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by Idris Ademola Adeleye

5 Min Read | Sun, 29 Jan 2023

SaaS Price Inflation in India and How It is Affecting Your Business


  • A primer on SaaS price inflation in India
  • SaaS price inflation benefits
  • SaaS price inflation disadvantages
  • How to mitigate the impact of SaaS price inflation?
  • Conclusion



Price inflation of SaaS services in India is a growing concern. Many businesses that rely on SaaS solutions feel the pinch as these services become more expensive. This has been especially true over the last few years, with prices rising significantly since 2019.


India's Software as a Service (SaaS) market is developing quickly as more businesses grow and attract investor interest. SaaS investment grew 170% from 2020 to 2021 and was anticipated to reach $4.5 billion in 2021, making up 8% of the value of all private equity and venture capital deals in India. 


The increase in cost cannot be attributed to any single factor but to a combination of factors, such as increased demand for cloud-based applications, higher tax rates imposed by government bodies, and increased competition among providers. 


A primer on SaaS price inflation in India

SaaS price inflation is the rapid increase in software-as-a-service (SaaS) prices as demand for SaaS products continues to grow in India. As more businesses adopt cloud computing technologies, competition for SaaS services has increased and driven up prices. 


As the software is becoming increasingly expensive to acquire, small businesses with limited SaaS spending bear most of the brunt of the inflation. As a result, small businesses may find themselves unable to afford the necessary services or pay far more than they can afford. 


Mature Indian SaaS enterprises with demonstrated scalability are the primary drivers of this increased interest. More than 35 Indian SaaS enterprises had $20 million or more in annual recurring revenue (ARR) in 2021, a sevenfold increase over the previous five years, with seven to nine of these businesses surpassing the $100 million ARR mark.


SaaS price inflation - The benefits they bring in

Let’s look at the positive side of SaaS inflation:


= Companies can keep their SaaS costs under control and ensure that their investments are well spent by tracking SaaS Price Inflation in India.

= Additionally, understanding the trends in SaaS price inflation can help companies make more informed decisions when purchasing services. 

= Companies should consider the current average cost of service and how these costs may change over time. This can help them plan for future purchases and budget accordingly. One way they can do this is by re-assessing their SaaS needs. They can use the Zoftware's Quiz Tool to actualize this. 

= Looking closely at SaaS price inflation in India can help businesses save money and make wise investments in their SaaS solutions.


The disadvantages

SaaS Price Inflation in India has a range of negative impacts, both for businesses and consumers:


= SaaS price inflation can lead to a lack of competitiveness for businesses as prices rise faster than cost savings achieved through technological advances or efficiency gains. This limits their ability to stay ahead of the competition and impedes growth. Additionally, businesses may be forced to pass on these higher costs to their customers, which can decrease sales and customer loyalty. 


= SaaS price inflation directly impacts customers’ purchasing power. India is already an expensive marketplace, and the rising cost of SaaS services makes it even harder for people to access the services they need. This can have severe implications for access to education, healthcare, and other essential services that rely on SaaS technologies. 


SaaS price inflation has broader economic implications in India. The economy slows down with less money to spend on goods and services. This reduces investment opportunities and employment prospects, negatively impacting the strained economy.


How to mitigate the impact of SaaS price inflation?

SaaS price inflation in India can negatively affect businesses, especially those that rely heavily on cloud-based software. Fortunately, there are steps organizations can take to help mitigate the impacts of SaaS price inflation. 


= Organizations should strive to become more efficient and reduce their reliance on expensive cloud-based services by leveraging internal investments in technology and development. This could mean improving existing systems or developing new ones that better meet the organization's needs.


Additionally, businesses should look for opportunities to increase their negotiating power when it comes to SaaS pricing. They can do this by consolidating their contracts with vendors and being open to alternative solutions such as cost-effective open-source options and on-premise solutions. 


= One way of mitigating the impact of price inflation is by working closely with a reliable SaaS provider. Companies should look for providers with a track record of providing quality services at competitive prices and strive to build long-term relationships with them. 


It is also important to pay close attention to market trends and potential new entrants, as this will help businesses stay ahead of the curve. Additionally, companies should ensure that they are keeping costs in check through regular monitoring and performance reviews of their SaaS solutions.


= Organizations should also strive to reduce overall costs by using automated systems that eliminate manual processes and leveraging cloud-bursting technologies that allow businesses to access lower-cost resources when demand is low. This can help keep SaaS costs in check. Finally, companies should clearly understand their monthly usage and costs and use this information to negotiate better deals with vendors. 


By taking these steps, organizations can help mitigate the effects of SaaS price inflation in India and ensure they get the most value out of their cloud-based software investments. With careful planning and an understanding of how to leverage technology, businesses can ensure their SaaS costs align with their budget.


Summing up

SaaS price inflation in India is an important concept for companies to understand and plan for when investing in cloud services. 


The challenge of rising SaaS prices in India is not going away soon. However, with careful planning and the right strategies, businesses can ensure they get the most out of their SaaS investments. This will enable them to keep up with price inflation and remain competitive in the current market.