SMBs in Tier II cities to spend $9 billion on IT by 2017: Report

Written by Heena Jhingan | Updated: Jan 3 2014, 18:49pm hrs
SMBSMBs in Tier II cities account for more than a fifth of all SMB IT Investments; says AMI Study. Reuters
India-based SMBs (Firms with 1-999 full-time employees) are keen to leverage technology to enhance employee productivity and collaboration, and are forecasted to display a healthy CAGR of more than 15% over the next five years in boosting their ICT infrastructure. SMBs within the Tier-II cities contribute a significant proportion of the all-India SMB IT spending, according to soon-to-be-released study by Access Markets International (AMI) Partners

The report titled, 'India SMB City Opportunity Analysis an IT-based Forecast Model' finds that as the Indian economy gradually shrugs off the effects of the downturn and begin to show a boom in many sectors triggered by innovative economic and investment policies, the metros or the Tier I cities are the ones that are primarily inundated with burgeoning investments in the industrial and services sector. The building-up congestion in realty structures and a huge burden on the overall city infrastructure has forced respective governments and many companies to seek out alternative smaller cities for their future, and earmark investments geared towards Tier II and III cities.

Hence second-tier cities like Kochi, Trivandrum, Nagpur, Vadodara, Vizag etc. form the next rung behind eight metros (Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Ahmadabad & Pune) and are anticipated to ride the growth wave in areas such as formation of new businesses and expansion of current businesses. Consequently, it is predicted that the IT investments by SMBs within these cities will also intensify. AMI-Partners study also reveals that SMBs in Tier-II cities exhibit a substantially higher growth-rate in terms of their IT spending compared to their compatriots in Tier-I cities; thus they are likely to be the future growth-engines of SMB in terms of IT spending.

In addition to investments in basic IT infrastructure, SMBs in these Tier II and III cities are anticipated to leverage the Wave II & III technologies (as per AMI-Partners Proprietary Three-Wave Technology Theory) and Cloud Computing in a bid to expand their business regionally & globally and also to gain a competitive edge over their peers," said Subrata Sarkar, Senior Analyst at AMI-Partners. This translates to a forecasted spend of around $9 billion by SMBs in the Tier II & III cities alone in various areas of IT - such as Server, Storage, Software and cloud based services. AMI also finds that the share of Tier-II city SMBs within the all-India SMB IT spending is on the rise -the current 26% contribution of SMBs within these cities is likely to rise by approximately 23% within the next five years, as predicted by AMI analysis.