrant economy that is enabling the proliferation of green shoots in technology across industries through supportive regulations, availability of grants, low-cost access to capital, an abundance of resources, and access to client base that is critical for any SaaS start-up to flourish - India would continue to expand its start-up/unicorn ecosystem at a much faster pace that would benefit the world in terms of exporting the solutions, tech talent and tech know-how to other countries around the world;

d. Additionally, the economic benefits of operating in India, as noted above,  availability of resources, and a ready/vast maket for consumption of the solutions being sold in the country would attract other SaaS companies to enter the Indian market and benefit from leveraging the infrastructure and support provided by India to expand their own businesses and value for their shareholders;

e. With several government agencies undergoing digital transformation, India will showcase how government bodies can leverage cutting-edge technology to become more efficient, swift and customer-friendly.

The startup ecosystem in India has been vibrant. How can government policies, investment strategies, and industry collaborations foster a conducive environment for SaaS startups to thrive and contribute to the industry's future?

The government has set up a regulatory sandbox for Fintech start-ups to test their ideas in a controlled but relaxed environment, which is a great initiative and could be extended to other sectors as well as for certain technologies like generative AI, edge computing, blockchain etc, which have a broader, industry agnostic application, where the sandbox could help several players to test collaborative solutions that can be built.

Not only private companies but also government institutions have become open to working with start-ups, which is a great shift in perspective and attitude as the industry has embraced the cutting-edge and innovative work being done by start-ups in their respective industries and seamlessly integrated them into their overall IT Framework - which has now become a hybrid ecosystem of home built, off the shelf products that are in the market and some start-up SaaS-based solutions seamlessly woven into an infrastructure that provides speed to market, agility, scalability, cost-effectiveness and competitive advantage to the companies. Many companies have also set up their own Venture Funds that provide financing to start-ups that are working on innovative business ideas for the market. This development is particularly beneficial to start-ups as it not only provides them access to capital but also an opportunity to get mentored by industry practitioners and test and learn by deploying MVPs in client organisations as PoCs and Pilots, leading to the refinement of their solution.

The government also provides tax sops for start-ups in terms of 3-year tax exemption in any continuous block of their first 10 years of existence, which is a great initiative for start-ups as in their earlier years they are always working with a short runway of available capital.

In addition, there are many grants and schemes to promote start-ups in India, which have contributed significantly to the growth and proliferation of start-ups in India. However, some concerted effort would be required across the central and state government machineries to encourage founders from tier-II and tier-III cities with the necessary infrastructure & support to help them convert their ideas into large & meaningful businesses.

While the ease of doing business in India has definitely gotten better in the last couple of years (we rank 63 among 190 countries as per the World Bank), I think the government should give it even more thrust, making it among the top 3 countries in the world. This will really make the environment more conducive. However, it remains to be seen how the recent provision of Angel Tax on Resident and Non-Resident Investors investing in Indian Start-ups would play out in the long term. Will it reduce the available capital for start-ups in India with investors looking towards other markets where the tax regime is more conducive, or will it increase the overall cost of capital for start-ups with investors loading the additional implications from tax into their expectations of returns.