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Small towns turn big for SaaS sector amid headwinds in global market

Headwinds in the global market are encouraging both major players and newer entrants to set up distributed workforce models outside of the major cities

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5 min read Last Updated : May 02 2023 | 6:17 PM IST

The Indian SaaS or software-as-a-service ecosystem is considered the third largest in the world after the US and China and is expected to surpass China by 2026. But a recent report by Bain and Company indicated that the country is already the second largest globally after the United States in terms of its size and maturity. According to Bain’s estimates, the country now contributes to around 18 per cent (8,120) of the total (43,951) SaaS companies in the world. For an industry that got its shape only in the mid-2000s in India, this is considered to be an achievement in itself.

In the SaaS model, organisational software is hosted by a third-party provider and delivered to customers over the internet as a service. The total annual recurring revenue (ARR) of Indian SaaS firms has grown four times to $12-13 billion in 2022 and investments into this sector have increased six-fold to $5 billion over the past five years. After India’s SaaS pioneer Zoho Cor