Evolution of SMEs in India
In India, a quiet revolution is taking place. If you look around the corner, you could just catch a glimpse of an India that is rapidly transforming in front of your eyes. This is India as seen through the eyes of SMEs, or Small and Medium Enterprises.
The larger organisations always spring to mind when we talk about companies that create change. Billion-dollar companies are eager to innovate and challenge conventional business models and practices. The SME sector, on the other hand, has around 36 million units, all of which are attempting to push the envelope a little further. It appears as if a few million drops of water have merged to produce an ocean of transformation.
In different parts of the world, SMEs are characterised differently based on their net worth, assets, staff strength, owners, and finance structure, among other factors. SMEs in India are divided into two groups based on the type of their operations. These are the categories:
1. Manufacturing enterprises:
These are businesses that are involved in the manufacture of goods (in any industry), and they are classed based on their investment levels, such as:
- Micro: INR 25 Lacs and up
- Small: less than INR 5 crores yet more than INR 25 lacs
- Above INR 5 crores but less than INR 10 crores is considered medium.
2. Services businesses:
These enterprises provide services to others (in terms of investment in equipment). Within this, businesses are categorised according to their investment levels, such as:
- Micro-finance: up to INR 10 lakhs
- Small: less than INR 2 crores, but more than INR 10 lacs
- Above INR 2 crores but less than INR 5 crores is considered medium.
In India, 63.4 million small and medium businesses (SMEs) employ approximately 460 million people and account for nearly 30% of the country’s GDP. According to the CII, the sector employs about 120 million Indians and accounts for 33.4% of India’s industrial output. In terms of exports, the contribution of SMEs is projected to be around 45% of total exports.
Even though SMEs account for a significant portion of India’s GDP, conventional inefficient business practices and a low rate of technology adoption have prevented smaller businesses from realising their full potential.
According to Google’s research, which was conducted in partnership with KPMG, 68% of the 51 million SMEs are not linked to the internet. India’s SMEs have yet to realise their full potential and go to the next phase of business development. The finance ministry had established a goal of making India a $5 trillion economy, and SMEs are critical to meeting that goal. The only stumbling block is technology adoption, and this is where digital businesses are stepping up to the plate, making solutions available to help SMEs succeed.
What are tech companies doing to encourage SMEs in Indian technology adoption?
There are numerous examples of how different corporations are focused on the SME market. Reliance Industries, a telecom behemoth, is one of the most well-known. Jio declared that it planned to broaden its digital benefits to include more small and medium-sized businesses. SMEs will receive low-cost digital services, including computation, storage, and connection, according to the company. Jio’s relationship with Microsoft will aid in the provision of cloud services that Jio will require to scale the infrastructure to millions of SMEs in India.
Reliance isn’t the only company striving to help Indian SMEs go digital. Large IT businesses such as Dell, HP, Intel, Vodafone Idea, and WhatsApp have collaborated on a project named Tech-Saksham with the help of the Confederation of Indian Industry (CII). Over 10,000 MSMEs will be reached as part of the project. The IT businesses will help SMEs overcome barriers to technology adoption by providing resources and experience to ensure that India’s enormous SME base receives the critical digital assistance it requires.
The immediate benefit of the initiative involving technology players, according to Shreekant Somany, Chairman, CII National MSME Council, will be made available through training programs and workshops on the newest technical solutions, such as cloud computing, and market access for trade and exports.
Another example is Cisco, one of the world’s leading cloud networking companies, which has established a goal of interacting with 25 SMEs every day as part of a digitalisation push. Small and medium-sized enterprises (SMEs) account for roughly 30% of Cisco’s business in India, therefore the corporation has made them a top priority.
According to the company, SMEs demand simple solutions, and as a result, the company’s cloud-based service has been particularly popular among SMEs, with 5,000 new clients added this year in India. “Thanks to the ‘Start’ portfolio, we are witnessing great growth in our SME business.” “We have onboarded 5,000 new customers in a year since the launch of the Cisco Start portfolio,” says Cisco India and SAARC Managing Director.
Apart from that, Google has been trying hard to grab this burgeoning market with products like Google for Work, Google Cloud, and others. Google’s CEO has also claimed that the corporation will assist “thousands of small businesses with digital training so that they can adopt the technology.” Google’s Digital Unlocked program, in collaboration with industry association FICCI, aims to give vital digital skills to Indian SMEs, allowing them to get online and connect with clients across the country.
Facebook has also unveiled an effort in which it would collaborate with venture capital (VC) funds to help small and medium enterprises expand faster (SMEs). Facebook’s VC Brand Incubator Program will be the first in a series of programs aimed at assisting SMEs in India in growing their businesses through technology training and support.
The possibility of SMEs in India
According to the above-mentioned Google-KMPG study, digitally empowered SMEs have roughly double the revenue growth estimates as offline SMEs. This is a huge potential for tech companies since they can make a lot of money by assisting SMEs in growing through technological innovation. Tech companies are quickly striving to give digital infrastructure support to SMEs to bridge the growing gap between large and small businesses. This spans everything from digital payments to cloud computing to AI-driven innovation.
SME IT hardware, software, and services, including business services, were estimated to reach $684 billion, according to IDC. From 2016, India will be one of the fastest-growing markets for IT spending in SMEs, with a CAGR of 7%. The digitisation wave that began with digital payments has now expanded to include GST software and GST-bundled devices for SMEs. The adoption of cloud-based technology has increased across the board. However, as compute and storage requirements grow, India will need a robust digital infrastructure with world-class cloud and connectivity services if it wants to attract SMEs in India.
The need of the hour is for industry players, government policymakers, and businesses to collaborate to allow SMEs in India that have been left behind to become digitally empowered. Big tech companies have recognised the opportunity and are actively assisting Indian SMEs in adopting newer technologies such as cloud, AI, process automation, IoT, and data analytics to improve enterprise processes such as accounting, inventory management, sales, marketing, HR, and customer service.