India 


Opportunity
Contents
Introduction 3

Voices of the Industry 4

Executive Summary 5

Chapter 1 Gen AI is different from A 7

Gen AI is general-purpose technology
Gen AI pushes AI below the API

Chapter 2 GenAI in B2B is not going to be straightforwar 10

Redefining workplace efficiency
Use cases of Ambient AI in B2B
Stages of evolution into Ambient AI

Chapter 3 Gen AI is reshaping B2B Categories, Applications, Builder Tools and the Platfor 13
New categories will emerge
Gen AI tech stack is different
Open-source alternative

Chapter 4 The Indian Angl 16

Boring Unse y ertical AI SaaS is the whitespace to play in

, x V

Owning the outcome is a big opportunity Software and Services

, .

Builder tools are also applications but re uires different business mindset
q

Chapter 5 W here is the right to wi 19

W here you start is key

Regulation will play an important role .

U is source of moa
X t

Chapter 6 Ris s in AI
k 20

Summary 21

Bibliography 22

Appendix 23

AI S a a S R e p o r t
Authors Project Manager Other Contributors
Thiyagarajan Maruthavanan
 Divya Ajitsaria 
 Mohamed Yoosuf

Managing Partner, Upekkha Head of Marketing, 
 Marketing Manager, Upekkha

Upekkha
Prasanna Krishnamoorthy
 Kavya Shastry

Managing Partner, Upekkha Communication Manager,
Upekkha

Editor & Content 


Rishit Desai

Partner, WestBridge Capital
Specialist Jaya Malhotra

Content Associate, Upekkha

Minakhee Mishra

Senior Editor & Content Ragini Sabharwal


Manager, Upekkha Research Analyst, WestBridge
Researcher Capital


Avi Vijayvergiya

Analyst, WestBridge Capital

Design by Delesign
2
AI SaaS Report
Intro
WestBridge has a multi-decade history of investing in These offerings target the global software buyer and
pioneering firms with Indian roots. It engages with a Indian enterprise markets.

broad spectrum of the ecosystem, including nascent

startups and funds of all stages. WestBridge identifies Like the myriad Indian investments WestBridge has
trends with unique Indian advantages and backs these spotted and nurtured, the Indian software business uses
with capital and key resources to build lasting impact. 
AI in its core offering. 

Upekkha, an accelerator fund WestBridge has invested In late 2023, WestBridge and Upekkha began exploring
in within India’s startup ecosystem, co-authored this the impact of AI-driven software startups from India on
report. As a premier accelerator focusing on SaaS, the global stage. They considered the opportunities and
Upekkha supports startups created by founders with hurdles presented by this trend and India’s role in an AI-
deep domain expertise to build global software brands. 
forward future.

Their investigation started with the following premises:

AI alters the software landscape

Gen AI will reshape the Indian SaaS
industry

Gen AI (Generative Artificial Intelligence) is eating

software. It is a fundamental shift, and it will India’s trillion-dollar SaaS economy, whose
redefine the rules of the game in every aspect of foundation was set by the 19 SaaS Unicorns in
life. A convergence of Gen AI technologies, 2023, will be fully reshaped by the advent of Gen
including vast data pools, storage, computational AI. Engineering cost advantage that Indian SaaS
power, and advanced algorithms, is setting the companies had will go away. However, the
stage for AI to fulfill the promise that it set out to expertise in Vertical SaaS will continue to stay and
make many decades ago. Computers taking rote morph into Vertical AI SaaS.

away from human life. 

IT services and SaaS integration

AI to transform enterprise processes

The IT services industry that pre-dated the

Just like the cloud, the transformation of Software as a Service (SaaS) industry in technology
enterprise processes is on the horizon. The will amalgamate with SaaS to provide the next
efficiency and productivity gains from AI are innings with Software and Services.
expected to surpass those from traditional
software and the cloud, prompting a re-
evaluation of nearly every business process. This is
productivity on steroids.

Inflection points are messy places and hard to research. will provide a map of how things are shaping up, not
At the time of the inflection it is not clear what direction only in the long-term vision but also in the near time
the long-term future is going to take. Extrapolating past future. 

data points will only lead to wrong and often dangerous

conclusions.
They interviewed a select few founders, investors and
operators in this space and posed simple questions to
Asking fundamental and basic questions from those in piece together the near-time future map of AI SaaS from
the field who are hands on building and investing in an India perspective.
shaping the inflection point

3
AI SaaS Report
Voice of the Industry

Pallav Nadhani
 Aakrit Vaish


CoFounder, Presentations.ai | Co-Founder & CEO, Haptik |
3x founder | Investors, Seeders
Interakt | Angel Investor

Generative AI will transform B2B workflows in The startup ecosystem in India is relatively
ways beyond our imagination. Most tools will young and has not experienced many
evolve into outcomes. However, before technology disruptions, unlike Silicon Valley.
becoming outcomes, they will undergo a cycle Indian founders have traditionally excelled at
of workflow contraction and workflow application-level software that emphasizes
substitution Next few years, the industry will great distribution more than great
redesign these workflows with an AI UI first technology.

thinking. The opportunity for Indian founders

lies in looking for opportunities that are not With Gen AI, Silicon Valley is again becoming
considered interesting in the eyes of the center of gravity. To be competitive
incumbents, including Silicon Valley-funded against this, we must rapidly shift our mindset
startups, thereby significantly increasing their to be at the forefront of this technology shift,
chances of success. and both founders and investors need to
rethink what they are doing.

Krishnakumar Natarajan

Managing Partner, 
 Ranjan Kumar

Mela Ventures | Former CEO, Mindtree
Founder, Entropik Tech

This redefinition of opportunity in software, For horizontal providers, excelling is tough, but
where services along with applications are set adopting a vertical approach tailored to specific
to play a key role, represents one of the functions adds value. Focusing on the middle
biggest opportunities for India due to Gen AI. layer of applications, blending core technology,
Our decades of experience in delivering and solving business problems presents
services will distinguish us from the rest of the significant opportunities for SaaS companies.
world as the market transitions from Software
as a Service (SaaS) to Software and Services.

Somnath Chatterjee

Aneesh Reddy
 Founder & CEO, Prismforce

Founder & MD, Capillary 


Technologies

Even when integrating GenAI, prioritize

customer experience by integrating them into
AI is emerging as productivity on steroids. the product ecosystem, enabling hyper-
Especially at the entry level in various work personalization. GTM strategy should focus on
functions like white-collar jobs in IT services automating marketing and sales with chatbots,
and product companies. A single, Gen AI virtual assistants, and data-driven AI analytics.
powered agent can rev up the work of 20
human resources.

AI SaaS Report
Voice of the Industry

Girish Redekar
 Gaurav Sharma


Co-Founder, Sprinto
CEO & Founder, SaaS LabS

The India opportunity is that India has many Like any technology shift, Generative AI
service professionals, especially in technical generates both optimism and fear. It offers a
domains where customer support requires a context of combining data so easily within
deep understanding of the product and enterprises that it will lead to a reimagination
domain. This advantage stems from a strong of how they engage with customers. No
service mentality and the availability of enterprise will appear too big or impersonal,
engineers skilled in technical and customer- driving extreme and accurate personalization.

facing roles. Human connections must remain

critical, especially in extremely high-stakes What does not change due to Generative AI or
sales or navigating roadblocks. One must any technology shift is the customer's problem
integrate AI into all aspects of business and their obsession with their own needs.
operations rather than treating it as an They will engage with whoever solves their
afterthought. The outcomes from an AI-first problems best.

company will likely become very large-scale in

the near future. However, what may change is how companies
restructure themselves in significant ways
that affect their margin structures and how
they provide solutions to those customers'
needs. India has traditionally had a margin
Sanket Shah
 structure advantage due to its expertise in
CEO, Invideo software and will likely continue to do so.

AI has reset the world. Today, with the advent

of Gen AI, Indian founders have the
opportunity to rethink all sorts of software
from first principles and lead the way towards Vijay Rayapati

innovation. After a long time, it is possible for CEO & Founder, AtomicWork

us to lead in different categories of software. I

think the Total Addressable Market (TAM) of all Gen AI is a big platform shift, and it's probably
products significantly increases with Gen AI, as big a platform shift as the internet. While
and as the barrier to usage decreases, more most are overestimating the impact of AI in the
mid-market products will become product-led short term, they are also underestimating the
growth (PLG)-ish. However, the go-to-market impact that it will have on the long run. There
(GTM) strategy for enterprises will not change. will be a significant opportunity to build
In fact, there will be budgets for all companies modern software ground up.

to try and use AI products, and there will be a

unique opportunity for enterprises to sell AI Incumbents have an initial advantage but
products. With a little bit of imagination and startups that focus on converging different
love for the craft, all kinds of software products problems, leveraging Gen AI for building
can add a significant amount of value via AI. modern solutions and leveraging India for GTM
with land and expand approach will have
unique advantages in the coming decade.

51

AI SaaS Report
Executive
Summary
Generative Artificial Intelligence (Gen AI) is One of the biggest areas that generative AI
not the same as traditional Artificial will force us to rethink is the categories
Intelligence (AI). It is a general-purpose and markets. Today, the world of
technology like steam engine, electricity & technology spends close to $4.8 trillion.
internet. Gen AI is likely to grow faster 900 billion out of this is expended on
than any general-purpose technology that software and $1.3 trillion in IT services.
we have witnessed in the past. 
Within the software industry, categories
will go through redefinition. When an
As society ushers in Artificial General end user can build their own tools, the
Intelligence (AGI) within the next decade need to buy CRM and support software
for enterprises, it will mean that AI will be disappears. This will result in the fusing of
available everywhere. Being omnipresent, both the software and the services
it will become ambient and invisible and market, leading to the expansion of the
can be called Ambient AI inside the Total Addressable Market (TAM) to
enterprise. 
include the entire IT service market of
multi-trillion dollars. 

In that future state, the go-to-market in

the enterprise is unlikely to be Generative AI is not just about attaching a
demarcated as SMB, Mid-Market and chat interface to your backend; it's really
Enterprise. AI providers will become about understanding a workflow and
platform providers like Microsoft, Google or reimagining its design. In Gen AI
OpenAI. They will supply AI to both workflows, this often results in the
enterprises and consumers, akin to utility compression of the previous workflows
companies providing electricity.
in places where human elements can be
shifted from a lower-risk step to a higher-
This vision of Ambient AI will be realized in risk area. Truly innovative generative
multiple phases. This incremental applications will rethink UX from the
evolution of AI from traditional AI to ground up to disrupt existing workflows
ambient AI within enterprises will happen and lead to workflow contractions.

as the tools will be replaced by

outcomes. The first step will be workflow
contraction. 

In this, the inception point will start in

those functions where the stakes are
low, such as in developer productivity,
customer support, etc. 

AI SaaS Report
 Chapter 1

GenAI is different from AI

Artificial Intelligence (AI), Generative Artificial These artificial neural networks are loosely inspired by
Intelligence (Gen AI), Machine learning, Deep Learning the human brain. This is called deep because the neural
and Data Science are often mixed up with one another networks have many layers stacked on top of each
and used interchangeably by many. There are overlaps, other. 

but they are not the same. It’s similar to how, in our daily
lives, we often use power, electricity, current, utilities, Generative Pretrained Transformer (GPT) refers to a
alternating current (AC), and direct current(DC) to type of artificial neural network that uses an architecture
roughly mean the same things. The nuances and called transformer. It was originally invented in 2018 and
distinctions (in both cases) are so stark that entire has been so powerful in its application across a wide
industries get built out differently. Many of the variety of domains that it can be earmarked as a
differences stem from the underlying technical different era for artificial intelligence. It is called
architecture design.
Generative AI (or Gen AI).

Artificial Intelligence (AI) is a subject that focuses on

computers that can reason and learn like humans. With
AI, computers can perform tasks like problem-solving,
reasoning and decision-making, which are normally
required of humans. 

Ever since computers were invented, they have operated

under the model of processing instructions. Computers
are programmed with high-level instructions that are
translated into machine language that computers can
execute. Some of the initial artificial intelligence
Just like alternating current was a disruptive force in
systems built had explicit rules fed into computers to
generating power, Gen AI is a step-up in AI.
answer questions in a way that mimicked human-like
responses. Though it had several limitations for narrow
tasks and domains, it gave overall enough results. 

The concept that computers can operate by just reading

data and learning from it without receiving explicit
instructions is called Machine Learning (ML). This is
different from the instruction-led approach. The
advantage of this approach is that every edge case does
not have to be explicitly instructed. 

Data science is a field that deals with extracting insights

and knowledge from data. These insights then
empower a business to make better decisions. Data
science is a mixed subject, and it overlaps with Machine
learning. A data scientist's goal is to suggest actions to
improve business based on insights they extract by Gen AI is general-purpose technology

analyzing data. 

The transformer architecture was invented in 2018

Deep learning is a sub-field of machine learning that within Google, and the orbit shift nature of this became
uses artificial neural networks to solve complex apparent in 2022 with ChatGPT. ChatGPT is a consumer
problems. question-and-answer website (chat) powered by GPT.

AI SaaS Report
It won’t be wrong to use another name for GPT: General The Internet took 10 years to get 500 million users;

Purpose Technology (GPT). It implies that general- mobile phones took 6 years. ChatGPT has over 180

purpose technologies are technologies with the million users* after 1 year and may take only 3 years in

potential to impact entire economies.

total to get to 500 million users. Thus indicating that

Generative AI will cross 500 million in just 3 years. In fact,

In the world of technology, hypes are real. Many fads it was also observed that there was no crash in the

have come and gone. However, the impact of mobile platform shift. 

technology is overestimated in the short term and

underestimated in the long term. Conversations around

the potential benefits derived f rom Gen AI are not f ree

f rom this over-and-under estimation. Gen AI is going to

be overestimated in the short term and

underestimated in the long term.

The widespread impact of generative AI makes it a

general-purpose technology like electricity, steam

engines, railroads, and the internet. Every general-

purpose technology goes through adoption curves.

Carlota Perez, an economist who has studied how

technology adoption happens in society, discovered that

Source - Coatue AI Report 2023

a crash demarcates widespread adoption. A crash

happens between the two phases when there is a

mismatch between supply and demand; in other words,

Gen AI is a highly pervasive general-purpose
supply is far ahead of demand. This happens when
technology that is unlikely to go through a crash
builders spend resources and do inventions that are far
experienced by many past general-purpose
ahead of the users who do not need them or know
technologies.

about them. 

Gen AI can escape the crash as technological

In Carlota’s study, she found that there are two phases of
capabilities intersect with business needs or demands,
every technological revolution: The installation phase,
leading to increasing synchronization between supply
when the technology comes into the market and
and demand.

inf rastructure is built and the deployment phase of

mainstream and large-scale adoption of the technology

For mainstream adoption, aspects such as reliability,

by society or users.
fairness, handling bias, aligning with regulation, and

solving security issues will have to be addressed. Unless

that happens, adoption will be slow.

The impact of Gen AI is going to be lasting in society.

What does this mean for someone building a Gen AI

appliance targeting businesses and enterprises? 

When the underlying available power source changes

f rom an AA-size battery to an AC/DC current, the design

of the appliance business can change radically. 

The technology jump offered by Gen AI will make the

earlier machine learning approaches seem like small-

w
size batteries. Due to their intrinsic shortcomings, the

As a thumb rule hen a general-purpose technology

5 ,
primitive ML approaches were not scalable. ML

reaches 00 million users it is said to be beyond the

approaches were not scalable. Further, it is difficult to

early adopter phase and is in mainstream adoption.

R&
imagine the changes the powerful new Gen AI

Technology has to be enabled through D investments

appliances can bring when seen f rom the limited

to move beyond the early adopters. Therefore, the role

capabilities of earlier ML approaches.

of capital markets and technology adoption timelines

are intertwined closely

*at the time of writing in Jan 2024

8
A I S a a S R e p o r t
Let’s use a helpful metaphor to better understand the Previously, augmenting software with intelligence
changes brought about by Gen AI. Think of an app required assembling a team of at least a dozen machine
running on a basic text-only operating system (OS). learning engineers and data scientists. However, with
Much like early AI, the OS's capabilities were initially OpenAI and other open-source large language models,
limited and not very powerful. This means that it's this capability is now accessible through an API. 

possible to only develop simple text apps using that

particular OS. However, with the advent of a more Gen AI pushes AI below the API, signaling a significant
advanced OS, the scope for app development expanded shift in how intelligence is seamlessly integrated into the
significantly. Graphical User Interfaces also became software. An Application Programming Interface (API)
possible. Now, it’s possible to create complex, large-scale serves as a framework of rules and protocols that
applications and even explore innovative uses that were establish the communication standards between two
previously unimaginable. Early AI is much like a basic software systems. With AI, even the average APIs,
text-only operating system (OS) with limited capabilities. developers gain the ability to integrate sophisticated AI
The evolution of AI into Gen AI unlocks large-scale functionalities into their applications or services easily.
applications and previously unimaginable This integration involves making requests to the API and
innovations, making them feasible. 
subsequently receiving responses, enabling seamless
access to advanced AI capabilities. 

Let us take the OS metaphor a little further. As the OS

evolved, it became a seamless, almost invisible With Gen AI, not only does the API’s capabilities get
foundation for the application being built. This shift led revved up easily the cost of components gets slashed. As
to a change in the market's dynamics in terms of the a result, imagination is amplified at the appliance level.
nature of products being developed, distributed and It is like playing with Lego blocks to create something
priced. This triggered new decisions: should they create previously unimaginable rather than building things in a
a niche app for a specific purpose? Or should they aim primitive manner. The availability of better tools
for a more versatile, commercial-grade application?
unhinges the imagination, making the previously
impossible possible even for those with limited technical
Underlying foundational technological advancements expertise. This leads to new AI appliances getting built
can redefine the landscape of creation, making the once by average users as opposed to only being built by
visible and limiting aspects—like a battery's capacity- an experts previously.

invisible enabler. This, in turn, can catalyze greater

innovation and bring diversity to the applications used In layman's language, it is ok to use Gen AI and AI
on a daily basis.
interchangeably. However, for the reasons stated above
Gen AI is better thought of as a completely different
term, general-purpose technology giving rise to a
completely new industry. 

Gen AI
pushes 

AI below
the API

AI is below
the API in
Gen AI

9
AI SaaS Report
 Chapter 2

GenAI in B2B is not going to be straightforward

Gen AI is emerging as productivity on steroids in the The next most common use for Gen AI is in applications
enterprise.  
that address aspects of an organization related to cost,
customer support, HR, and legal. Companies looking to
Many businesses are dipping their toes into Gen AI, optimize their balance sheets by minimizing costs will
driven by a mix of curiosity, ambition, and perhaps a fear increasingly adopt Gen AI in their functions to
of being left behind and beaten by competition. Yet, for streamline operations and reduce costs.

many, this journey is still in its infancy. A delicate dance

of experimentation and learning is going to be key. 

Given the concerns and risks of intellectual property, Gen AI in workflows:

data privacy and bias in Gen AI in the consumer world,
safety guidelines and guard rails will be needed before
adoption can skyrocket. In a business environment,
customers use their own data on their platform. This
data is highly curated, quite unlike the consumer
segment. The guardrails that must apply to the
consumer world and open internet do not come into
play in B2B. On the other hand enterprises are still
looking at developing policy clarity and assessing ethical
impact before they adopt AI. 

As a result, the adoption of Gen AI in businesses will be The utopian vision of Gen AI in the enterprise is that all
faster in some areas of the enterprise and will be slow in tools will be replaced by the outcome. However, this
others. 
will happen in multiple phases. The existing workflow
will shrink in a big way. What would take fifteen steps
Redefining workplace efficiency
will get done in five. Initially, humans will be in the loop.
Gradually, in some areas, humans and tools will get
Over time, a Gen AI tool will become the de facto office replaced to just get the outcome.  

productivity tool. It will become part of the environment Moreover, through constant analysis and learning from
where developers and enterprise professionals work. It data, generative AI will create emerging patterns and
will become ambient or invisible, with the underlying provide predictive insights. This helps to craft self-
element evident only to the creators/developers.
optimized/customized workflows. 

G en AI Applications 
Next, Gen AI will be used in important areas such as HR
The first killer app, i.e. game-changer app that boosts tasks and legal work, as well as different support roles
productivity via Gen AI in the enterprise, is in writing within companies. This growth means work can be done
code. Here, a 40-50% productivity jump is already being more efficiently, and resources can be used better in
witnessed. Another interesting place where Gen AI is many areas.

being used is in data analysis using the code

interpreter in ChatGPT. Gen AI will become universal in
code generation in a few years. There may be a few
exceptions, where Gen AI usage may be completely
banned. Developers will, however, use tools that
enhance their productivity with or without
management's approval. This area will see the wildest
growth within the businesses. In the near future, coding
Apps like CodeWhisperer, Apollo.ai, Devin, etc, will
develop to an efficiency level where these smart coders
obsolete the need for human coders for most
application development. 

10

AI SaaS Report
Use cases of Ambient AI in B2B
Next comes S upport AI. This stage sees AI stepping in

to help with customer service and technical support. It's

If the grand vision for AI in the consumer world is AGI as if every customer gets a personal assistant ready to

(Artificial General Intelligence), then the equivalent in solve their problems anytime

the business world is Ambient AI. AI is available

everywhere abundantly as a commodity, like electricity. Then, we reach M arketing AI. Here, AI starts

Given below are some of the use cases that will shape understanding and predicting consumer behavior and

over time, starting with: crafting personalized marketing strategies. It's like a

marketer who knows exactly what the customer wants,

even before they do

1 4
Programming
automation and code Generate Sales AI follows, transforming how products are sold. AI
generation web copy analyzes data to identify potential leads and tailor sales

pitches. It's akin to a salesperson with an impeccable

2 5 memory for details and an innate sense of timing

Data Wrangling 
 Note-taking in

(code interpreter) online meetings Finally, we arrive at A mbient AI. This stage represents

the culmination of AI's integration into our daily lives,

working seamlessly in the background. It anticipates

3 Customer support

6 Creating multimedia
our needs, simplifies tasks, and enhances decision-

operations logos and videos in making, all without us even noticing. Ambient AI can be

that order like a benevolent presence that can enrich our lives

quietly and continuously. The extent to which we can

use AI to enhance our abilities hinges on how we

The emergence of Gen AI is set to change go-to-market develop and implement it, with a focus on safeguarding

strategies in a big way, altering content creation to data security, privacy and considering human aspects

prioritize quality, consistency, and delivery. It will elevate at its core.

web experiences to unprecedented levels. Companies

will gain a full understanding of their customers through The AI landscape is evolving in a manner that distinctly

holistic data, enabling them to identify and prioritize favors established players or the Incumbents. The

leads with enhanced precision and automation.

transition from on-premises solutions to cloud-based

services was a big leap that saw incumbents scrambling to

Stages of evolution into Ambient AI 

adapt. Similarly, the shift to mobile computing required

substantial adjustments. However, AI integration presents

The journey to Ambient AI unfolds through distinct a different scenario altogether. It's proving to be far easier

stages. Each stage builds on the earlier one, evolving the for incumbents to adopt and integrate AI into their existing

role of AI frameworks, giving them a distinct advantage over

newcomers.

First, there's Development AI, where AI assists in

creating software and solving complex problems. It's
like having an invisible team member who never
sleeps, enhancing productivity and innovation.

Stages of evolution into

Ambient AI

11

AI SaaS Report
This ease of integration is leading to a big change in
business models, notably the phasing out of seat-based
pricing. The traditional model of selling software licenses
per user is becoming obsolete as the functions of
businesses converge under the influence of AI. This shift
is not just a minor adjustment but a fundamental
change in how software value is perceived and
monetized. 

Currently at the early installation stage, AI in services

will have outcomes that are non-deterministic. This
means that the results and accuracy levels are
unpredictable. Sometimes the outcomes are great and
work as desired, but at times they don't. Similarly,
resource usage also will be non-deterministic. This
relates to the number of API calls versus the number of
users, which may not be constant at all times.

This is in complete contrast to SaaS where there is a

predictability in revenue and cost. Services plus AI will be
a lot more variable when compared to SaaS.

For designers and product leaders, the rise of AI

necessitates a new skill set centered around
understanding and leveraging GPT-4 and similar
models. Mastery over creating effective prompts
becomes a critical competency, akin to understanding
user needs in traditional design. The ability to craft
prompts that elicit desired responses from AI showcases
technical skill and artistic sensibility.

In this new era, AI is not just a tool but the product's

core, with the user interface enhancing AI's functionality.
Design decisions now encompass persona, tone,
context, and character, reflecting the nuanced
integration of AI into user experiences.

These challenges paint a picture of a landscape where

vision, legal clarity, policy development, cultural
acceptance, talent acquisition, infrastructure readiness,
and technical capabilities are all key to navigating the
future of Gen AI within enterprises.

12
AI SaaS Report
 Chapter 3

Gen AI is reshaping B2B Categories,

Applications, Builder Tools and the Platform
When an earthquake happens old maps become It's still very early. What is important is a fundamental
useless. 
understanding of the customer use case. Right now, it’s
time to focus on Gen AI’s capabilities with a deeper
During a technology shift, change usually happens at understanding of AI use cases. The base problem
one specific layer of a value chain. In Gen AI the shift is companies face when they begin growing is missing
happening across every point in the value chain. At the context.

application layer, the user interface layer, the

middleware and the core hardware layer. When the Use cases that are probably targeting very unsexy,
pace of change is as fast as it is happening due to Gen vertical, and very niche industries will be a big
AI, it is hard to keep track. Old-known concepts and differentiator in product adoption. Understanding
categories are not helpful anymore. 
customer use cases will be the ultimate reason to win for
most of the products.

To make understanding easier, the first demarcation

that has to be done is between traditional AI and Gen AI. 
Gen AI’s utopian promise is that tools will get
replaced by outcomes. When that happens, it will
Not all AI is Gen AI.  
impact how entire software markets are perceived.
Biggest shift in the market category will be the
Gen AI is AI that is built using a transformer or the redefinition due to merging of Software or SaaS tools
latest architecture that beats state-of-the-art into the broader IT services market. 

benchmarks in intelligence tasks. 

Within an enterprise the tools budget and headcount

Traditional AI is the earlier architecture of neural budget are distinct and they don’t eat into each other.
networks, or those built using the older primitives of During the Gen AI shift headcount budget can be
machine learning.  
replaced by an agency line item. This is because the
agency line item, which internally uses Gen AI tools and
According to Crunchbase there are 206 Unicorns offers to do the same thing at one-tenth or one-
worldwide that are tagged as AI. 14 of them are Gen AI hundredth of the cost, will instantly take a major chunk
unicorns. While some of them are naturally transitioning of the focus.

to Gen AI architecture, those who don’t have their ears to

the ground on the technology changes and are working The Chat part of ChatGPT was an important reason for
with old architecture will face a bleak future. its wild adoption. Powerful AI needs to be paired with a
new UI. In Gen AI context when people say AI first they
usually mean an UI that is AI UI first

Humans are creatures of habit. Just because a

technology like cloud computing exists, people won't
compromise on the capabilities they've come to expect
or are accustomed to from software. They insist that any
new technology should enhance existing workflows
rather than provide suboptimal solutions. The
expectation is for platforms to adapt to users' needs
seamlessly. There is a need to understand users' mental
models and not expect them to regress in their
demands for software capabilities. Understanding how
People are buying mostly because of FOMO and don't to make the UI and UX seamless is very critical.
realise the true value of the product. While sales are
rising now, FOMO will kill those sales six months in
advance.

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AI SaaS Report
Currently two application design patterns are emerging Within dev tools, low code and no code tools give way to code
in this, namely Co-Pilot and Agents.  
automation tools in ways not imagined before. 

The new type of Gen AI application design patterns are Within horizontal functions, use cases that will follow
different. It involves building using Lego blocks of AI and adoption starts with customer support, automating HR, legal
not AI primitives. Additionally, it involves dealing with & accounts and then later move to revenue-shaping
non-determinism in application building and in design. functions in sales. 

The approach here changes from being a creator to a

curator of the builder tools for Gen AI, which again are The biggest disruption will happen due to category
very different from what was used before. New IDE, redefinition. Older known category names and budgets
application monitoring, and deployment tools are also allocated towards that will constrain thinking. Adopting a
getting shaped up. 
mindset of shaping a new category and guiding the product
building through latent need identification and a category-
For the average use case there is no longer any need for defining approach will be the best navigating compass. 

a data scientist to build a model using Matlab and then

port it to production in Python by a machine learning Gen AI tech stack is different

engineer. Today an average engineer can use an API and

do what previously needed a big team of data scientists AI triggered a platform shift in SaaS that was similar to what
and machine learning engineers. 
happened during the shift from web to mobile in the
consumer sector. With foundational models and LLMs that
Going forward, only a few companies like OpenAI, can be trained for various tasks, Gen AI has been
Cohere, and Anthropic will build foundation models. democratized and made accessible to all. This has
Enterprises may either use that or open-source models empowered individuals from all walks of life to engage with
to fine tune for their needs. The vast majority of its capabilities firsthand, regardless of their expertise or
application developers are only going to consume the background. 

foundation or fine-tune models. 

New categories will emerge

This reshaping of roles from data scientist and ML

engineers to maker (of foundation models), shaper (via
fine-tuning), and taker (consuming Gen AI API) will drive
a new set of builder tools with differing ML Ops than
that used before.

Vertical AI like vertical SaaS is going to be very

prominent as the presence of vertical data will drive the
intelligence ability very strongly.

Horizontal and Vertical AI are broad categorizations within

each function. Ultimately the use cases will shape these
workflows and those will get adopted first where the risk of
going it wrong is not very high.

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AI SaaS Report
TOVL stack
Open-source alternative

Navigating the current technological landscape reveals Parallel to the emergence of the TOVL stack is the rise of
a compelling evolution towards a more interconnected open-source alternatives, which are challenging the
and intelligent ecosystem, prominently featuring the rise dominance of proprietary solutions like OpenAI with a
of the TOVL stack—Typescript, OpenAI, Vector democratic approach to technology. This movement is
Database, and Langchain.
not just about providing free access to powerful tools
but is fundamentally reshaping the landscape of AI
This stack represents a confluence of programming development and deployment.

language efficiency, advanced AI capabilities, innovative

database technology, and the seamless integration of Open-source projects offer the promise of increased
language models into applications, creating a transparency, flexibility, and community-driven
formidable toolkit for developers aiming to build the innovation, enabling a wider range of developers to
next generation of intelligent software solutions. experiment with and contribute to the advancement of
AI technologies. These alternatives foster an
Typescript, with its robust typing system, enhances environment where tool chaining—integrating multiple
code quality and maintainability, making it an ideal software tools to create advanced applications—is
foundation. becoming more accessible and diverse. 

OpenAI's groundbreaking AI models, such as GPT,

offer unprecedented natural language By leveraging open-source AI models, developers can
understanding and generation, enabling more tailor AI functionalities to specific needs without the
intuitive user interfaces and sophisticated data constraints of commercial platforms, potentially
analysis lowering entry barriers and accelerating innovation.

Vector Databases, optimized for high-speed search

and retrieval of vector-embedded data, are crucial for This trend towards open-source solutions represents a
powering AI-driven applications with instant access significant shift in the AI ecosystem that could
to vast amounts of information. democratize access to cutting-edge technologies and
Lastly, Langchain's technology bridges these amplify the collective potential for creating
components, facilitating the creation of applications transformative applications.
that leverage natural language processing in novel
and impactful ways.

Together, these technologies are shaping the future of

software development and setting new standards for
what is achievable with AI integration.

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AI SaaS Report
 Chapter 4

The Indian Angle

Gen AI is one of the most pivotal points in software since It goes without saying that a lot of R & D and
SaaS. It is a platform shift, and when a platform shift engineering centers will get set up in India to rewrite the
occurs, a lot of software gets rewritten. A lot of software previous technology stack used by SaaS companies. A
was rewritten when the cloud and mobile shift modern-day Gen AI SaaS tech stack will include layers
happened. Initially, some incremental refactoring such as Typescript, Open AI, Langchain and Vector
happened, but eventually, the biggest value unlock Database or a similar equivalent.

happened when the platform native or platform first

approach was taken
Regulation around data that is shaping up will play a big
role in how deployment gets affected. Even amongst the
Shift in cloud enabled a few things. While the cloud providers, partitioning of data across geography
deployment architecture changed, the other shift that alters the deployment cost structures significantly.

added more wind to it is the rise of online search and

social platforms that enabled newer go to market for After 15 years of SaaS proliferation, enterprises face
software.
unique challenges; 500 people may be staring at the use
of 500 different SaaS tools, leading to operational and
Traditionally, the only way software was bought before security nightmares. These applications do not talk to
the cloud was through trials, sold by traditional each other, leading to integration tools getting built and
salespeople meeting customers door to door.
data lakes getting built so that data silos can be broken.
Enterprises are looking to simplify. Gen AI-based
With multi-tenant architecture deployment over the technology solves this easily, providing a common
web, customer preference of interest in buying changed. context for exchanging data from one to another and
Software sales model flipped from selling to assisted helping reduce the number of tools and interfaces that
buying. This was the major enabling factor of the birth an enterprise will have to use. This simplification will
of the Indian SaaS industry. Assisted buying. This shift lead to category destruction and reformulation of new
was a global phenomenon which companies like categories. Several classes of new horizontal and
Hubspot capitalized in a big way by paving the method vertical applications will be present, and they will look
of Inbound marketing but it was championed by Indian completely different from the past known categories of
SaaS companies. tools such as CRM, Support Desk software, etc

Boring, Unsexy Vertical AI SaaS is the

whitespace to play in  

In the global debate between startups and incumbents,

With Gen AI, as software goes through rewrite the way it the common wisdom that is arising is that incumbents
creates advantages and disadvantages for Indian have an edge over startups when it comes to Gen AI. 

startups changes. 

However, it is also important to point out that from an

Indian perspective, it is in the application where there
are better opportunities.

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AI SaaS Report
Even in applications where the markets already have a large This also solves some of the problems associated with
TAM, the incumbent is likely to staff a team to pursue that Gen AI with respect to quality and reliability. When there
opportunity. True opportunities would be in white spaces, is a human in the loop performing the task along with a
which do not look very big today and, therefore, are ignored Gen AI tool, you get efficiency as well as quality. 

by incumbents. Startups should explore these unsexy, boring

industry verticals and build an advantage before an When you build an offering such as transcription, you
incumbent can make an entry into the space. 
can throw the human into the loop. 

Owning the outcome is a big This is Software and Services instead of

opportunity, Software and Services
Software as a Service. 

One of the biggest opportunities for Indian startups is This will lead to a massive expansion of TAM. Entire B2B
owning the outcome. Instead of providing an application software put together was $250 billion dollars in revenue
delivered as software as a service, startups should lead with in 2023. But the entire IT services put together was $1.6
services and software. They should also not build new trillion dollars.

horizontal or vertical application tools but rather own the

entire outcome for a use case.  
TAM expands when startups build Software and Services
instead of Software as a service.

Gen AI in workflows:

In this space of software and services, the biggest

opportunity exists for Indian startups. 

According to an estimate 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. 

As per an IDC estimate 1.3 trillion dollars is expected to

be tagged as Gen AI related revenue by 2033. It will be a
combination of both Software (& SaaS) and IT services as
Gen AI fuses the two categories. Gen AI related revenue
in 2023 was less than $10 billion, which puts the growth
This is not very different from how SaaS companies in the rate slightly at 63%.

India market operate; Indian buyers have always purchased The Gen AI India opportunity is 10% of the global market
outcomes over tools. Thanks to Gen AI in this service, internal share, which will stand at $130 billion in the same time
operations can be done with far greater efficiency. 
period.  

A marketing agency, an operations support company, etc, The SaaS industry started with Salesforce in 2004 when
can provide better outcomes with 2 people using internal the cumulative industry was less than $100m in
Gen AI tools compared to the need for 20 people doing revenue. In 2023 with the revenue pegged at $250b, it
things manually. 
results in a growth rate of 48%.

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AI SaaS Report
Gen AI with Software and Service categorization is Platforms in any industry have high barriers to entry, and the
therefore going to grow faster than the SaaS industry.
startup cost (Fixed and Computational costs) is exponential.
This makes them natural monopolies. Platforms that power
Builder tools are also applications but requires different Gen AI are no different. An example of how platforms end up
business mindset 
becoming natural monopolies is Google. Usually, the Google
of a country is not a unique country-specific one but the
Another big opportunity is in applications that help global player itself. 

build end-user applications or builder tools. The previous

old tools are less relevant now. How models are built has Despite this challenge, building and engaging with a
fundamentally changed; therefore, the process has platform becomes important for sovereign reasons. At times,
changed as well. Now, the role has changed some large investors may face pressure that would create a
significantly. Now, there are 3 new different stratified strategic compulsion to create platforms. There is a danger of
roles: Makers, Shapers and Takers
hyper scalers ring-fencing their oligopoly. To safeguard the
public interest and ensure platforms remain public goods,
Takers are API users of AI who are like regular full-stack policymakers must move their feet fast to ensure a small
engineers, now called as AI engineers. They consume AI number of big private corporations do not control this
via API and have some knowledge of how scalable AI emerging market. Monopolistic tendencies inherent in
systems are built.
platforms necessitate strong differentiation between the
platforms built. It’s possible to do this by only working actively
Makers are the ones who are involved in building and with regulators. The government will play a significant role
deploying large language models. As the industry here.
consolidates, there will be far fewer people and
companies involved in doing this.

Shapers are those who use models from Makers and

shape them for specific enterprises or data sets via fine-
tuning

In this newly evolved organization that is creating new

products with AI applications, the roles and tools used in
MLOps 1.0 will go through a significant redesign. This
will lead to the rise of newer builder tools for the new
Gen AI stack.

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AI SaaS Report
 Chapter 5

Where is the right to win

In Gen AI, every 6 months a 10x improvement in It's no longer just about being present across channels
performance is taking place. In such a fast-paced but about mastering the art of timing, messaging, and
landscape, founders and investors will have to be very engagement in a way that cuts through the noise. 

agile in identifying and leveraging opportunities. 

Regulation will play an important role. 

Indian startups are extremely good at fast-follower

strategies and can replicate applications overnight. That Unlike during the invention of the internet, today, most
is no longer a source of advantage, as everyone has countries have evolved deeply in their regulatory
access to reduced R&D costs due to Gen AI.
frameworks in dealing with new technologies.
Understanding the implications of data rights and
Where you start is key 
regulations will be critical in ensuring that startups don’t
get edged out of the market due to regulatory
Leveraging the shift that is happening due to transition restrictions.

from traditional application and tools to outcome-

oriented services, offers a natural area of advantage In the digital economy, data acts as both currency and
given the rich IT services history of India. 
compass. The role of data governance laws has
become paramount as businesses navigate the complex
Gaining deep insight into use cases and building landscape of privacy concerns and regulatory
vertical-focussed applications is an area in which Indian compliance. How a startup manages, protects, and
startups have a huge advantage. The starting point leverages its data can significantly influence its
often dictates the trajectory of a startup's journey. competitive edge and reputation. Adhering to
Venturing into the less glamorous, "unsexy" verticals governance laws is not just about avoiding penalties but
and markets, where competition is sparse and the about building trust with customers and stakeholders in
needs are acute, can provide a fertile ground for a world increasingly wary of data misuse.

innovation. These overlooked niches, devoid of the

dazzle that attracts most, hold untapped potential for UX is a source of moat 

those willing to delve deep into the intricacies of

industries that the mainstream deems mundane. It's in Moreover, the significance of UI/UX in building moats
these realms where solving real problems can become around a business cannot be overstated. In an era where
the cornerstone of a sustainable business model.
user experience can make or break a product, investing
in design is not a luxury but a necessity. A well-thought-
Finding an anchor for takeoff is not about chasing out user interface and a seamless user experience are
what's trending but identifying a solid, defensible critical in converting first-time users into loyal
position in the market. The current GTM strategies for customers. They serve as the silent ambassadors of your
startups often revolve around creating buzz within echo brand, embodying the values and solving the pain
chambers and leveraging influencers. While these points for which your startup stands. In the crowded
tactics can amplify visibility, they don't guarantee lasting marketplace, where features and functionalities often
traction. The essence of a robust GTM lies in crafting a blur into a sea of sameness, UI/UX becomes the
value proposition so compelling that it resonates with differentiator that can shield your venture from the
the core needs and pain points of your target audience, commoditization trap.

turning early adopters into vocal advocates.

In sum, navigating the startup ecosystem with a strategy

When it comes to funding, the modern startup that emphasizes thoughtful market entry, a solid GTM
ecosystem is awash with tales of astronomical rounds approach, judicious use of funding, mastery over
and valuations. Yet, the reality is that not every venture distribution, compliance with data governance, and
requires vast sums to make a significant impact. 
excellence in UI/UX design is akin to charting a course
through uncharted waters with a compass that points
Winning in distribution and GTM is increasingly about towards enduring success. It's a journey fraught with
understanding the nuances of how your product challenges, but for those who navigate it with insight and
reaches and is adopted by your target market. integrity, the rewards go beyond mere financial gain; they
extend into the realm of lasting impact and innovation.

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 Chapter 6

Risks in AI
The journey into the unknown realms of generative AI Many AI products offer potential benefits that are
unfolds a narrative filled with unexpected outcomes, more aspirational than guaranteed, relying on
security, safety, fairness, bias, and privacy concerns. probabilistic outcomes rather than being
These elements form the core risks that anyone deterministic
venturing into this field must be acutely aware of. 

Gen AI outcomes can be non-deterministic, resulting

Among these, the phenomenon of incorrect results— in varying levels of success, with some instances
often referred to as "hallucinations" in AI parlance—is working while others may not
not just common but stands as a towering challenge. It
underscores a reality where unexpected, incorrect, or Accuracy levels with Gen AI solutions may differ,
inappropriate outputs emerge as the most formidable leading to inconsistent performance across different
risk associated with Gen AI technologies.
tasks or contexts
The issue of fairness demands a spotlight of its own. In Resource utilization in Gen AI applications, such as
an array of applications, notably those within the the number of API calls required versus the number
medical domain, bias is not just a problem but a critical of users, can be unpredictable and fluctuate
concern that necessitates rigorous testing and
mitigation strategies. The task of cleansing training Unlike the relatively predictable revenue and cost
data of historical biases is both arduous and crucial, models seen in Software as a Service (SaaS) offerings,
highlighting the importance of fairness in AI-driven services combined with AI introduce a higher degree
solutions. 
of variability
This challenge is compounded by the fact that biases Businesses integrating AI into their services should
can be incredibly subtle, particularly to developers who be prepared for this increased variability and
may not have firsthand experience with the types of bias adaptability required in managing resources and
their users face. What appears as a minor oversight to a expectations.

developer becomes a glaring flaw for a user. This

underscores the need for a diverse development team Addressing some of these risks in accuracy, reliability,
that can better identify and address these subtle biases.
regulation and security will be key for fast adoption of
Gen AI.
The vulnerabilities inherent in Gen AI present another
layer of complexity. Prompt injection attacks, where
malicious inputs are designed to manipulate AI
responses, exemplify the novel security challenges
posed by this technology. Similarly, model leeching—a
technique where attackers craft prompts to extract
information about the training data—highlights the
unique vulnerabilities exclusive to AI systems.
Additionally, the issue of model interpretability looms
large, particularly in regulated industries where
explaining how decisions are made is not just good
practice but a regulatory requirement. This need for
transparency and accountability in AI processes points
to the broader challenge of ensuring that AI systems are
not just effective but also equitable and understandable.

Despite the excitement surrounding the early stages of

the Gen AI revolution, there are inherent uncertainties.

20
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Summary
The apprehension surrounding AI job displacement is exaggerated.
While some roles may fade in the short term, AI will concurrently
stimulate the creation of new job opportunities, mirroring the pattern
observed in previous major technological shifts. Similar to the advent of
computers, AI will unveil fresh avenues for employment. 

Most professions necessitate a diverse skill set, whereas AI only fulfills a

fraction of these requirements. People will naturally gravitate towards
tools that enhance productivity and make work easy. Ultimately, AI will
not make people jobless but rather help them work more efficiently.
However, learning to use AI tools will become extremely critical. This will
also ensure that AI augments rather than eradicates jobs. 

Since mastering AI tools will be indispensable, employers must prioritize

equipping their teams with the necessary AI proficiency through
comprehensive training initiatives. Consequently, businesses that
embrace AI will outpace those that resist, underlining the imperative for
investment in both builder and user education.

Businesses will have to invest in training both builders and AI users. 

AI will not replace humans, but businesses that use AI will replace
businesses that don’t. 

India’s big opportunity is not only in building the new Gen AI tools at the
application level but showing the world how to promise and deliver
outcomes that are powered by Gen AI tools.

India will lead the way for the rest of the world as Software as a Service
moves to Software and Services.

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Appendix
As part of our primary research methodology for crafting this report, we
engaged with esteemed industry experts and investors within the AI &
SaaS ecosystem to gather their insights and perspectives. 

Aneesh Reddy(Founder & MD at Capillary Technologies), Brijraj (Vaghani)

Bhuptani(Co-founder and CEO at Spry Movement App), Gaurav S. (Founder
& CEO, SaaS Labs), Girish Redekar(Co-founder, Sprinto), Raghavendra
Reddy(Co-Founder, Bluecopa), Ranjan Kumar(Founder, Entropik), Somnath
Chatterjee(CEO & Founder, Prismforce.Inc), Vijay Rayapati(CEO,
AtomicWork), Vipin Raghavan(CEO & Co-founder, Haber), Pallav
Nadhani(CoFounder, Presentations.ai | 3x founder | Investors, Seeders),
Krishnakumar Natarajan, (Managing Partner Mela Ventures | Former CEO
Mindtree), Aakrit Vaish (Co-Founder & CEO of Haptik | Interakt | Angel
Investor), Sanket (CEO, Invideo), Gaurav S (CEO & Founder, SaaS Labs),
Jonathan Siddharth (CEO & Co-founder, Turing. AI), Girish Redekar (Co-
Founder, Sprinto), Aneesh Reddy (Founder & MD, Capillary Technologies),
Vivek Raghavan (Co-Founder, Sarvam AI), Vijay Rayapati (CEO & Founder,
AtomicWork), Vipin Raghavan (CEO & Co-founder, Haber)

* at the time of writing this report in Jan 2024

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India 

Opportunity