Why SaaS startups are on Cloud Nine


The shift to the cloud is gathering momentum. Forrester Research says cloud computing in the form of Software-as-a-Service (SaaS) grew by over 20% last year – which was even higher than the figure for mobile computing – with companies in emerging economies too increasingly abandoning on-premises software. Gartner has said the total SaaS market will top $22 billion in 2015.

Naturally, in such an environment, the cloud has been a happy hunting ground for startups to innovate and grow. As we can see in the accompanying infographic created by US-India venture capital firm Inventus Capital Partners, one out of five companies that had an IPO last year was SaaS-related. What's more, several of them saw their share prices soar after the IPO.

Image Credit: Inventus Capital Partners

More of the same is expected this year as well. Coupons.com and cloud-based advertising service provider Rubicon Project have already filed for IPOs, while Box Inc, a competitor of Dropbox, is likely to follow suit soon. According to a 2012 study, SaaS companies are the most profitable post-IPO, among service-based tech companies.

SaaS startups out of India too have been making their presence felt in the global market, and this trend can only gather momentum in a favourable climate for cloud-computing. Freshdesk, Explara, Webengage, Wingify, Zoho, FusionCharts, Capillary, Chargebee... the list is growing ever longer, with the costs of starting up and distribution coming down, and the ecosystem developing.

The public cloud providers like Amazon Web Services, Rackspace, Google and Miradore have made it possible for startups and entrepreneurs to tackle sophisticated computing and storage infrastructure so that they can offer software services quickly, without burning too big a hole in their pockets. This has fuelled a trend of startups using bigger data.

"As more businesses use ‘Big Data’ to boost profits, track trends and grow, the influx of analytics and 'Big Data' will just become ‘Data’. In other words, massive data sets will become common data that more businesses use to propel growth and will be fully integrated within everyday operations.” Dr Andrew Urbaczewski of University of Denver stated recently. He is the Chair and associate professor of the school's Department of Business Information and Analytics. He has spent his career analyzing how data affects the user experience. Currently, he focuses on how “Big Data” integrates into every-day business operations. He noted in a university statement: “Business analytics will become more affordable, with on-demand cloud based services that allow small businesses to spend less money. They won’t require the same massive capital investment of technology, server space and expensive programming, licenses and hardware that formerly only larger or wealthier companies could afford.”

As Freshdesk founder Girish Mathrubootham told YourStory recently: “The fact that we have assembled one of the best product teams in India is what is keeping us motivated that we have a real shot at building a billion-dollar SaaS product company out of India.”

It appears the cloud is the limit for an entrepreneur willing to take on the best in the world. How do you see the potential for SaaS startups this year? Do add to the story in the comments below.