INDIA: There is just no escaping the term slowdown these days. Go anywhere and it will be staring at you, etched on the walls, on account books, in the dimmed lights and even on the faces. No sector, no vertical, nothing has been left untouched by the sulphur of recession. Talks about job losses, wage cuts and tighter squeeze have become the norm of the day. These are trying times indeed, especially so for vendors.

Ironically, it is only in the past few years that the domestic market in India had started to blossom, with the IT spend increasing significantly. In fact, for the very first time in a decade or so, the domestic IT market (inclusive of both hardware and services) grew more than the exports market. Vendors of all hues and types, ranging from hardware to software, heralded this shift.

Much of the domestic spurt in India can be attributed to the advancement of the small and medium business (SMB) segment in India. The small and medium enterprises (SMEs) that dot the length and breadth of India were suddenly becoming competitive in the face of global competition in the domestic marketplace, as well as aspirational in terms of the global marketplace. A good indicator of the excitement can be gauged by the plethora of reports that are available on the segment.

According to one such report, India has the second largest population of small and medium businesses (SMBs) among BRIC countries and the US. The SMB segment contributes more than 60 percent to the Indian GDP and their spending on IT is around 30 percent of India's total IT spend. Little wonder that vendors that had already milked the big enterprises dry, were keenly looking at this segment.

Another study by Zinnov Management Consulting pegged the total size of the Indian SMB space today at about 35 million units, with retail contributing 52 percent of the total landscape. The study also reports that the spend on IT in 2007-08 by the segment was $6.6 billion.

Recessionary Blues?

Yet, for all the glamor and glitz, the SMB space is not unaffected by the slowdown. What is bad for the goose, is bad for the gander as well. The liquidity crisis is the biggest one that faces the segment. Even though interest rates might be coming down regularly, the availability of capital for expansion is still an issue for most SMBs. Coupled with the risk averseness among entrepreneurs, this is affecting the market badly.

While on record most of the vendors deny any significant impact on spending patterns, the rumblings on the ground are evident. The challenge is two-fold for vendors. Unlike the other SMBs, the Indian ones are pretty demanding and extremely cost conscious.

For an Indian SMB, more than the ROI, the cost of acquisition is more crucial. Thus vendors across the board need to adapt newer stratagems for wooing the segment. One of the means adopted is to provide financing schemes to clients; companies like Cisco and HP are the first movers in this regard.