Frugal on technology

Written by Neha Pal | Neha Pal | Updated: Jun 22 2012, 07:49am hrs
Enterprises shun sophisticated tools despite their multiple benefits

Information and communication technology (ICT) lends considerable competitive advantage to an enterprise. With the aid of ICT, an enterprise can react faster to competitive pressures by improving its products, processes, distribution channels and customer engagement. ICT also aids cost reduction and brings in new business opportunities. Still, small industries in India have not yet woken up to the possibilities that ICT offers them.

Such indifference to ICT, in an era of e-commerce and 24X technology access through mobile platforms, poses risk to the long-term prospects of SMEs, and by extension to the larger economy, since the MSME sector accounts for 45% of manufacturing output and 40% of exports in the country.

Though most MSMEs have the basic ICT in place, in the shape of mobile phones, desktops/laptop computers, adoption of advanced ICT tools is assumed to be complicated. This is because ICT is still viewed as a technical challenge while it is only an adaptive challenge. A recent Ficci survey, exclusively shared with FE, reveals that over a quarter of SMEs thrives without a website.

For the survey, the Federation of Indian Chambers of Commerce and Industry surveyed 150 respondents from across the country and across verticals. It found that only 12% SMEs uses an ERP software, though about 58% has awareness about the software. Enterprise resource planning (ERP), which integrates the flow information between all business functions within the enterprise and from outside stakeholder, is vital for quicker business decisions and customer response. The software automatically integrates information from functions like accounting, finance, manufacturing, sales & service and customer relations, among others. The main reason SMEs are averse to ERP is that it is expensive to afford. Enterprises rather make do with substitutes like Tally, MS Access, MS Office.

The survey found that 21% SMEs does not use any ICT tool. The key reason cited by this group was the lack of knowledge about tools (68%), followed by a lack of funds (23%).

The chamber also sought to know the impact of ICT tools on the business of SMEs. Sixty per cent or more respondents reported an increase in overall productivity, improvement in partner/customer relationship, and time-saving from the usage of ICT tools. Over 50% derived benefits like cost reduction, improvement in brand awareness, increase in sales & revenue and increase in profits. These findings should serve as an eye-opener for SMEs that are yet to use ICT tools.

In the survey, it is revealed that across business verticals, ICT tools were employed mostly in sales & marketing (79%), finance (67%) and market research (53%), with a crucial function like supply chain scoring a poor 21%.

However, some industry veterans are not surprised at the survey results. SMEs do not find any need to use ICT tools like ERP or bar code system, they argue. According to MK Mishra, GM Finance of storied poultry producer Keggfarms Private Limited, Many SMEs do not have business operations large enough to require sophisticated software tools like ERP. Many a time, the company, including the promoters and the employees, do not feel the need to incorporate such technology tools in their organisation because they think they can easily do without them. For instance, ours is a poultry-oriented company and we dont have much requirement of the ICT tools. His remarks perhaps best exemplify the approach of SMEs to ICT tools.

Vijay Venkatesh, managing director, Syscon Solutions Ltdwhich is into Erp and other software solutionstold FE, Managements want to introduce ICT tools, but many times it is resisted at the junior level. The main reason behind this is that they are so used to their old manual ways of operations that they dont want to adopt new methods of technology.

It is often hard to go beyond basic ICT tools like email, B2B portal and Facebook, for an SME.

Ficci feels that the need of the hour for SMEs is to access ICT tools for improving their production processes, market access and supply chain integration, besides customer feedback.