India’s Role in the Global AI Market - Stellaris-IFC Study

Stellaris Venture Partners, an early-stage venture capital firm and International Finance Corporation (IFC), a member of the World Bank Group, have released a report titled - ‘AI Enabled SaaS: The Next Frontier for Global SaaS Startups from India’. The report is based on an industry-wide study conducted in collaboration with tech giants including Cisco, Infosys, Amazon Web Services (AWS), GitHub, and Freshworks.  

Commenting on the launch of the Stellaris - IFC report, Alok Goyal, Partner, Stellaris Venture Partners said, “In the last decade, India has become a significant player in the global SaaS ecosystem, with breakout companies across different software domains. As AI transforms enterprise processes across industries and functions, we expect massive value creation through a new wave of AI-first startups. We believe India could potentially generate a market value of US$500B from both AI applications and services by 2030, driven by the country’s thriving startup ecosystem, experience of building successful SaaS companies, and world-class data & analytics talent”.   

Ruchira Shukla, Head, South Asia, Disruptive Technologies – Direct Equity and VC Funds of International Finance Corporation (IFC) said, ““AI has the potential to solve complex problems on a global scale and can unlock a host of employment opportunities across the board. In India, there are several inflection points such as an abundance of data, storage capacity and computing power, that are priming AI to drive the next wave of business transformation. Several critical sectors such as education, healthcare, agriculture, logistics and financial services stand to gain tremendously from AI-led solutions, driving inclusion and economic development.”   

Key insights from the Stellaris - IFC report 

AI is not a feature, but a new wave that will help create a new generation of start-ups

Artificial intelligence (AI)—the use of technology to aid human judgment, as opposed to simply automating repetitive tasks—is ready for prime time. Efficiency and effectiveness gains from proper use of AI can create value. AI, therefore, will not just be a “feature” in existing applications, but will help produce a new class of applications, creating ‘the’ next disruption in the enterprise software market. We believe that globally, AI represents a ~US$900B revenue opportunity by 2030 from infrastructure, applications and services.

India is well-positioned to be at the forefront of the AI revolution; to create more than US$ 500 billion of market value by 2030

Within the realm of AI, the immediate opportunity for India lies in leveraging capabilities built during the IT and SaaS waves to build global AI applications and related services businesses. During the last decade, Indian companies have gained significant experience in building successful and category leading SaaS companies from India. 

From a talent perspective, India’s AI opportunity could create more than 900,000 white collar jobs and 3.6 million new indirect jobs. 

India has a large talent base of developers and strong process expertise, along with a fast-growing pool of niche talent such as designers and data scientists in addition to the availability of unique data sets and sophisticated algorithms. Moreover, the overall ecosystem for early-stage companies is backed by adequate high-risk capital, with individual and institutional investors who are focusing on software investments and industry-specific accelerators that are willing to support these companies in their early stages. In 2021 alone, $4.5B was invested in SaaS startups in India, an increase of 170% from 2020 as per Bain & Company. These in combination with the increased service intensity inherent to AI and the democratization of AI infrastructure, is where India’s advantage lies.  

Methodology

The starting point of this report was four fundamental hypotheses, following which we conducted extensive conversations with 40+ industry experts which included founders, industry experts, investors, academics, from reputed organizations like TCS, Microsoft, Google Research, to name a few. We also interacted with 150+ AI-first enterprises, who were identified through the AI4Biz Challenge that was curated specifically for the purpose of this report. Subsequently, in-depth discussions were held with the 20 finalist organizations such as Limechat, Factors.ai etc. These conversations played a significant part in strengthening our confidence in the hypotheses laid out at the beginning of this process and in the completion of this report.