WestBridge Capital & Upekkha Release Report on AI SaaS in India

WestBridge Capital, a late stage India US crossover investment fund along with Upekkha, a leading SaaS fund and accelerator launched a report titled “AI SaaS: India Opportunity”. The report highlights the impact of generative AI, the impact on SaaS and the larger India opportunity. As per a recent report by gartner technology spend was close to $4.8 trillion in 2023 and growing every year at 8%. At this rate it is expected to reach $11 trillion by 2033. Out of the $4.8 trillion in 2023, 1.3 trillion was spent in IT service and within that 900 billion was spent on software and $250 billion was spent on SaaS.  

The software landscape is undergoing a fundamental shift driven by Generative Artificial Intelligence (Gen AI). This is poised to redefine every aspect of how software is built and used. The traditional IT services industry will merge with the SaaS model, offering a combined “Software and Services” approach for the next generation of solutions.  Gen AI will usher in  an era of “Ambient AI.”

The Rise of Ambient AI

Within the next decade, Artificial General Intelligence (AGI) will pave the way for the widespread adoption of Gen AI, seamlessly integrating it into our daily lives. This “Ambient AI” will transform enterprise processes, surpassing the efficiency gains of traditional software and the cloud. This shift will blur the lines between Small and Medium-sized Businesses (SMBs), Mid-Market entities, and larger enterprises, creating a truly unified business landscape.  

Rishit Desai, partner at WestBridge Capital spoke about how how “Generative AI is swiftly transforming the UI/UX landscape for businesses. It marks a rapid advancement, with UI serving as a key factor for differentiation in enterprise applications. This technology offers significant opportunities to optimize workflows, streamline repetitive tasks, enhance customer experiences on a large scale, and revolutionize how we interact with enterprise applications, leading to an advanced user interface.”  

Thiyagarajan Maruthavanan, Managing Partner, Upekkha commented, “Gen AI is a platform shift. When platform shifts happen, just like how the mobile OS changed with Android and iOS or from on-prem to cloud, it leads to software being rewritten for the new stack. Given that this platform change affects every layer of the tech stack, categories are bound to get redefined. The end state of Gen AI in B2B is where tools will become outcomes, and therefore, the big opportunity is managing the outcomes, not just selling a software tool. The biggest advantage for India is in managing outcomes when Software as a Service becomes Software and Services, leading to a massive expansion of the total addressable market.”  

According to Crunchbase there are 206 Unicorns worldwide that are tagged as AI.”  14 of them are Gen AI unicorns. While some of them are naturally transitioning to Gen AI architecture, those who don’t have their ears to the ground on the technology changes and are working with old architecture will face a bleak future.  

Prasanna Krishnamoorthy, Managing Partner, Upekkha commented on the India opportunity for AI SaaS, “India’s booming SaaS industry, valued at a trillion dollars, is set to be completely reshaped by Gen AI. This technology has the potential to propel India to a leadership position in the global AI landscape. Indian AI SaaS startups are poised to create the next wave of innovation, aiming for the creation of 100 new AI Unicorns.”  

The convergence of SaaS, AI, and India presents a massive opportunity. However, it’s crucial to recognize that building platforms and models requires significant investment.  Therefore, the most promising opportunities lie in “white spaces” – niche markets currently overlooked by established players.  

While Gen AI holds immense promise, it’s not without risks.  “Hallucinations,” or unexpected and inaccurate outputs, pose a significant challenge.  Accuracy variations across tasks and contexts necessitate careful consideration.  

Gen AI goes beyond simply adding chat interfaces to existing software. It possesses a deep understanding of workflows, allowing for strategic automation and optimization. True innovation lies in completely reimagining user experiences and workflows, leading to significant advancements. As businesses navigate this transformative landscape, strategic foresight and adaptation to Gen AI will be essential for remaining at the forefront of technological innovation.