Limited Period Offer:Be a PRO for 1 month @Rs49/-Multiple payment options available. Know More
you are here: HomeNewsBusiness

Coronavirus impact | SaaS firms may see 10% drop in revenue, delay in new deals

Major transformation deals, where SaaS firms play a major role, are likely to be suspended now and the existing contracts may be delayed

March 19, 2020 / 02:25 PM IST

India-based Software-as-a-Service (SaaS) startup expect 10-25 percent drop in revenue and deal deferrals as the Novel Coronavirus, or COVID-19, pandemic continues to spread across the world, impacting business operations.

Suresh Sambandam, CEO, KiSSFLOW, a workplace automation software, said the industry may see a 10 percent revenue hit in the short term, which may rise to 25 percent since it is impacting global firms.

A recent NASSCOM report pegs the Indian SaaS market at $3.3-3.4 billion in 2020.

How are SaaS firms impacted?

Most revenues for Indian SaaS players come from overseas, primarily the US. Due to COVID-19, major businesses are disrupted, in turn affecting their service providers, including SaaS firms.

Also, IT spends are discretionary. As firms clampdown on spending and minimise cost, discretionary spending will see a cut.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

In an earlier interaction, Krish Subramanian, co-founder, Chargebee, an automated subscription billing software, explained that if the discretionary spending is $200 million, more than 50 percent of it went to SaaS services. This spending is likely to reduce.

Prasanna Krishnamoorhy, co-founder, Upekkha, a platform that helps SaaS startups, said it will impact startups that cater to both enterprises and small and medium businesses. “While the enterprise startups will be able to sustain, the ones catering to the small and medium businesses may not be able to,” he added.

Krishnamoorthy explained that large enterprises cannot just stop using a software, customer relationship management service for instance, all of a sudden, given that the CRM software is essential for them to run their business. “So, they will continue to use the software,” he added. But for SMBs, it might not be the case.

“New deals are unlikely to happen and this will impact growth,” Krishnamoorthy pointed out.

Major transformation deals, where SaaS firms play a major role, are likely to be suspended now and existing contracts may be delayed.

Ashish Tulsian, co-founder, Posist, which provides restaurant management platform, said the company expects growth to slow down by 15 percent if the situation continues. The company, so far, has been growing at 35 percent quarter-on-quarter (QoQ). But because of the coronavirus pandemic, he expects it to fall to 20 percent QoQ growth.

“Our best period is the January to March quarter and we are definitely impacted due to COVID-19. We expect the impact to last for the next two quarters as we see delay in the start of new projects and payments from clients,” he added.

Most of Posist’s clients, including restaurant chains, fine dining and individual restaurants, are in India and across 20 countries overseas.

Postponing expansion plans, IPO

While there has not been any cancellations yet, clients are delaying projects and in some cases payments have been delayed. In SaaS, payments are annualised. Considering that most sectors are suffering, firms like Posist are exploring monthly or quarterly payment options for the time being.

The company is also contemplating its overseas expansion plans as well. “We were planning to open operations in London in October. It is too early to cancel. But depending on how the situation develops, we will take a call by May-end,” he added.

Another SaaS entrepreneur pointed out that any major decision such as planning an initial public offering (IPO) is likely to be deferred as well. “Clearly now is not a good time and getting good returns when the market sentiment is down is unlikely. So, firms may not go in for an IPO,” he added.

One of the companies looking at an IPO was Freshworks. It is readying for an offer in the US markets and was exploring both an NYSE and Nasdaq listing.
Swathi Moorthy
first published: Mar 19, 2020 02:25 pm

stay updated

Get Daily News on your Browser