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Indian IT SMEs have a great potential for growth

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CIOL Bureau
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What is the current status of the IT SME industry and how much business do

they contribute?







Indian SMEs have a great potential for growth. There are about 3200 SME
companies in the Information Technology industry, and their average size is

about $ 1.13 million. SMEs, which are mostly less than 7 years old, now

contribute to about 37 percent of the overall software exports, and provide

employment to 60 percent of the IT workforce overall.






Are there any comparative parameters in the IT SME sector?







Yes! Israel IT market is seeing as much growth as Indian IT industry. The IT
SMEs in Israel could be taken as an example. The average annualized revenue per

employee in Israel is about $ 208, 000 compared to that of $ 35, 250, which is

almost 6 times lesser. Similarly, the revenue of an Israeli IT SME is $ 3

billion compared to that of $ 17 billion of their counterpart in India.






The number of employees in Indian IT SME is 485, 000 compared to that of 14, 500
in Israel. Similarly, only 3 Indian IT SME companies are listed in NASDAQ

vis-à-vis 70 companies from Israel, and while number of US patents being filed

is concerned it is 234 from India as against 1256 patents from Israel, which is

again 6 times higher than what we do.






However, taking the Indian context, there are 77 CMM certified vendors whereas
Israel has only one.






On the product revenue front, Indian IT SMEs contribute 1.3 percent versus 56
percent in Israel.






While you say there is a huge potential for the IT SMEs in India to grow, in
what way do you think they can contribute?








What the Indian SMEs could be contributing is in terms of Specialization &
Market Leadership, Patents and also Intellectual property such as best

practices, methodologies and processes apart from bringing in innovative

products and applications, which are at par with global standards. However,

there is a huge gap, which needs to be bridged for these companies to take off.








How do you think that the gap can be bridged?







The responsibility of bridging the gap for the growth of the IT SMEs lies with
industrial body such as Nasscom, good initiatives from the Government, as well

as the companies and employees in the industry.






As for the Nasscom, it needs to make some Marketing efforts to create a brand
for Indian IT SMEs (within & outside the country), and act as a catalyst for

partnerships and alliances. Nasscom can also foster cooperative relationships

between BIG and SMALL IT companies






On the Government side, it should start encouraging SMEs which are meeting up
with the crying demand for innovative applications in the areas of health care

applications and the like. They are the biggest buyers, for eg. The Department

of Defense has spawned so much of innovation in the recent past.






The existing companies have also a role to play. They should look at working
together to build a sustaining Eco system that can better meet future market

demands and help India retain its competitive edge.






Does the responsibility lie with Nasscom, the Government and the industry, or
does the society have a role to play?








There needs to be a drastic change in the cultural attitude of the society, in
which most people do not want to work for a start-up company, which in this case

is an SME, or as Nasscom Chief Kiran Karnik would call 'Emerging Companies.'






Though there is a forced change, which is happening in the mindsets of the
people, we still require more to do be done. Employees should look at the

start-ups or SMEs as a place where they would have a lot of challenges, which

would gratify their professional ego.






Let's take the case of the biggest market — US Silicon Valley, which has 20
percent of the world's software and hardware companies. On an average there are

5 companies, which are going for IPO, everyday and the average net businesses is

about 7, 900 in a year. But, the average size of new business is only 7

employees. Interestingly, 16, 000 MIT graduates joined Silicon Valley start-ups,

which spend about 12 percent of revenues on R & D.






On comparative terms, Israel, which is again an emerging market, has got 1000
start-up companies among the total number of 3000 companies, which are the

largest per capita start-ups after the US. These companies are successful as

they specialize in niche markets, and dominate them globally, e.g., ICQ and Ex-Libris;

as also they maintain a product expertise, in this case some of the companies

that may be quoted are Mercury Interactive, Amdocs, and Checkpoint.






Thus a cultural attitude change is necessary among the society to make the IT
SMEs which have a great growth potential to actually grow or else India would be

left behind in a space where we know there is growth and revenue.






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