After a period marked by frozen budgets, cautious enterprise spending, and extended deal cycles, the SaaS (Software-as-a-Service) sector is witnessing a revival. As we move further into 2025, there’s a noticeable improvement in customer sentiment, a shift in enterprise spending patterns, and a rising appetite for AI-powered software tools.

Leading voices from India’s SaaS ecosystem, including Freshworks, Chargebee, Exotel, Capillary Technologies, Whatfix, Kissflow, and SuperOps, have expressed optimism about the market’s evolving direction. While the sector hasn’t returned to the hyper-growth phase of 2021, it’s clearly steering out of survival mode and heading towards sustainable scale.

Enterprises Begin Reinvesting in Software Tools

The freeze on software spending appears to be thawing. Many enterprises are now reassessing their technology budgets, particularly looking at AI-powered SaaS tools that can offer automation, productivity gains, and faster decision-making.

According to Girish Mathrubootham, Founder of Freshworks, AI is beginning to significantly contribute to revenue, marking a key shift in enterprise buying behavior.

“Customers are now more open to optimisation with SaaS tools… AI is playing a key role,” he noted.

This sentiment is echoed across the board. Krish Subramanian, CEO of Chargebee, highlighted that enterprises are now expanding their budgets for solutions that integrate AI and automation, calling it a valuable shift.

AI Integration: A Non-Negotiable for Modern SaaS Companies

One of the strongest takeaways from recent interviews and industry events is the centrality of AI to the SaaS resurgence.

“Companies that are able to adapt will survive, companies that cannot will be disrupted,” said Mathrubootham.

SaaS startups and enterprises alike are rethinking product development with AI at the core. It’s not just about feature upgrades—it’s about redefining the value proposition. AI is allowing firms to reimagine workflows, build 10X better products, and expand into new addressable markets.

Aneesh Reddy, co-founder of Capillary Technologies, stressed that AI is helping improve win rates, with customers actively appreciating AI capabilities during contract discussions.

The State of SaaS Sales Cycles and Budgets

Despite improved sentiment, sales cycles remain long, albeit shorter than the most difficult months of 2023 and early 2024. The buying process is still cautious, but there’s a marked relaxation in budget freezes.

A leading SaaS founder (who requested anonymity) revealed that budgets have gone up by 10–15% compared to last year, though deal closures still face delays due to internal decision-making layers.

Khadim Batti, CEO of Whatfix, confirmed that cheque-writing hesitancy has eased, although sales processes are far from the high-speed deals seen in the pandemic era.

Vertical SaaS Is Gaining Strong Momentum

One of the most promising growth areas in the SaaS ecosystem is Vertical SaaS—solutions built specifically for industries like healthcare, logistics, and retail.

“We are seeing better growth in vertical SaaS. Enterprises want mission-critical, tailored software,” said Manav Garg, Founding Partner at Together.

These domain-specific platforms are gaining preference over generic tools, as enterprises prioritize measurable outcomes and clear ROI.

From Surviving to Scaling

During 2023, many SaaS companies faced tough calls—restructuring, reducing burn, and shifting focus from growth to profitability. Now, those who weathered the storm are positioning themselves to scale with caution and clarity.

Budgets that were frozen are being unlocked, especially by mid to large enterprises with clearer digital transformation goals. New contracts are getting signed. Pipelines are healthier than a year ago.

“The sentiment in the US is improving… almost every founder I speak to says things have improved,” said Shivakumar Ganesan, CEO of Exotel.

SaaS Hiring Trends: Conservative Yet Focused

While the overall ecosystem is recovering, founders are taking a conservative approach to hiring.

“We have slowed down hiring consciously… We’re investing in tools, not people,” shared Saravana Kumar, founder of Kovai.

The focus is shifting towards tooling, AI integration, and internal automation rather than scaling teams prematurely. Efficiency is the new growth mantra.

AI: The Catalyst Behind SaaS Growth

At the heart of this revival lies Artificial Intelligence. Enterprises are moving from viewing AI as a gimmick to understanding it as a strategic enabler.

Generative AI is finding applications in:

• Customer support

• Sales enablement

• Predictive analytics

• Internal workflow automation

Founders say customers are willing to pay a premium for tools that offer real-world AI outcomes, including reduced operational costs, improved speed, and better customer engagement.

Suresh Sambandam, cofounder of Kissflow, sums it up well:

“SaaS companies today can’t be just SaaS anymore. They must innovate with AI.”

Changing SaaS Pricing Models

Another shift underway is in SaaS pricing structures. The traditional flat or seat-based pricing is giving way to outcome-based and usage-based models.

“As more automation happens, pricing will become more value or outcome-based,” said Mathrubootham of Freshworks.

Enterprises want to pay for results, and vendors are adapting their models to reflect performance-driven pricing. This aligns better with AI-enabled tools, where value creation is more immediate and measurable.

Consolidation Looms in the AI-Era

With AI transforming workflows and shrinking competitive moats, consolidation in the SaaS industry is almost inevitable.

“In the AI-era, only companies with strong execution and real differentiation will survive,” noted Aneesh Reddy.

Companies with strong AI capabilities, scalable infrastructure, and proven ROI will likely acquire or outpace smaller, less prepared competitors.

Conclusion: Green Shoots, Not Yet a Full Bloom

The SaaS sector is not in a boom, but the bounce-back is real. Founders and investors are cautiously optimistic. With AI acting as both a catalyst and a filter, the next wave of SaaS innovation will be more purposeful, more efficient, and more sustainable.

Enterprises are investing in tools again, but with a sharper lens on ROI, scalability, and mission-critical utility. For SaaS players, it’s no longer just about shipping features—it’s about delivering outcomes with intelligence.

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