What’s eating the Indian SMB’s IT Spend pie?

A recent study by the premier management consulting company Zinnov had estimated the Indian Small & Medium Scale Business (SMB) sector to have of 48.8 million enterprises with a projected Compound Annual Growth Rate (CAGR) of 5.29%. With the SMB sector’s Information & Communication Technology (ICT) Adoption rate projected to grow at 15%, even Gartner Research forecasts the Indian public cloud services market to grow by 37.5% and reach $434 million by the end of 2013.

However, when everything seems to be so conducive to the Indian SMB sector’s growth, the foremost authority on Indian IT & BPM sector – Nasscom in association with Nielsen Research, India have unearthed a few important insights. In their recent report titled “SMBs – Current State of Software Adoption and Outreach Strategies” they sample surveyed 1047 SMBs across all business sectors and regions India. The report revealed that Indian SMBs have a favorable disposition towards software usage but are currently working with a very limited level of automation in day-to-day operations. If not taken seriously, the following 5 key highlights of the report might prove to become the challenges in ICT Adoption by the Indian SMB sector:

1. Among intenders of business software adoption, lack of funds (38%), technical know-how (28%) and manpower issues are the most important barriers for software adoption.
2. Although 90% SMBs surveyed are aware of the kind of software that can be installed on laptops or PCs, only 64% respondents are actually using such technology.
3. About 50% SMBs prefer in-person training, installation and demonstration of business software. The key assistance need is on usage, primarily through interactive method such as in-person and training sessions.
4. Approximately 70% SMBs use operational software and lack awareness of better solutions. Even in the age of Bit Coins, they prefer direct sale, traditional means of transaction with only the larger SMBs opting for electronic payment.
5. SMBs are most aware of and most frequently adopt office suites with highest usage statistics for word processor and spreadsheets followed by accounting software. Awareness of advanced solutions such as BI, analytics, virtualization and cloud, etc. is extremely limited. Awareness of IT firms is also limited to major ones like Microsoft, Google, etc.

In addition to these warning signs, the Nasscom report also highlighted a few additional insights which might prove to be helpful in monetizing the future ICT potential of the Indian SMB sector. These are:

1. Approximately 28% SMBs are planning to buy business software.
2. The high inclination towards software adoption among 65% SMBs holds huge business potential for service providers.
3. SMBs represent a vibrant mix of young, dynamic, independent and educated owners who are more open towards assistance for software usage and adoption of new technology to cut costs wherever possible.
4. Larger SMBs show positive disposition towards software adoption to increase business efficiency, better manage operations and solve business problems; investment on hardware and Internet increases with size along with positive inclination towards cloud.

While new-age SMBs require cost-effective, reliable, secure IT networks that would enable them to achieve their business plans and goals, they also need products that are easy to adopt and maintain. Thus, leading technology vendors are increasingly developing products designed specifically with SMBs in mind. In conclusion, we may only hope that, if the warning signs are appropriately analyzed and the favorable factors adequately leveraged, we are en-route to a booming SMB sector which surpasses the projected IT spend of $15 Billion by 2015.