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Understanding megatrends and how they can help investors build wealth

15 Aug , 2022   By : Monika Singh


Understanding megatrends and how they can help investors build wealth

Megatrends are dominant, transformative forces that have the potential to change the global economy, business, and society and have been changing the way we live for centuries. Consider electricity, the automobile, the Internet and Smartphones. Identifying the possibility of change is the critical driver of investment decisions. The understanding of megatrends is crucial to get valuable insights while making an investment decision.



There are several avenues for an investor to play these megatrends. This strategy needs investors to concentrate on stocks in long-term megatrend sectors. Music Streaming, Electric Vehicles, Affordable Housing, Cloud Computing, Healthcare and Insurance, SaaS, CDMO/CRAMS, Specialty Chemicals, and so on are examples. India’s per capita income has risen, along with the country’s aspirations for goods and services. In conjunction with government policies, this has created megatrends that will drive India’s growth story over the next decade.



Let’s discuss one megatrend in detail

SaaS

SaaS (Software as a Service) has emerged as a major disruptor in the global technology industry. SaaS is a new business model gaining traction in the enterprise software product industry. Unlike the traditional Licence-Implementation-AMC model, the SaaS business model involves selling Software as a service. Customers can use the product (typically hosted on the cloud) by paying a subscription fee regularly, such as monthly or quarterly.



Consistency in innovation and value creation are both essential for corporate growth. India’s Software as a Service sector is constantly delivering innovation and value. As a result, the Indian SaaS industry has a lot of potential and will continue to grow in the future. 



The last two years have given it a significant boost compared to established legacy vendors, thanks to improved pricing, quality, and customer service. As the ambition of Indian Startups is to compete with global software giants such as SAP, Indian SaaS companies have the potential to scale up and become like the other Indian IT behemoths. Many companies are concentrating on specific user problems and client pain points. 



Why will SaaS be India’s next big thing?

As the startup ecosystem matures in India, many entrepreneurs will enter the market to create a positive impact on the lives of Indians. In addition, consumer Internet companies headquartered in India have expanded rapidly in recent years. This is a fantastic opportunity for India to become a significant player in the world of services while also increasing the efficiency of businesses worldwide.

  1. The majority of Indians prefer smartphones first. People use mobile devices to access the internet first, and its penetration will continue to rise.
  2. SMEs operate traditionally and account for 40% of the country’s exports. They have several operational and supply chain inefficiencies that SaaS products could help to address.
  3. Human resources, recruiting, education and training, and healthcare all require IT infrastructure that has the potential to transform the way these services and enterprises operate.



SaaS as a delivery model benefits the business in two ways.

1. Increases a customer’s LTV.

The entire thesis of SaaS is that rather than a customer investing upfront by purchasing a licence, which costs huge capital, the customer would be content to pay in small chunks regularly for the same software application. One can consider the difference between buying a house in cash (the traditional model) and buying a home on an EMI basis (SaaS). And we all know that the cost of the house would be higher in the case of EMI vs paying upfront. A similar phenomenon occurs in SaaS, where a customer’s Lifetime Value has nearly doubled over a 10-year period.



Daily Sales Outstandings and reduced volatility
SaaS accelerates by removing one-time and upfront licence revenues entirely and converting the entire revenue stream of a deal into a recurring annuity, similar to how Annual Maintenance Costs works.




Mostly the clients of such products and services are Banks- that cater to Retail or Corporate customers, Central Banks, Wealth Managers and Private Bankers, Insurance Companies, Card issuers, and Capital Market participants such as Brokers, Custodians, Government enterprises and Retail chains, etc.


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