SMBs in India to spend US$9.7 bn in 2008

KOLKATA, INDIA: Small and medium businesses (SMBs, or companies with up to 999 employees) in India are set to spend US$9.7 billion on IT this year, up 22 percent over 2007, due to a boom in the overall economy and a rise in the number of SBs (small businesses, or companies with up to 99 staff). This comes from the latest study by New York-based Access Markets International (AMI) Partners, Inc.

"More than 80 percent of SMBs are confident about reporting revenue growth in 2008 over last year," says Partha Sarathi Sengupta, Manager - Strategic Market Analysis at AMI-Partners. "The liberalization of India's economic policy, de-regulation of key sectors and progressive moves toward integrating India with the global economy has been a key driver of revenue growth among SMBs."

As the level of IT investment increases, there is a change in the perceived role of IT from a support functions to an enabler of competitive advantage. SBs have started maturing in terms of IT infrastructure. While a significant number of them are still at a basic hardware usage level, some of them are reaching higher levels in the maturity chain. There is an increased expectation from IT by SMBs. CIOs are facing challenges in justifying the value derived from IT investments.

"Domestic demand for IT in India is witnessing a gradual transformation," Sengupta says. "From being predominantly hardware-driven, to being solutions-oriented. This will result in a growing emphasis on IT services."

Services stand out in the midst of a huge range of offerings, value added services and multiple brands. About 12 percent of the total IT spend by SMBs was on service and support in 2007. SBs spent the bulk of it on computing support services, while MBs (medium businesses, or companies with 100 to 999 staff) spent on network management and development and integration services.

"Larger MBs (companies with 500 to 999 staff) are looking at end-to-end IT services and this will be a major growth engine for the market," Sengupta adds. "MBs are looking for total solutions which can help them achieve business goals which lead to the larger demand of tailor made services."

There has been a considerable increase in mobile employees across India. About 42 percent of SBs and 72 percent of MBs in India have mobile employees. As the economy booms, business travel is on the rise, lending new meaning to the words "mobile connectivity". This, coupled with the availability of wireless technology has resulted in a mobile boom.

Notebook PC penetration currently stands at 22 percent among SBs and 86 percent among MBs in India. Affordable mobile computing products, the cellular explosion in India and wireless LAN have resulted in tremendous growth in the notebook market.

Improving Internet or networking bandwidth/connection speed and helping staff collaborate more effectively are two major issues for Indian SBs this year. SBs are adopting the latest Internet-related technologies now - 63 percent of Internet-owning SBs are broadband-enabled. Comparatively Internet penetration among all SMBs now stands at a little over 60 percent.

"The demand for firewalls and VPNs is expected to surge among MBs," Sengupta says. "VPN solutions experienced a tremendous growth among MBs in 2007 due to increased broadband penetration, increasing notebook users, workforce mobility and a telecommuting culture. Customers are increasingly demanding industry expertise from IT suppliers. The knowledge of verticals is critical for any IT supplier who wishes to engage customers in a meaningful conversation."