Competition in the SaaS (Software as a Service) space is increasing as customers are looking for better solutions to their problems. Korea has been known for its innovation in the tech space. Many software companies in Korea have sprung up. Thanks to easily deployable infrastructure like AWS and readymade website builders like WIX and Shopify, it’s possible to get a company up and running in less than a day and start collecting leads. Therefore the SaaS market in Korea is at an all-time high, with Korean SaaS startups coming up with SaaS solutions for the Korean market.
It is estimated that South Korea’s public cloud market alone is expected to double in size over the next 5 years from $1.7 billion to over $3.5 billion. However, the number could be much higher as most SaaS companies are so busy trying to convert existing SaaS services into Korean that many startups get left behind.
SaaS is Constantly Evolving
Covering the SaaS scene in Korea, it is clear that once a startup focuses on a service, they don’t quickly adapt. That is why many of the top SaaS startups in Korea are behind global SaaS companies. Older features like integration, which was once able to generate thousands of dollars in revenue, are now industry standard. Globally, implementing new software products now takes less than one working day. However, in Korea, many new innovations first need to be converted into Korean for the Korean market and the implementation takes a few days. Therefore, SaaS startups and companies in Korea are finding it more challenging than ever to acquire clients and users. Furthermore, those who manage to get on the products/services are not as happy as they used to be.
The South Korean Public Cloud Market
It is estimated that Korea’s public cloud market will be worth more than $3 billion by the end of 2025. Digital native businesses and media and gaming companies are the biggest spenders in Korea’s public cloud market. Therefore online gaming, eCommerce, and other digital businesses in Korea that need to deliver the best possible online experience to their customers are looking towards the cloud to gain that advantage.
This includes all models such as SaaS, IaaS (Infrastructure as a Service), and PaaS (Platform as a Service). Many global companies have already entered Korea thanks to data centers in South Korea from AWS and Microsoft. AWS and MS have been actively partnering with Korean companies to set up cloud services in Korea. These services include technical cloud consulting, data transfer, migration, and cloud management. However, the most significant need comes from eCommerce companies in Korea that are using the public cloud to get access to big data, which helps them personalize customer service. In addition, the cloud can help optimize delivery times by predicting demand spikes and finding the best possible routes in real time.
Major companies in Korea are also getting into the cloud market. These major companies include:
Samsung SDS
Samsung SDS already partnered with AWS, MS, Google, and Alibaba. They provide cloud-related services such as consulting, conversion, operation, and establishment.
SK C&C
SK C&C provides container services for every type of cloud environment. It offers a service that combines many clouds into a single cloud. It manages the single cloud regardless of the cloud service provider. Some of SK C&C’s customers include major gaming, distribution, manufacturing, and finance industries.
LG CNS
LG CNS is working on a hybrid strategy that applies public cloud services and stores data in a private cloud. They focus on Korean and foreign companies that want to migrate to the cloud.
Lotte Data Communication Company
Lotte has partnered with AWS, MS, Oracle, Salesforce, and Sysco to target the public cloud and hybrid cloud markets. Their customers are mainly in the eCommerce industry, with some also coming from the medical and manufacturing industry. They provide a multi-cloud and hybrid cloud service optimized for each industry.
POSCO ICT
POSCO made a partnership with AWS to offer consulting and establishment and operation of infrastructure services to companies that are looking to use AWS for robotics, smart factories, and automation services.
SaaS Companies in Korea are Offering the Wrong Products/Services
Global products or services which work excellently outside of Korea don’t work so well inside Korea. Therefore many SaaS startups in Korea try and convert global products or services to better suit the Korean consumer. This is not as effective as building a Korean SaaS product from the ground up. To create the right SaaS product or service, startups in Korea need to do a lot of research to understand customers in Korea better.
Once they start getting customers, it is even more important to continue the research. Many SaaS CEOs and founders I have spoken with have less than a couple of customer development conversations each month. Learning from customers should lead to companies running tests and experiments every month. However, Korean companies typically avoid risk and like playing it safe. Once a company stops innovating, products/services become outdated, or companies produce the wrong products.
How Foreign Players Can Dominate the SaaS Industry in Korea
Foreign players are quicker to try to understand their customers. As Korean SaaS startups make their typical slow approach to innovation, there is a window for a hungry SaaS company to break through in the Korean market. The SaaS products of today are leaps and bounds ahead of those of the past few years. However, most SaaS startups in Korea are not current with these new products or services. More importantly, customers in Korea are unaware of the alternatives. Therefore learning from customers in Korea and getting their feedback is far more valuable than focusing on the acquisition. If your product or service suits the customers, the customers will come.
Customers in Korea, in the end, want to go with a product or service that offers the most value. Therefore, instead of getting as many customers as possible, focus on building better products for Koreans.
The 5-Steps to take before Entering the SaaS Market in Korea
- Talk to your customers. If you don’t have customers, talk to your competitors’ customers. Companies in Korea don’t understand how valuable this is.
- Create a database of what the customers want. Many of their requests will not be possible at this moment. However, this does not mean it will not be possible. Many will discover that some recommendations are easily doable and require little money. This data collection will lead you to develop the perfect SaaS solution for customers in Korea.
- Focus on quality over price. Koreans are willing to pay a premium if they get the product or service they like. Don’t hurt the quality because you want to save some money.
- Avoid discounts. While Koreans love deals, many customers in Korea associate discounts with lower quality which can hurt your brand. If you believe in your product or service, the customers will be there because there are few places they can go. In addition, your brand will be considered a premium product or service that Koreans respect.
- Stay up to date on the latest SaaS trends. A SaaS startup in Korea that keeps up to date on the latest SaaS trends will dominate the space. If they keep up to date on the services and research whether customers in Korea will like said product/service and quickly implement that service into their will become an unstoppable force in the SaaS space in Korea. Korean companies and even startups move very slowly due to a strict working culture where free thinking is suppressed. A solid Global team with innovative thinkers has a legit shot at creating a SaaS unicorn in Korea.
