12 December 2019

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‘SMEs investing heavily in IT’

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SMBs are increasingly adopting technology for the betterment of their business and are investing heavily on tools like PCs, the Internet and website to market themselves and compete in global/domestic markets, a Zinnov study revealed.

The study further said that while the overall domestic IT spending is expected to grow at a CAGR of 12 per cent to reach $36 bn by 2015, SMBs will grow at a CAGR of 15 per cent contributing $15 bn by 2015.

Titled 'Indian SMB ICT Adoption Insights’, the study highlights the current state of IT adoption in the SMB segment in India, and predicts the likely trends going forward.

It provides a detailed analysis of the different opportunities, challenges and scope related to IT spending and technology adoption in the sector that may result in SMBs contributing to over one third of the total domestic IT spend by 2015.

Indian is home to around 50 million SMBs currently, of which 10 million are technology-ready. Transforming itself from the traditional ‘pen & paper’ business culture, SMBs today are increasingly adopting technology for the betterment of their business, the research said.

Providing some interesting statistics, the study went on that today five lakh SMBs in India have websites and two million SMBs are accessing the Internet. Increased adoption of PCs by SMBs is also another significant factor that will fuel the growth of this sector.

Four million SMBs in the country are using PCs which is expected to grow at 30 per cent from 2011 to 2015, resulting in doubling the base of SMBs with PC, Zinnov study said.

According to the study, the addressable opportunity of 10 mn SMBs will continue to increase during 2011-2015 as more firms realize the necessity of organizing themselves with the help of technology. A lion’s share of (8.9 million which is 94 per cent) technology-ready SMBs in the country are very small in size with an employee base of less than 10.

This clearly shows the increased awareness and interest level of base level SMBs in technology which is also an indicator of India’s technology progress.

Further splitting the SMB market in India, the study finds that retail is the single largest vertical by addressable opportunity with an overwhelming two million firms ready for technology adoption and expansion. Around 1.9 mn professional services firms is second in the list followed by 1.2 mn manufacturing enterprises and 1 mn hotels & restaurants.

By 2015, retail will stand at 2.5 mn, followed by professional services at 2.3 mn, manufacturing at 1.6 mn and hotels & restaurants at 1.1 mn enterprises. The study also says that not far behind is the Education segment which is expected to grow to 1.1 mn units from the current 0.9 mn units.

While the SMB segment is witnessing steady growth, it has its own set of challenges that needs to be overcome in order to sustain the rate of growth. The main roadblocks facing the SMB sector in India are the lack of technology know-how, unclear return on investments,cluttered product portfolio, high cost for technical support and high investments made in legacy systems.

“The Indian market is promising and challenging at the same time. We are optimistic about the growth outlook but there are serious concerns which need to be addressed immediately,” said Kishan Bhat, engagement manager, Zinnov.

“Majority of SMBs still perceive IT adoption as a time-consuming and complex process and therefore, prefer to stick to their existing traditional processes. There needs to be a categorical shift from legacy systems, and some fresh investments made from a long-term growth perspective,” Bhat added.

The study also provides some useful suggestions to technology providers to succeed in the highly competitive SMB market in India. The four key points that technology providers need to bear in mind while addressing the SMB segment are:

  1. Product Localization is necessary for growing in emerging markets

  2. Unique support models are needed to showcase value and reduce the overall solution cost

  3. Need for customized pricing strategies targeted at driving adoption of solutions

  4. Solutions that understand local workflows and can offer a bouquet of services under the same umbrella.


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