Its 2019, Globalization and Technological transformations have changed the way of doing business. Automation and Artificial Intelligence are taking over and gone are the days of manual work. Adoption of technology has become a top priority for business success.
To keep up with the changing business environment every company needs to be equipped with latest technology. However, many Small & Medium Enterprises (SMEs) stay away from investing in technology due to the fear of high investments and complexity. This puts them at a risk of being left behind.
Current SME Tech Adoption Scenario
SMEs are considered to be the growth engines of developing countries. In India too this is the reality. There are over 5.5 crore small business enterprises that boost our GDP through manufacturing, trading, exporting and importing. As per msme.gov.in, MSMEs contribute around 45% of the total exports and over 15 million people are employed in this sector per annum, according to a survey conducted by CII.
In order to understand how technology can play a key role for the growth of SMEs, we need to look at the current state of technology adoption among the Indian MSMEs. A survey was conducted by Tally and Kantar amongst 2250 MSMEs of different industry verticals across 34 cities in the country. The study revealed that 35% MSMEs have adopted business management software and among them more than 40% of the MSMEs already use digital banking and payment services.
According to survey conducted by Lightspeed India Partners Advisors that covered 1000 MSMEs (B2C) split across sectors and across Tier 1 and Tier 2 cities in India, they found that sales prediction and inventory management were amongst their biggest pain points.
Why SMEs aren’t ready to invest in technology?
“For SMEs, technology can be a growth enabler or a great threat”, said Mukul Mathur, V.P, Global Partners and CSI, IBM India/South Asia. He further said that technology can help in business growth but the lack of it could completely destroy your business.
In our experience at SME MaXX, we believe SMEs aren’t investing in technology due to two main reasons. The first reason why SMEs do not invest in technology is that they don’t have adequate knowledge regarding the benefits of using technology for their business. They are unfamiliar with latest trends in technology and have limited knowledge regarding the use of it.
The second reason is the cost. SMEs operate with limited capital and many times they can’t afford the investment to keep up with the latest technological trends. Lack of resources including trained manpower, and market access are also restricting the use of technology by SMEs.
How Technology Adoption can help SMEs
- Helps in Automation: Automation is the need of the hour and it is something that India’s vast SME sector needs to adopt to avoid inefficiencies and enhance productivity. Adopting right technology can help SMEs focus on the core business. Manual and Repetitive tasks can be avoided by using automated technology. Moreover the chances of errors are reduced greatly. This can help the SMEs to save time and cost and thereby increasing productivity and efficiency.
- Focus on core activities: Running a small business comes with its own challenges. The business owner has to juggle between different tasks. Due to limited number of employees, the burden on the owner increases. By using right technology, SME owners can focus on what matters the most rather than focusing on daily chores of the business.
- Customer Communication: With proper technology, SMEs can enhance their communication levels. Customers appreciate prompt response to their queries. Using CRM tools will help SMEs build long lasting relationships with their customers.
- Ease of Marketing: Having the business technologically inclined allows SMEs to reach a wider group of customers. Creating a digital presence could help SMEs differentiate their business from the competitors in a cost-effective manner.
Efforts taken by the Government
The Government of India launched the Digital MSME Scheme on 27th June 2017 to encourage technology adoption among MSMEs. The main objective of this scheme was to sensitize and encourage MSMEs to use Cloud Computing in their production and business process with view to improve their competitiveness in national and international market.
Cloud Computing is emerging as a cost effective & viable alternative in comparison to the current IT Infrastructure used by MSMEs. It is a boon for MSMEs, who were otherwise reluctant to invest in adopting ICT services. It uses a “pay as you use model” hence businesses do not have to invest upfront. By adopting cloud technology, MSMEs can free themselves from the burden of investments in hardware/software and infrastructural activities.
The scheme offered 60% Subsidy (Max. Rs.1Lakh in 2 years) and also allowed EMI options. Initially these 4 services were made available to MSMEs through various service providers. Need-based other services were to be added in due course of time.
- Manufacturing Design
- Regulatory Compliance including GST
This was an excellent initiative by the Government of India but it failed to achieve desired success. Only 541 MSMEs have registered on this portal even though the scheme was launched two years ago. However the original numbers may vary if the website hasn’t been updated.
How is SME MaXX helping SMEs find the Right Technology?
While Technology is clearly necessary for SMEs to succeed, it’s important to know where to start and how to prioritize technology adoption. This is where SME MaXX is trying to make an impact.
Based on our experience of working with Indian SMEs since 2015, we realize that even among similar SMEs of the same sector the priority sequence of technology adoption could be very different. This is because of the influence of the human element and differences in the working process. Before investing in any technology buys, we recommend a comprehensive evaluation of the SME’s pain points and opportunities for technology adoption.
It is important that the technology investment should allow SMEs to immediately reap the low hanging fruit rather than promise a vague gain at a distant time period. The other key factor is ensuring adequate employee training and buy in.
Though its MaXX Tech platform, SME MaXX is working with SMEs to explain the role of technology and its impact on enhancing productivity. We are helping SMEs select the right technology as per their business needs, sequence the acquisitions as per priority, and ensuring adequate employee training and incentive for technology adoption.
SME MaXX also works with a large number of technology providers to offer a range of Software Solutions that can contribute to an SME’s success.
SMEs are contributing in every sphere of Indian economy. They are an important component of India’s goal to become a $5 trillion economy. Thus, it is important to integrate this sector with technology which enables them to grow and compete in the global scenario.
Anand Bidarkar, Chief Operating Officer
Pranav Sachde, Digital Marketing Executive
Puneet Dhiliwal, Investment Banking Analyst