I am a strong believer in the SaaSification of Asia. I see increasing pull in the market for Asia-facing SaaS companies, a sea change from what I observed five years ago (I wrote about this in 2014). Here at Lightspeed, we have partnered with several exciting founding teams focused on this theme, including at Darwinbox, Yellow Messenger and Freight Tiger.
While the trend is strong, India/Southeast Asia is still relatively early in its SaaS adoption cycle and so the need is for horizontal and broad applications that can span any vertical. Also, non-core payloads such as CRM and HCM (versus vertical SaaS or use-case specific SaaS which is what is active in the US) can scale faster in this early adoption phase of SaaS, much like what happened in the US 10–15 years ago.
You may ask why SaaS for Asia needs to even exist as a category. Why can’t vendors from the US or Europe continue to dominate here? My view is these Western vendors never really dominated, but only skimmed the top of the market.
What’s really happening in India/Asia is that companies that were non-users of packaged applications, or employees (e.g. blue collar workers) that were non-users of technology are now starting to leapfrog straight from paper-based and manual processes to SaaS.
The trend now has some evidence behind it. For high ACV, direct sales motion companies, evidence comes in the form of higher average contracts values (ACVs), meaningful account expansion, increasing inbound demand, shorter sales cycles and displacement of harder-to-use and non-regionalized solutions from the West, such as SAP, Oracle, Salesforce and Workday. For companies with a self-serve, inbound marketing motion, evidence comes in the form of high word-of-mouth virality, increasing efficacy of search engine marketing and first-time adoption of technology at many smaller companies.
Why is this happening? I think it is because competitive pressure in open markets is forcing Asian companies to focus on productivity. Also the millenial-heavy workforce is demanding easy-to-use, zero training software that gets much closer to the ease-of-use of consumer applications such as Whatsapp and Instagram.
India/Asia also have unique local requirements when it comes to workflow automation:
- One size does not fit all, rapid configurability is required (versus 1–2 year long consulting assigments run by large systems integrators). There is a lot more hetereogeneity in India and Southeast Asia, including in languages, cultures and processes. And many companies run multiple business models that change often.
- There is a more hierarchical decision-making style and so workflows go through more approvals in general, requiring applications to handle more complexity.
- Interaction paradigms in Asia are clearly about ease-of-use (consumerization of IT) through mobile apps, messaging/chat and quick/short workflows, rather than purely desktop applications.
- Software to automate processes for enterprises with large consumer bases is a special feature of SaaS for Asia. Areas here include customer support automation (e.g. through chatbots), B2C marketing automation (e.g. through traffic analysis, user segmentation, lead management) and mobile workforce automation.
There still remains a lot to prove though. For Asia-facing SaaS, total addressable market (or TAM) is a concern. Companies are mitigating this concern by adding Southeast Asia as a market as well as adding a marketplace or transactions component on top of the base application. Think travel & expense management (T&E) applications adding travel booking as an option and charging commission or a procurement management application adding a supplier marketplace.
This concern can’t be addressed, in my opinion, by simultaneously targeting Asia as well as the US/Europe. These markets are very different from a product-market fit, competitive and GTM perspective. SaaS companies should not hedge their bets between a US GTM and an Asia GTM.
Productivity is still a concern. Revenue per vendor employee starts out in many cases at $20k-40k per year which is abysmally low compared to US counterparts. This is trending upwards as SaaS companies shed their own manual/low-margin processes and target larger enterprise-grade accounts.
And finally, the talent pool in enterprise software is also a concern although changing fast. A few years ago, there was a dearth of product management and architecture talent in the market. This has largely been addressed. We still see bottlenecks in areas such as AI/ML engineering, product marketing and enterprise sales management.
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