The SMBs are well on their way towards the second level of IT adoption. Now it's important for the solution providers to grab the opportunity. SMBs are a burgeoning element of the open economy, capable of driving profitable growth. According to the SME Chamber of India, it is estimated that there are 35 million SMBs in India and they contribute 45 per cent of the industrial output, 40 per cent of exports, 42 million in employment, creating 1 million jobs every year. According to IDC, the SMB PC spending in India was estimated to be Rs. 5,515 crore in 2010. Thus, solution providers (SPs) should consider the SMBs as a vital component of the ecosystem and merely a process while pushing their products to them.
Transformation in SMBs
It is also true that traditionally SMBs have been looking at process as a key parameter. However, the modern-age SMBs are more tech-savvy. SMB sector used to be conservative but in recent times they are showing signs of adventure, adaptive outlook and evolution, which is a welcome sign for service providers.
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SMEs are willing to invest in technology which gives them the cutting edge in the market. Cost effective solutions is a paramount need but yes, they are willing to experiment. According to the Access Markets International-Partners (AMI), a significant proportion of Indian SMBs are well on their way towards the second wave of IT adoption. Some are even likely to migrate to the third.
The key booster of this rapid adoption of technologies is the Internet. Hence, after installing the basic hardware infrastructure, they are looking at an advanced framework of storage, security, etc. Technology is changing the way business is conducted and this has brought changes in the business model of SMBs as well. According to the Symantec 2010 Global SMB Information Protection Survey India Findings, the SMEs on an average spent approximately Rs. 1,48,000 on IT in a year.
According to Vineet Sood, head-channels and alliances, Symantec, “IT demand from SMB is growing. The SMBs, though different from large enterprises in requirements, are now making protecting their information one of their highest IT priority and are moving towards the internet for networking, business transactions and ommunication in a big way.”
The AMI-Partners, 2011 study on SMB spending revealed that Indian SMBs are planning to spend more than $2 million on ICT in 2011 and there is an anticipated growth of nearly five times of this spending by 2014. This is an indication of the trend that will see increased awareness and conscious willingness to earmark IT Budgets that will help them sustain, secure and grow their businesses.
Delhi-based Saket Kapur, director, Green Vision said, “The transformations in SMBs are bound to happen. In order to survive, and thrive in the current ecosystems, where margins are wafer thin, SMBs have understood that for their future growth they have to invest on IT to manage their business and to run better administration.”
Moreover, the solution providers have also observed that small business has slowly and steadily started moving up to the medium and from medium to large organization. Hence, a small office entering into medium phase, they have a limitation with existing IT infrastructure.
For eg, moving from the Tally financial accounting, the company needs ERP, CRM, HR management solutions for future growth in the business process. This is the phase, when solution providers come into the picture and extend their hand to educate SMBs in the right direction.
As the IT requirement of SMBs is growing faster, solutions providers have started positioning such solutions which fit into their requirement and budget. Paresh Shah, CEO, PK Teknow, said, “Today, SMBs are rapidly embracing new technologies. Gone are the days when SMBs were limited to one PC concept. Presently, we are offering latest technologies such as messaging, infrastructure, networking and backup solutions and virtualization solutions to SMBs. Moreover, this year, SMBs spending on IT will be increased by almost 30per cent from the last year.”
Key IT priorities and challenge for SMBs
Right now their foremost priority is to optimize existing IT resources. Of course, this also implies hiring full-time IT staff, apart from allocating budgets for new hardware, software, and platform-based services.
Consequently, a large part of their IT spend will go towards virtualization. “As the pace of growth for the Indian SMB is dynamic, it is critical to proceed with caution, as SMBs are witnessing highly mobile workplaces, as mobility increases, so do vulnerabilities. Today, SMEs are on the lookout for technologies that help them to increase efficiency, save money, and make the most of their IT resources,” emphasized Sood.
According to KV Jagannath, MD, Choice Solution Ltd, “In the SMB space, IT priorities include running their key applications in accounting, inventory, manufacturing, payroll etc, and office automation tools like office and mail. In the infrastructure area it is the connectivity, security, backup and hosting, etc.”
While highlighting key priorities of SMBs, Amit Rambhia, director-technology, Panache Infotech said, “Looking at the topmost IT priorities of SMBs require good advice in areas such as the process of production, selection of machinery, and technical collaboration available both domestically and internationally. Therefore, strong support is needed regarding information on technologies available, research and development activities for technology acquisition.”
On the challenge front, since the small businesses are not visionary about their future growth, therefore they have scarcity of good talent. “Since 90 per cent of our business comes from SMBs, we have seen that new talent feels hesitant to work with these SMBs companies as they do not see any growth path in these small businesses,” added Kapur.
Ankesh Kumar, director-channel products & marketing, Emerson Network Power, said, “Typically, the key challenges we face while doing so is that SMEs are currently unaware about the technology going into our products. We also face issues while explaining the concept of ideal capital and operational expenditure while purchasing these products. SMEs focus on low capex and end up buying some products which are not efficient enough to provide better return on their investments. Thus we make it our priority to create awareness about IT usage to our customers.”
Kapur pointed out, “The biggest challenge for SMBs in our country is borrowing. They can have an investable capital either through equity or debt. Ironically, there are very few capital equity firms who are investing on SMBs, and largely SMBs have to depend on debt. But, debt in our country is very expensive if compared to world standards. Typically, if you have to invest on collateral, SMBs have to shell out 15 per cent interest on borrowed which is phenomenally high.”
Moreover, rising infrastructure costs and managing working capital are key pain points for Indian SMBs today. Commercial space is becoming very expensive and SMEs are bearing the brunt of it as they are not monetarily well equipped as larger players. So the crux is the SMBs should have to define their vision for at least next 10 years. They have to think of investing in right areas. They should introspect about the present work and future growth.
Growth opportunities for SMBs
Typically, a SMB does not have dedicated IT personnel running the operations and they depend on service providers to guide them through the buying, deployment and management processes.
“The role of the service provider is akin to that of a trusted advisor and they are expected to be solution experts in ensuring that the SMB user is getting the right product for his specific requirement. They also need to bear in mind that the typical SMB will depend upon them for market knowledge and latest issues or threats,” said Sood.
A solution provider has to play the role of a trusted partner for SMBs when it comes to delivering value becoming aligned with the business strategy and helping organization become more agile, responsive, innovative and profitable.
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Girish Madhavan, CEO, Quadsel Systems, a solution provider, said, “It is important for solution provider to understand their pain points and contribute in improving topline, bottom line, people productivity and operational efficiency of SMBs customer.”
Gurmukh S Malhotra, head-business marketing, Intel, South Asia, said, “However, a significant proportion of SMBs have been considering the RoI and long-term TCO as more compelling factors. Hence, it is important for solution provider to put across their views on these parameters to SMB endusers while convincing them about the utility.”
Best practices for solution providers
With so many challenges on the road of SMBs, what are the best practices solution providers should have that one can adopt for a smoother ride?
Jagannath pointed out, “If one needs to play in this space, one should be using the consultative approach to win customers. At times SPs may get frustrated as time investment verses returns in short term are very low. One needs to work with the customers to grow with them and reap the benefits. Second biggest problem is most of the time the owner or the key family member is involved, if you do a separate sale then you are having the challenge of payment release from them.”
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In a nutshell, he said, “Consultative selling, long lead times, smaller order value, systematic growth, relationship management and payment terms are key points one should be prepared to work with in the SMB segment. Lastly, the deal size may not be big and the vendor support becomes an issue in some areas and also achieving the SP company goal.”
Madhavan said, “While selecting a particular solution provider, SMBs look at the after-sales-support scenario since they usually have a less evolved IT management infrastructure in terms of in-house IT service and support team. Thus, SMBs consider the after-sales-support infrastructure being provided by channel partners as a paramount factor. Ideally, they want a 24x7 infrastructure.”
Meanwhile, Shah said,” As a trend amidst SMBs, it is noticed that most of the solution providers have specific strategies for tapping SMBs and follow best practices. We provide considerable insight into best practices right from information requirements, survey, products, information flow analysis to more implementation specific details like data extraction and transform studies.”
Conclusion
In the changing scenario, the business dynamics of the SMBs will definitely change. India is basically thriving upon the growth of its SMBs. And these SMBs need to make a revisit to their strategy. They should watch out for the opportunity and adapt themselves to play a significant role in the growing economy of the country. To make it happen the SMBs entrepreneurs have to behave prognostically. They should evolve themselves as leaders for their employees and customers. Not focusing on the business competitions, they should look at a larger goal because the market will be too big to accommodate a number of brands.
New technologies are driving business growth these days. Definitely, it has resulted in an increased IT spending. SMEs are building websites, automating their accounting, implementing ERPs and CRMs. They have understood that IT not only speeds up their operation but also provides better visibility to their businesses.
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