AI is India’s SaaS Moment — Will We Seize It?

This is a SaaS moment for Indian software founders and investors all over again, but much bigger. Will we seize it?

It was not long ago, that some remarks about India’s AI capabilities from one of the global voices on the subject, taken out of context, had caused much outrage amongst our techizens.

More recently, only a few weeks ago, one more front-page headline cited another global AI entrepreneur suggesting India should focus on fine-tuning existing AI models to its purposes instead of building its own. No controversy arose this time.

This complex question is on everyone’s mind: What should India’s AI strategy be? And if I’m a software entrepreneur, what should I build that’s highly relevant today and has a decent shot at continuing to be so in the future? Or if I’m an investor, what type of ventures and which founders should I be backing?

I think we can agree that from the nation’s point of view, the answer is not likely to be binary about choosing one over the other – build versus buy/rent – but a combination of taking short-term advantage of what’s available while strongly supporting ‘make in India’ for the long term.

And IndiAI’s efforts in this regard are absolutely commendable.

As an operator-turned-VC-investor, however, I would argue that while the answer may not be obvious, we’ll find it if we look to and start with our historical strengths – building applications. And this time, the way ahead too is most likely to open up in the shape of building AI applications.

There was a time when SaaSBOOMi’s aspiration of a trillion-dollar software product ecosystem powered by Indian entrepreneurs was met with scepticism. While that absolute number remains a distant dream, Indian companies from Zoho to Freshworks, Postman and BrowswerStack, have undeniably built software products and platforms being used by millions around the globe today.

But sometimes the universe conspires to give us what we want in ways that we couldn’t have anticipated. This is one such time because with the right effort and the right mindset, we’re likely to get there. Perhaps we’ll get there not as SaaS but as SaaS.AI.

With the AI waves washing over the globe, the next one crashing over us before the first has receded, it’s time to surf or drown. The trick is about choosing which ones to ride, of course. Perhaps this is where India’s software entrepreneurs and investors should focus not on building the next foundation model, but on what we do best — solving real-world problems at scale.

What did we learn from the rise of the SaaS and cloud software before generative AI hit us? The infrastructure opportunity was consolidated by the hyperscalers. In the AI world that’s already becoming a more interesting landscape with players such as Groq emerging. (By the way, which of the two newspaper headlines at the top do you think I hinted at was from a Groq co-founder?)

At the next level, there are several more players offering software tooling, data management and other cloud technologies.

In my view, the most interesting layer, and also where Indian entrepreneurs can aim to build large businesses turned out to be the applications one. Think Salesforce or ServiceNow, HubSpot, Adobe, Atlassian, Workday – well you get the picture.

These are some names that showed the way in solving real-world business problems, sitting the closest to their customers.

The AI opportunity is being seen as much bigger, and one that’s evolving at an insane rate, but it’s showing familiar characteristics. Long-term productivity gains derived from generative AI applications is projected to add between $2.6 trillion and $4.4 trillion in value annually to the global economy.

At Together we’ve already begun to invest in some early-mover entrepreneurs who are building to deliver that productivity in some niche areas for global customers: In AI-led revenue cycle management in healthcare, in delivering the promise of software + salary in market research, in an AI assistant that changes how you code, in a product that we think re-envisions making presentations, I could go on.

We’ve even invested in a couple of ventures that are building AI one or two levels deeper, such as at the software integration level. Which brings me to my thesis that in applications lies our path to becoming a global powerhouse of software tech, to never be known again as only an outsourcing destination.

Let’s start building AI-led applications that deliver outcomes to global markets. We have all the ingredients, including 5.5 million developers – the second-largest such base worldwide – a million engineers skilled in AI/ML and familiar with the SaaS playbook of engineering in India and GTM in the US, India’s digital public infrastructure, and 1.4 billion-person population-scale data.

And we top the world by relative AI skills penetration rate, a measure of prevalence of AI skills across occupations in a country or geography.

If you’re a SaaS founder ask yourself: ‘Can my product not just assist a user but do the job for her and deliver an outcome?’

If you’re an investor, ask yourself who’s building an AI product that will help the world rewire some aspect of its workflow for the better – reinventing CRM, ERP, HRMS, vertical SaaS, you name it.

Look around for who’s building for Bharat which will also therefore be relevant across the global south, with vernacular LLMs, localized AI agents, market-specific products and so on.

There may even be a surprise upside in that we may even build AI tooling and platform companies, if we make the right investments and back the right initiatives. We could build the Pinecone, LangChain, and Databricks of the AI era.

And we also know what needs to happen next: shared GPU clusters (democratise compute), open LLM initiatives, founders thinking about AI as products and not features, India-first AI-focused long-term capital and support for growth-stages and scale.

This is India’s SaaS moment all over again — but bigger. And this time, we will build the applied AI powerhouses the world needs. Not just an outsourcing destination, but an AI product nation. The foundation is ready — now it’s on us to make it happen.