In today?s dynamic business environment staying ahead of peers is critical for any business to build on growth and gain from evolving opportunities in the global market. This is particularly so for the small and medium enterprises given the nature of their businesses and the extremely competitive environment they operate in. It is vital for SMEs to constantly strive to remain competitive. Technology upgradation, amongst other factors, is a critical component of competitiveness. However, given the scale of operations of most SMEs, keeping pace with emerging modern technologies becomes a major challenge.

Indian SMEs use heterogeneous technologies, right from primitive to sophisticated machinery. While some use advanced technologies for improving efficiency, others are still stuck with low technology. Even the report of Prime Minister?s task force, constituted to address the issues of micro, small and medium enterprises (MSME) sector, has alluded to the fact that the MSE sector in India, with some exceptions, is characterised by low technology levels-?a major handicap.

Studies conducted by Dun & Bradstreet India reveal the level of technology adoption amongst SMEs differs across regions and across industries within the same region. For example, in the Chennai cluster, companies operating in the auto components industry are in tune with changing technology and most of them use relatively modern machines. According to the findings, 24% of the surveyed companies use automatic machines, 36% use semi-automatic machines and remaining use both automatic and semi-automatic types of machines.

In contrast, most companies in the electroplating industry in the same cluster use manual machinery. Another survey of the readymade garments industry in the Nagpur cluster revealed that as many as 64% manufacturers surveyed were still using the old technology (which is manual machines).

Several factors influence technology adoption. According to the survey, the quest for increasing productivity is a major driver of technology upgradation amongst SMEs across clusters and industries. Many SMEs also go in for technology upgradation to meet their vendors? demand.

A large number of SMEs have also rated opportunities to increase efficiency and streamline production as factors influencing technology adoption. Other factors included the desire to stay ahead of competitors and move up the value chain.

Similarly, many factors inhibit SMEs from enhancing their technological capabilities. Having limited resources, it is difficult for SMEs to invest in research & development and acquire latest technologies. While the lack of capital and technology costs were commonly cited as prime hindrances, the factors differed across sectors and clusters, given the unique nature of each industry or cluster. For example, most of the surveyed SMEs in the Jalandhar cluster have rated infrastructure issues, especially regular power cuts, as the major hindrance in technology upgradation. Some other issues included the lack of knowledge about the latest technology and the absence of a local vendor. Even the lack of skilled labour has been considered by some respondents as a factor in not upgrading to modern machinery.

As the cause of low technology levels differ from cluster to cluster and industry to industry, it is identifying the issues and providing solution through cluster development programmes becomes imperative. Development of SME networks and clusters would stimulate innovation and help SMEs to keep abreast of developments in their industry.

The writer is senior economist, Dun & Bradstreet Information Services India Pvt Ltd.