Indian SaaS firms want to ride the generative AI wave to attract customers, investors

"The fusion of ChatGPT's generative AI with our home-grown AI features will provide users with a more intuitive, efficient and secure experience, reflecting Zoho's deep R&D-first culture," said Ramprakash Ramamoorthy, director of AI research, Zoho Corporation.

While AI and its use cases themselves are not new in the tech ecosystem, generative and conversational AI has been gaining a lot of attention, thanks to the launch of OpenAI's ChatGPT last November.

Generative AI is a type of AI technology that can produce various types of content, including text, imagery, audio and synthetic data, and conversational AI refers to technologies like chatbots or virtual agents to which users can talk to.

It has been the buzzword and has even attracted software giants like SAP, Salesforce, and IBM to explore this space. While the West has been fast to adopt the same, Indian SaaS and tech companies are now getting on the generative AI bus.

“SaaS companies building in the chat space has a lot of scope to explore generative AI, the companies will also have huge customer base to get into this,” Arvind Parthiban, the founder of SuperOps, ai, an AI-driven MSP (managed-service provider, or a third-party remote IT infrastructure manager) software according to its website, told Moneycontrol.

Firms like Mad Street Den and ManageEngine are also developing newer AI products that are customer-centric.

ManageEngine, the enterprise IT management division of Zoho Corporation, in a recent report, said that to stay ahead, IT teams must ditch siloed management and embrace IT operations solutions with advanced AI- and machine learning or ML-powered observability.

“Despite the challenges, the benefits of observability and AIOps (artificial intelligence for IT operations) in delivering superior customer experiences and driving business growth are clear. As organisations continue to prioritise CX (customer experience) initiatives, they are likely to invest in these technologies. We are committed to providing world-class solutions that will empower ITOps (IT operations) teams in their journey,” said Mathivanan Venkatachalam, vice president of ManageEngine.

“There is pressure from investors for many startups to build products in the generative AI space or tap into ChatGPT… Many are today raising funds with a promise of building an extraordinary product with AI,” said a SaaS startup founder, who did not want to be identified.

However, investors believe that firms that build their own playbook to tap the AI wave will fare better.

“Most people are underestimating the impacts of AI and Indian SaaS companies are starting to realise that there is no playbook to build on an existing AI but to build something on their very own,” said Thiyagarajan Maruthavanan, managing partner of SaaS-focused venture capital firm Upekkha.

A recent report by Stellaris Venture Partners and World Bank Group arm International Finance Corporation said that Indian SaaS startups that utilise AI could create $500 billion in market value by 2030.

“India’s AI opportunity could create more than 900,000 white-collar jobs and 3.6 million new indirect jobs by 2030. We believe that globally, AI represents around $900 billion revenue opportunity by 2030 from infrastructure, applications, and services,” said the report, titled ‘AI Enabled SaaS: The Next Frontier for Global SaaS Startups from India’.

AI talent demand is soaring

“The demand for AI talent is going up today, the existing engineering talents are also getting trained in several AI-related skills like data analysis, data science, ML and specific areas like natural language processing, image and voice recognition tools, and more,” said a chief human resource officer of a SaaS firm, on condition of anonymity.

There are several skills that may get redundant and there is a shortage of AI talent across the globe and not just in India and that should be fast bridged.

“Even though layoffs are happening on one side, companies are ready to pay a lot for specific AI-related talent… This segment is a hit. IITs and IIMs (the Indian Institutes of Technology and Management) have picked up this trend already,” said the CHRO of the SaaS firm cited above.

Understanding the risks

Sridhar Vembu, CEO and co-founder of Zoho, in a press conference last month said that the rapid growth of AI, particularly the recently developed conversational AI platforms ChatGPT and GPT4, is posing a threat to the workforce, particularly programmers.

In fact, Vembu submitted a proposal to the government, along with Rajiv Kumar, former NITI Aayog vice chairman, and Sharad Sharma, co-founder of iSPIRT Foundation (an advocacy platform for the software industry), which urges the government to establish an AI policy that prioritises openness and transparency.

Apart from the risk of developer jobs getting absorbed by the growth of AI, especially generative AI, many founders and investors point out the risk of data security.

“Everyone today is building products using AI that is using ChatGPT. While small businesses may worry about data and privacy now, as they scale, these are very significant aspects to look at. Generative AI is presently in its nascent stage and sharing data to these platforms may take away some parts of confidentiality that every founder should be wary of,” said a top executive from a SaaS unicorn, on condition of anonymity.

Investors remain wary of AI integration in startups

“Existing and new vendors claim chatGPT integration to build new solutions. It’s hard to say who wins at this stage. One in thirty new companies may build something truly unique” said Bala Srinivasa, co-founder and managing director of Arkam Ventures.

“Sales enablement SaaS is a big area for AI integration. However, within this segment, there is a new business model with AI and CHatGPT integration every day…We like to look for startups who can demonstrate models that we believe are truly disruptive based on talking to customers and experts,” Srinivasa added.

Upekkha’s Maruthavanan said that in the post-ChatGPT era, the first question a founder should ask as an AI startup is whether you are building applications on top of LLM (large language models) or developing the LLM infrastructure itself.

“The recent excitement in AI is about generative AI. Generative basically means guesswork. It is like machines are taught to mug up the entire web,” he said.

“While 90 percent of the companies are just riding on the hype, the 10 percent, who will truly understand the impacts and build products will truly become the next Amazons or Ubers of the world… I look at a company from a perspective of whether a company is solving an application problem or an infrastructure problem,” he added.