Doubling of Internet use in SMEs can generate 43 pc higher profits

MUMBAI, INDIA: FICCI, in partnership with Google released new research that showed the web makes a big impact on small to medium enterprises (SMEs) in India.

The report, 'Internet's Role in the Performance of - India's Small and Medium Enterprises' compiled and presented by Nathan Associates, showed that SMEs, who use the web, fare much better than those that do not.

Report snapshot:

* The Internet can be a great equalizer for SMEs, providing them with access to new markets, more customers and visibility so as to unleash their potential. The survey of 951 small and medium enterprises in various industrial and geographical clusters across India shows that SMEs that use the Internet, 69 percent experienced an increase in customers, and 63 percent an increase in geographic reach and 44 percent saw an increase in firm employment.

* Controlling for factors such as an SME's investment in plant and machinery, the age, sex and education of personnel, and ownership type, the study found that using the Internet for business operations increased the SME's revenue by 51 percent and profits by 49 percent.

* On an average, an SME adopting the Internet is able to grow its customer base by 7 percent and employment growth by 4 percent.

* The perceived benefits of using the Internet are significant: 64 percent of respondents reported an increase in sales due to Internet use, 65 percent an increase in profits, 69 percent an increase in customers, 63 percent in geographic reach and, 44 percent in employment.

* While email was used by almost all the Internet using SMEs (95 percent), only 49 percent of Internet using SMEs had websites; IT & ITES and hospitality had the highest numbers, and the chemical products and foundry sub sectors had the lowest. SMEs having websites perform better than the ones not having them.

* Doubling of Internet use in SMEs can generate 43 percent higher profits for SMEs

* Despite perceived and actual benefits, certain problems and concerns hinder Internet adoption and prevent SMEs that have adopted it from realizing its full potential. Sixty-one percent of Internet-using SMEs are very concerned about the security of online financial and personal transactions (e.g., hacking of email accounts).

* Only 23 percent of surveyed SMEs engage in e-commerce; on average they have more revenue, employees, and customers than those that do not.