According to a report by Springboard Research, Indian SaaS market will grow at a compound annual growth rate (CAGR) of 77% from 2006 to 2010, to reach $165 million by 2010.

Springboard believes that a buoyant Indian economy, driven by rising domestic consumption and exports, expanding broadband infrastructure, and increased internet penetration among small and medium businesses (SMBs), will make India a significant market for SaaS applications. SaaS also has great potential and room to grow in India due to low penetration of software applications among Indian enterprises, especially the SMB segment.

“The level of SaaS awareness in India continues to rise,” said Balaka Aggarwal, senior market analyst for Emerging Software at Springboard Research. “Our report showed that more than anything else, ease of use and management is driving this trend toward SaaS, with 44% of our survey respondents indicating that these were the key reasons they put SaaS in place, beating out lower cost of ownership at 23%,” Aggarwal added.

The challenge -- and the opportunity-- for SaaS vendors is to continue educating the market about the benefits that SaaS can provide end users. About 26% of Springboard’s survey respondents in India named “low awareness of the concept and benefits of SaaS” as the main reason preventing their adoption of software as a service.

Springboard Research also found that while most SaaS applications are still purchased directly from the vendor, there is an emerging channel for SaaS in India appearing, especially for more complex SaaS applications focused on enterprise resource management (ERP), customer relationship management (CRM), and human resources (HR).