BANGALORE, INDIA: Indian small and medium businesses (SMBs) spent a whooping USD 6.6 billion on IT in 07-08 which is around 30 percent of the total IT spend in India, says a new in-depth study on "IT Opportunity in Indian SMB Sector" by Zinnov Management Consulting, a leading management consulting firm.

TheZinnov study provides a detailed analysis of the Indian SMB market and reveals that the total size of the Indian SMB space today is about 35 million units, with retail contributing 52 per cent of the total landscape.

The study defines the term "SMB" as organizations with employee strength up to 999. And clearly divides the segment into three main categories namely Retail, Manufacturing and Services. Of this, the report states that the present Retail sector has maximum contribution to the SMB landscape with about 15 to 18 million units. The next sector that significantly contributes to the landscape with 9.5 million units is the Services sector, closely followed by the manufacturing sector contributing about 7.3 million units to the same. 

SMB Market Perspective

• Globalization in trade is forcing SMBs to improve their efficiency of conducting business
• Ease and affordable availability of technologies is driving the overall technology adoption among the SMB fraternity
• Governmental regulations, lack of funds and micro-markets in India are some of the key reasons for a large SMB sector in India
• The study predicts that the SMB market for software products will grow rapidly with the increase in PC, Internet and mobile adoption
  
• The study states that ease and affordable availability of technologies is driving the overall technology adoption among the SMB fraternity, which is evident from the fact that India already has 5000 IT/ITeS companies that have 100% PC penetration. Also, Internet is growing with a CAGR of 46 percent for the last seven years, according to the study.
  
  The work identifies a number of macro and micro economic factors that would impact the technology adoption in the sector and would become the reasons for growth. Deep diving into the IT Opportunity of the sector, the study highlights that India has seen an increase in the interest among many IT majors to cater to specific needs of SMB sector. Growth in internet and mobile penetration even in tier III cities and rural areas has led to awareness and affordability of technology. Globalization in trade is further increasing the pressure for better efficiency with the help of IT, according to the study. 
  
  IT Spend Perspective
• PC, Peripherals and Application Software makes up a majority of the SMB spend today
• IT/ITES and Professional services sector have the highest PC penetration. There are about 5000 IT/ITES companies in India which have 100% PC penetration
• Increase in the penetration of Internet in the form of high speed broadband in the rural sector has helped in IT adoption. The Internet in India is growing at a CAGR of 46 percent for the last 7 years
• The total value of benefit to the Indian economy due to growth from Broadband is expected to be USD 90 billion for the years 2010 – 2020

Pari Natarajan, Chief Executive Officer, Zinnov said, "India's explosive growth today is driven by its burgeoning SMB sector, which is experiencing revenue increases and double digit growth. Greater employee mobility, increased competition and expansion in terms of office locations have further pushed more SMBs in India to embrace IT and the Internet.

The Government has realized the potential of this growing segment and is now trying to further develop this sector. Most of the big players in the industry, irrespective of the vertical they belong to, are eyeing this ever-growing lucrative market and are aggressively formulating strategies to tap it, Natarajan added. 

Globalization in trade is further forcing SMBs to improve their efficiency of conducting business, highlights the study. Indian SMBs are exporting their products to the global market and are in direct competition with global players especially from low cost countries such as China and Bangladesh. The Exports for the SMB in India has been growing with a CAGR of 12.5 percent over the last 10 years while total Imports have been growing with a CAGR of 16 percent. The study also reveals that a large number of MNCs are entering into the Indian Market and thereby offering a direct competition to the local players.