SaaS: Seizing Indonesia’s SME Digitisation Opportunity
Indonesia is home to over 65 Mn SMEs that have the highest contribution to GDP
1. Indonesia is home to over 65 Mn SMEs that have the highest contribution to GDP, and can benefit from the up and coming SaaS wave
Growing SMEs present a lucrative opportunity for SaaS players to capitalize on. These businesses are heavily reliant on labour to complete operational tasks ranging from accounting, payroll, sales processing to manual data entry and manipulation. They are a prime target of SaaS products because penetration among these players is very low when compared with large businesses who are open towards new technologies and have adequate funds for IT Budgets. Thus, SMEs are a great opportunity for early players to gain foothold and build their moat amongst local businesses.
Note – Definition of SME is in accordance with regulation rolled by the Indonesia Financial Services Authority
2. 2020 brought with it a myriad of challenges for some of the key sectors of the economy; SaaS helped solve some of these problems
Due to COVID, many sectors were marred with challenges that they were not equipped to deal with in the face of uncertainty, first and foremost being taking action and moving forward. This meant focusing on the transition from offline to an online channel. Investment in SaaS solutions helped them overcome this and a series of other challenges that the pandemic brought with it.
How can SaaS benefit the Key sectors?
3. Indonesia SaaS market is at a nascent stage which is why the vertical players are on the rise, paving the way for Horizontals
Horizontal SaaS provides a broad service that can cover the market through different industries while Vertical SaaS solutions are targeted to a very particular segment of the industry.
The former is usually for a more mature market, where there are less or no bottlenecks associated with raising awareness and educating potential customers. The most popular ones in the global market are Salesforce, Adobe, Workday etc.
Vertical SaaS paves the way for SaaS to go deep, offer solutions to very specific problems of a vertical. It acts as an opportunity for customers to try it out, experience the benefits and gradually digitize other verticals. It is convenient for new users as it can easily accommodate customer needs in comparison to horizontal SaaS and this adaptability helps keep the churn low with increased upsell opportunities with its customer base.
Key Players in SaaS Verticals
4. Ease of Management coupled with increased affordability of SaaS solutions- Makes the Indonesian market well positioned for a massive 5X growth
2019 onwards, there have been dramatic changes in the behaviour of businesses ushered by the affordability of mobile devices and internet penetration. SMEs, for instance, are now more cognizant of the fact that in the long term implementing SaaS solutions will prove to be more efficient over the use of manual labour to execute simple operational tasks. The realization that there is an affordable, simple and efficient way of performing the same tasks that saves time.
Due to COVID the market has witnessed an upsurge in Demand for SaaS platforms and this has helped the market grow faster, the Indonesia SaaS market is all set for 5X growth by 2025
Indonesia SaaS market size and growth , 2020-2025P, USD Bn