1. Small companies have to think digital

Small companies have to think digital

A Deloitte-Google survey shows offline SMBs are seeing revenue shrinkage

By: | Published: August 3, 2015 12:16 AM

Despite all the focus on Digital India, a massive 36% small and medium businesses (SMBs) in India are still offline with just about 10% of them near an “Advanced Digital” adoption stage. However, a report by Deloitte and Google, suggests an increase in revenue for companies adopting social media, cloud computing and mobile tools resulting in substantial increase in revenue. The report is based on a study of over 500 SMBs spread across various sectors, but primarily in the B2B space and located in urban India.

The 10% “digitally advanced” firms can expect an annual revenue growth of 19% and are 4.5 times more likely to be offering new products, expanding their businesses and becoming job creators with 84% of them looking to hire. For the study, Deloitte divided digital engagement among SMBs into four stages: Offline, with no internet connectivity or devices; Basic, with intermittent access to the web and social media; Intermediate, with e-commerce platforms or websites to connect with customers and client; and finally the Advanced, with companies that have moved on to cloud platforms, mobile tools, etc to better coordinate their businesses.

Interestingly, in contrast to the growth of digitally advanced SMBs, Deloitte and Google found that firms that operate totally offline were seeing revenues falls 8% annually, while those with just basic digital presence had zero growth. Those at Intermediate levels were seeing 14% annual revenue growth.

“There’s a low adoption curve for digital in India. In such a scenario, I feel that a right policy framework can help change this. Digital adoption can help many businesses make a jump start,” said Prakash C Prabhakar, director, Deloitte in India. “The government has to step in and give the right push like fiscal incentives to help digital adoption,” he added.

Prabhakar pointed out that cultural perceptions with regard to technology are another roadblock in the adoption of new digital tools. He says often business needs drives digital adoption and infrastructure was a crucial factor here. “Reliability of mobile transactions is still a concern. This is an infrastructure problem that needs to be solved by the government to boost digital adoption,” he added.

The study also looked at how some SMBs have been utilising cloud storage and found that across a variety of uses from databases and storage to marketing and external communications, the dependence on cloud services was between 33 to 21%. While the maximum cloud usage was for databases and storage, their usage was under 30% for functions like accounting, internal communication, management workflow and customer relationships. In short, the study shows that many SMBs are slow to adopt cloud management tools.

“SMBs that have turned to cloud and mobile tools have seen solid growth,” pointed out Mohit Pande, India country manager for ‘Google for Work’—the search giant’s own tools offer a host of features like Gmail for work, Android, Google Docs, Google Cloud and the like. Google for Work costs around R150 per month per user to an SMB, but it comes with limited storage of 30 GB. Unlimited storages cost more at $10 per month per user. He highlighted the story of SpoonJoy, a Bangalore startup that delivers lunches, which grew faster thanks to use of Google Apps. On the other hand, 50-year-old manufacturing company EMCO saw 30% growth after adopting digital tools. Creating a ground for larger adoption of digital tools among SMBs is crucial as they hold the potential to create 50 million jobs in the non-agricultural sector, says the study, which will help significantly in India’s dream of 8% growth.

Meanwhile, Prime Minister Narendra Modi’s Digital India initiative is likely to plug the gaps in infrastructure which has traditionally been the biggest impediment for the adoption of web tools in India. Projects like Bharat Net, a rural broadband connectivity project using optical fibre, solar-powered Wi-Fi system and 100 Gbps optical fibre cable (OFC) link, could gradually start making it easier for smaller companies to adopt new technology and to start depending on its for critical functions. But as the Deloitte-Google study shows, SMBs can no longer wait for things to improve before becoming part of the digital bandwagon.

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