SMBs to play crucial role in India's economic growth

KOLKATA: Small and medium businesses constitute one of the

most important segments of India's industrial economy, accounting for

approximately 95 percent of the total industrial units and contributing a

substantial amount to India's GDP, as per a new survey by AMI Partners. While

SMBs play a critical role in developed and developing nations alike, the total

revenue earnings by India SMBs in 2004 stood at $898 billion, of which India

MBs (medium businesses) earned the lion's share of over $625 billion. Buoyed by

their recent performance, 18% of MBs expect their revenues to rise by over 20

percent in the near term.

At the same time, small businesses in India constitute

approximately 99.4% of the country's SMB universe, and play a key role in

India's growing economy. At present SBs in India generate employment to a

workforce of over 21 million people and more than a third of them have plans to

recruit an additional 3.4 million personnel in 2005.

The survey shows that while traditional parameters like GDP

growth, job creation, and revenue earnings can be used to gauge the economic

health of a nation, ICT-related factors such as technology adoption, IT/telecom

usage and spending trends also play a vital role and must be taken into

account. “It can be anticipated that increased spending on IT and

telecommunications products and services by India SMBs will stimulate India's

economy and take it to new heights in the near future”, said Sunetra Datta,

Research Analyst at AMI-India.”

According to the survey, India was among the top five IT

markets in the Asia-Pacific region. India SMBs have emerged as one of the highest

spenders on IT and telecom services in the APAC region (excluding Japan). Among

India SBs, IT spending was close to $3.5 billion in 2004, with computing

hardware (computers, printers, peripherals and servers) accounting for over

half of expenditures. Highly tech-savvy services sectors were responsible for

two fifths of India SBs' IT spending.Â

In the present context, more and more SMBs are viewing IT as an

essential strategic tool for their business instead of just another technology

investment.

In India, MBs have

already crossed the first wave of IT & technology adoption. SBs, on the

other hand, are still in the first wave, primarily focusing on basic computing

needs. Desktop PC penetration among India MBs has reached saturation. In

addition, as many as two fifths of MBs in India are using notebooks due to

heavy discounts and promotional offers on top of inherent benefits such as

mobility and wireless connectivity.

In the telecom space, India SBs spent almost $6 billion on

local and long-distance telephony services, reflecting that usage is still

basic and they will likely access more advanced telecom services in due time.

However, the entry of new operators and the introduction of novel services are

contributing to growth in this segment. Advanced technologies and increasing

importance of wireless communication were factors that escalated the

subscriber-base. “The key to success for the vendors,” added Ms. Datta, “will

be to arrive at 'best-fit-possible' offerings for SMB customers that would be in

line with their specific requirements.” SMBs' choice of vendors will largely

depend on the vendors' go-to-market strategy. The majority of India SMBs are

inclined towards buying both local and long-distance services from a single

service provider. Over two fifths of India MBs are likely to shift to providers

who offer service packages that include local, long-distance and high-speed

Internet access.