A silent SaaS revolution is brewing in Chennai

CHENNAI: With more than $1 billion in revenues, a workforce of around 15,000, and having attracted investment of more than $500 million from local and global investors, Chennai is pivoting around SaaS (Software as a Service) industry. A conservative business approach and availability of strong tech minds with great work ethics have helped the city earn this status.
The city is home to two unicorns (Freshworks and Zoho) both having SaaS as their business backbone. Zoho has not diluted equity, but is valued much higher than the $1bn to qualify for Unicorn status. While these IT product companies have managed to cross the $500 million revenue mark, products of Chennaiborn SaaS enterprise OrangeScape have reached more than 10,000 customers across 160 countries.
Startups such as Chargebee, Cloudcherry, Mad Street Den, and many others continue to add value to the Indian SaaS landscape, starting in Chennai. The city, meanwhile, continues to be home to some of the old names like Ramco Systems whose products have made a global mark.

“Chennai is not a city of glamour and glitter, but one with ‘boring’ focus on R&D work, and that helps build a long-term tech enterprise,” says Zoho CEO Sridhar Vembu. Having founded Zoho in 1996, Vembu believes the explosion of talent here aided the company’s growth over the past two decades.
Scaling up a SaaS business requires a higher organisational discipline and a problem-solving approach, unlike in consumer tech enterprises which populate Bengaluru and Mumbai, to strike gold.
As Shekhar Kirani, partner at VC firm Accel and a tech investor, puts it, “Growth is possible only when you have repeatability, and that requires prioritised focus.” Freshworks cofounder and CEO Girish Mathrubootham believes that Chennai entrepreneurs are blessed with a relentless focus on revenue growth even while being cautious. “We generally don’t spend money unless we see productmarket fit and customer acceptance of products,” says Mathrubootham, whose company is a recent entrant into the country’s elite unicorn club.
A recent SaaS market roundup by Google and Accel notes that a perfect combination of talent availability, market accessibility, and cost advantage is likely to help India’s SaaS industry touch $10 billion by 2025. Industry leaders are confident that Chennai, with a well-rounded pool of product managers, UX designers and inbound marketers, is ready to ride this wave.
“SaaS companies generate high quality revenue unlike e-commerce companies whose top line numbers are essentially gross merchandise value,” says Orangescape founder Suresh Sambandam, who pegs gross margins in SaaS at 80%-90%. KiSSFLOW, Orangescape’s flagship business automation tool developed and sold out of Chennai, counts Airbus and Motorola among its clients.
The city’s SaaS market is also ahead of its peers in embracing AI (artificial intelligence) and machine learning. Ashwini Asokan, co-founder and CEO of AI enterprise Mad Street Den, says launching the startup out of Chennai was perhaps one of her best decisions. “Building an AI-first business requires“a certain kind of humility and willingness that Chennai’s talent has,” Asokan says.Mad Street Den’s product Vue.ai is an image recognition tool automating the retail industry, and is used by brands across 20 countries.
TN chief minister Edappadi K Palaniswami called Chennai the SaaS capital of India. “We propose to give a huge impetus to this sector to make TN a global SaaS destination,” he noted ahead of the Global Investors Meet that opens on January 23.
The large pool of government and private engineering institutions, including IIT, Madras and Anna University churn out quality graduates, who are in turn picked up by companies and moulded in SaaS. Though a SaaS-focused curriculum is found lacking in colleges, young talent often learn from scratch at their workplace, and grow along with it.
Interestingly, India may be a fertile ground to build software products, but almost 80% of the demand flows from the US and Europe, requiring Indian entities to have a global go-to-market strategy.
Freshworks has offices in San Francisco, London and Berlin to service its key markets, and Mad Street Den’s AI tool got its first break in the US. Krish Subramanian, founder of billing management software ChargeBee, views distance from consumer as a blessing in disguise. “We focus on scalable channels of customer acquisition and service instead of spending efforts on costlier inperson activities,” he says.
With global SaaS revenues estimated to hit $85 billion in 2019, and pegged to grow the fastest among various IT segments, industry captains are looking to make the year count.
“The Saas ecosystem, for all the good things that happened, is still broadly not profitable, around the world,” says Vembu, hoping that the industry, as a whole, adopts the financial discipline that bootstrapped Zoho swears by.
The founders are also keen to create the network effect that makes Silicon Valley what it is, and want to propagate the “SaaS playbook” to as many aspiring entrepreneurs as they can. “If only we could also make it attractive for global talent from anywhere in the world to work in Chennai or elsewhere [in India], a lot of challenges can be solved better,” says Chargebee’s Subramanian.