Selling SaaS in India

Selling SaaS in India isn’t necessarily the same as selling it in the US or Europe. We spoke with Ishan Das Sharma, co-founder of Voxxi.ai, about how businesses buy software in India, how foreign SaaS companies should approach the market, and some of the mistakes they should avoid.

Key Takeaways

1. There isn’t one Indian SaaS market. VC-funded startups buy software much like American companies, while traditional SMBs (small-and-medium businesses) are far more price-sensitive and often buy technology through local agencies.
2. For many Indian SMBs, SaaS is competing with Excel rather than another SaaS product. Software needs to save a substantial amount of time, prevent important tasks from being missed, or replace a sufficiently complicated manual process.
3. Agencies can be an important distribution channel. Small businesses often ask a trusted agency or developer to solve a problem rather than researching SaaS products themselves.
4. Western SaaS pricing can quickly become expensive relative to what Indian SMBs earn. This is especially important when selling software to agencies that need enough margin to resell or bundle the product into their services.
5. WhatsApp is a major business channel. SaaS companies should support customers through WhatsApp, and WhatsApp automation itself has demand.
6. Indian companies tend to prefer yearly, flat SaaS pricing. Seat-based and usage-based pricing are less common, although VC-funded and larger technology companies are much more comfortable with Western SaaS pricing models.
7. Recurring card payments are a specific problem in India. Two-factor authentication requirements can interfere with automatic subscription charges, making local payment support particularly important.
8. You generally don’t need to translate B2B SaaS into Indian languages. English is widely used among larger companies, technology companies, agencies, and other tech-forward businesses.

The Interview

Embed Workflow: How is selling SaaS in India different from selling it in the US or Europe?

Ishan das Sharma: When we say selling SaaS in India, there’s really no such thing as one India. There are basically three different Indias within the same India.

At the top are VC-funded startups and larger companies. Then there’s a middle layer of companies like mine. We’re not VC-funded and we’re not particularly large, but we’re substantially tech-forward.

Then you have the bottom layer, which is probably 95% of businesses. These are very small enterprises that mostly do offline sales. That includes pharmacies, grocery stores, coaching centers, transport businesses, smaller logistics businesses, and things like that.

When you’re selling SaaS, each of these three layers needs to be targeted differently.

Let’s focus on the middle and bottom layers first.

I think it’s useful to distinguish between different kinds of SMBs here. There are tech-forward smaller companies that do buy SaaS. The much larger problem is with traditional small businesses, where you’re often competing with Excel or offline processes.

I’ll give you an example. There are plenty of home service systems available in the US and Europe. By home services, I mean things like plumbing, HVAC, stuff like that.

There are a lot of vertical CRM and SaaS products available for those industries in the US and Europe, but there are basically zero of them in India.

Now, part of that can be put down to the fact that the home services sector isn’t really that formalized here. But the unwillingness of SMEs to pay is definitely part of it.

So what kinds of software are actually purchased by businesses in India?

Mostly SaaS products that are under specific categories. The two categories are accounting software and payroll or HR software. In India, those two are mostly sold as a package. That’s basically the only software that most small to medium businesses are willing to pay for.

Almost everything else, you’re competing with Excel and Tally.

What’s Tally?

Tally is the historically entrenched accounting software used by most Indian businesses. It’s popular because it was early, and it’s ridiculously sticky. It has all the compliance and tax-related things built in, and it can even directly let you upload GST returns without having to mess around with government portals.

What if you have a regular SaaS company and you add features so that it also works as accounting software, even though that’s not really the main thing? Could that be a way to get people to buy it?

I don’t think that’ll work because accounting software has high switching costs. You’ll have to really justify why someone needs to use the accounting features built into your software.

Anyway, you’ll have to provide a Tally export because Tally is the accounting software that all chartered accountants use. That’s what a public accountant is called in India.

So your software needs to have a Tally export. Otherwise, it’s not going anywhere. I don’t think turning your software into an accounting thing is going to work.

What does a SaaS need to have in order for them to stop using Excel and start using a SaaS instead?

You need to be delivering some sort of solution that saves an inordinate amount of time. I’m not going to pay you every month to save me a small amount of work. You need to be saving something like 20-plus hours of work in order to make your subscription price justified.

Or you need to be replacing a sufficiently complex Excel workflow. That’s one reason accounting and similar business software is so popular.

So if I’m writing a sales page and saying, “Stop doing this in Excel and use our product instead,” is saving time the main argument?

It could be saving time, yes. But again, it has to be a substantial amount of time.

Another argument might be that you can forget to do certain things if you’re doing everything in Excel, whereas the SaaS product isn’t going to let you forget. That’s one reason WhatsApp automation and CRM are also big categories of software in India.

Have you noticed that changing as India gets more developed? Or do you think it’s more of a cultural thing that isn’t going to change anytime soon?

No, it has been changing. Especially in the post-COVID era, small and medium businesses are slightly more likely to be buying SaaS nowadays.

But the weird thing is that you’ll have businesses you’ve never heard of buying SaaS products that you can barely find an online presence for, because SaaS terminology isn’t really that widespread in India.

So how are they hearing about these products?

Direct sales. Offline sales. It’s almost surprising for a software product, but that’s what happens. Small pharmacies are buying software nowadays to manage their inventory.

What usually happens is that someone needs some software. They’re not going to research brands. They’re going to find the nearest tech agency they can find and ask for a solution.

Whatever solution that agency recommends, if it’s reasonably priced, then they’ll do it.

Do VC-funded companies buy SaaS differently from more traditional Indian businesses?

Yeah. VC-funded startups are a distinct part of the market. They’re modern companies, and they buy pretty much the exact same SaaS products in the same way that American companies do.

They use Slack rather than WhatsApp. They buy AWS. They pay for Notion. And they’ll buy most SaaS products if they help them. They’re also comfortable paying monthly and using usage-based or seat-based pricing.

But they’re a smaller, distinct subset of the Indian market compared to the millions of traditional businesses we’ve mostly been talking about.

And what about that middle tier?

They’re still pretty online. You can find them on Instagram and LinkedIn, and they’re going to be open to being pitched. But they’re much more price-sensitive.

Take Buffer as an example. If an agency is managing Facebook, Instagram and LinkedIn for a client, they might be making ₹5,000 per month from that client. That could include replying to DMs and comments, creating the posts and images, and actually posting everything.

If I then have to spend something like $18 per month on Buffer to manage those three channels, where is my margin?

That’s the problem. $18 a month doesn’t sound expensive for SaaS in the US, but if the agency is only making ₹5,000 from that client, the software is taking a significant part of its margin.

Agencies

Can you explain more about how these small businesses actually work with agencies?

Let’s say I’m a small coaching center and I want some sort of app to track attendance.

As the coaching center owner, I don’t necessarily want to spend my time researching what the best attendance software is. Instead, I’m going to go to the person or agency that handles my website or technology and tell them, “I want to track attendance. What do you suggest?”

The agency might suggest an app that already exists. Or maybe they specialize in coaching centers and already have a solution for it. Or they might say, “We’ll build one for you.”

The coaching center can be okay with any of those options because they’re not thinking, “I need to buy a SaaS product.” They’re thinking, “I need to ask the person who handles my website to solve this problem for me.”

They’ll generally go with whatever that person recommends as long as it’s reasonably priced. That kind of trust between agencies and clients is pretty big here.

So if you’re a SaaS founder in America, does it make sense to find those agencies and get them to sell your SaaS?

Agencies are a good distribution channel, particularly if you’re targeting small to medium businesses.

How would a foreign SaaS company actually find these agencies?

You can find them on Google or agency directories like Clutch. You don’t need somebody local just to find them.

You can search something like “best web developer in Kolkata” or “best software developer in Kolkata” and find a huge number of agencies.

If you’re targeting a particular market, you can get more specific. Search for Shopify developers or WooCommerce developers, for example. People here really like to specialize in one technology.

How do the small business owners themselves find these agencies?

Almost entirely through word of mouth.

What’s the business model for these agencies? Do they get a cut of the software they’re recommending, or do they buy it and resell it?

Cuts are rare, although they do happen. Usually it’s some kind of markup.

ERPNext is a good example. It’s basically business-in-a-box software and it’s open source. Agencies can take that, put their own logo on it, customize it to fit their client’s needs and sell it at a huge markup.

Then they’ll make recurring money from hosting and other services.

So let’s say I sell my SaaS to an agency. They could buy it from me and then essentially decide themselves what they’re going to charge their customer?

Right. The agency might buy your software for $10 and sell it to the customer as part of an all-inclusive fee.

As far as the customer is concerned, there might be no such thing as your SaaS product. They might never even open the admin panel and find out what software has been installed.

They’re not really buying your software. They’re buying a solution from the agency, and the software is just one of the tools the agency uses to provide it. That’s why white labeling can be a big deal.

SaaS Content Marketing in India

When I talked to someone about selling SaaS in Germany, he said that the content and marketing often needed to be less aggressive and less sales-oriented, with more emphasis on stability. Is there a similar difference in India?

Again, it depends on who your target audience is. Tier three isn’t going to be reading your content anyway, so there’s not much point worrying about it.

Tier one and tier two are susceptible to the same kind of marketing as America. They’re already consuming a lot of American media. They’re watching American television and Hollywood movies, and the corporate culture is already heavily influenced by America.

So they’re not going to need some completely different kind of marketing.

If you’re trying to get attention through content marketing, what are the major platforms?

Instagram, LinkedIn and YouTube. Older people are on Facebook. Nobody from my generation is really using Facebook anymore.

Should that content be in English or a local language?

If you’re targeting tier one and tier two, English is fine.

What do you think are the biggest mistakes foreign SaaS companies make when they try to sell in India?

I think the biggest mistake foreign companies make is not getting an Indian payment processor because it causes a lot of problems with recurring billing. I’ll talk about that more later.

That’s the first biggest mistake. The second biggest mistake would be trying to market through ads. Ads don’t really work if you want to sell SaaS in India.

Ads work beautifully for consumer products, but they don’t really do it for SaaS.

I’ll give you an example. We spent around $800 on ads and got around 100 leads. A lot of those were people who had clicked the ad and somehow filled in the form, but they were mostly unqualified leads. Some people wanted a job.

Is there a Silicon Valley of India?

Yeah, that would be Bangalore. Bangalore is the place to be if you’re interested in tech. But it has a ridiculously high cost of living, and many companies are trying to move out.

So in recent times, other cities have also been coming up as technology hotspots.

What about the actual buying process? Is it basically similar to the US, where you email or call a buyer, talk back and forth, negotiate, and eventually sign a contract?

Exactly the same. Except in India, we don’t really care about SOC 2. India is more into ISO 27001.

ISO 27001: An international security standard covering how a company manages and protects sensitive information. Certification is commonly used to demonstrate that a SaaS company has formal security controls in place.

When you’re selling SaaS, is the advertised price basically the starting point, or do companies generally expect to pay that price?

There is always going to be some amount of negotiation, but larger companies will not haggle too much.

Let’s say you have a company with marketing, engineering, HR and the CEO, and marketing wants to buy some software. Is marketing making that decision or is the CEO ultimately making it?

That varies a lot from company to company. In one of the places where I worked, the CEO was personally making all buying decisions.

In other companies, there’s usually a procurement team. And yet in other places, for example with some clients I’ve worked with, there’s an audit team who gives the final sign-off on the purchase. India’s corporate culture is very much inspired by the US, so it’s not that different.

Imagine you’re an American SaaS company and you want to expand into India. Are emailing people and doing Zoom calls enough? Or is it better to actually go there, meet people in person and physically show them the product?

Cold emails are a waste of time. Cold calling is surprisingly effective. In-person meetings are more common when dealing with small to medium businesses. Larger businesses, or more tech-savvy businesses, are perfectly fine with online meetings.

Do you think it’s much better to have an Indian salesperson? Or could you train an American salesperson and send them to India?

A local salesperson is not necessary. But if you’re doing online sales, then you have to understand Indian business processes, which is tough.

What would you use to get your first ten customers?

LinkedIn outreach. Agency owners are on LinkedIn and you can find them pretty easily. Targeted cold email might work, but it’s very hit or miss. In my experience, at least, it hasn’t worked.

I read that WhatsApp is used for corporate sales and business communication in India.

Yeah, WhatsApp is huge. If nothing else, you must provide support over WhatsApp. And WhatsApp automation is one of the things that Indian businesses are willing to pay for, surprisingly.

I’d actually say WhatsApp support is more important than INR pricing. People will still manage to pay you in US dollars. They’ll deal with having to log in and manually make payments every now and then. But WhatsApp support is not something they’ll necessarily want to give up.

Localization and Pricing

India has a huge number of languages. English is sort of the lingua franca, but not completely. Is having the software in English fine, or is it beneficial to support local languages?

As long as your SaaS is not customer-facing, English is fine. And I don’t think most B2B SaaS is customer-facing.

English is the language of corporate India. The software industry in general basically runs on English.

Imagine you’re an American company. Do companies typically price things in US dollars or rupees? And is pricing normally monthly or yearly?

There are some that price monthly and there are some that are usage-based. Seat-based pricing is not that common and neither is usage-based. Indian companies really love flat pricing.

The exception is companies like VC-funded startups, which are much more comfortable with monthly, usage-based and seat-based SaaS pricing.

What’s the payment method that a B2B company would usually use? Is it normally a bank transfer?

Bank transfers are preferred.

How easy is it for an Indian company to send money to a foreign bank account?

It’s doable and usually it can be done online, but it takes a while to clear. So if a foreign company is serious about doing sales in India, they should probably invest in an Indian collection account.

Certain Indian payment providers offer virtual Indian bank accounts. They can receive money and then remit it to your US bank account.

Card payments are also fine, but the problem with card payments is recurring payments.

The Problem of Recurring Payments in India

Explain the recurring card payment problem.

Banks have very tight regulations in India because there has been a lot of money laundering and similar scams. Because there are such regulations (called 3-D Secure), online card payments require additional authentication.

It’ll redirect you to a page on your bank’s website, send you a text message with a code, and you have to enter that code on the page. Then and only then will the transaction go through.

This two-factor workflow breaks a lot of the automatic charging mechanisms used for subscriptions and other things like that.

Most card processors, like Stripe, don’t have the mechanisms you need enabled by default.

So is that why some companies try to push annual plans? Because then there’s less of this recurring payment problem?

Yeah, that’s probably why. And if you’re selling to SMEs or consumers, then you have to support UPI.

UPI is the name of the payment system, right?

Yes. UPI is a payment system. It’s government-sponsored and it’s direct bank-to-bank transfer. The government basically forces every bank to be on it, and it’s an open standard. It’s actually quite interesting technologically.

UPI is the most frictionless way to pay. With cards, you have to enter the card number. You have to go through two-factor authentication and everything. But with UPI, there’s none of that.

And on top of that, UPI has basically no charges. With cards, you pay a percentage to Visa. With UPI, there’s no charge up to a certain amount and very low charges beyond that.

Let’s say you were bringing a foreign SaaS product into India today. What would you do first?

First, make sure Indian payments work and ideally add rupee pricing.

Second, decide on your distribution channel. For something like RevWorkflow, I’d focus on agencies. Search for Shopify or WooCommerce developers, build a list, and start reaching out to the owners on LinkedIn.

And I’d open WhatsApp support. That’s one of the most important things you can do.