Technology for MSMEs: Over 10,000 small and medium enterprises (SMEs) part of the Indian technology industry — providing either traditional or digital solutions to technology buyers — will contribute an estimated $15-20 billion – 7-9 per cent to the industry’s revenue of around $245 billion in the current financial year 2022-23, said the latest report India’s Tech SMEs by Nasscom on Tuesday. The revenues are expected to grow over 100 per cent to $35-40 billion by FY30 as the technology industry doubles to around $500 billion in revenue in seven years.
The report noted that 60-70 per cent of technology SMEs comprise business process outsourcing (BPO) firms followed by 20-25 per cent in IT services and 10-15 per cent in the software-as-a-service (SaaS) segment. In terms of revenue by geography, with 50 per cent of the revenue coming from North America and 30 per cent from Europe, the two regions are the biggest markets helping technology SMEs sustain their growth.
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However, the report indicated that traditional technology services offered will be taken over by digital solutions ahead. “Technology SMEs have predominantly offered legacy IT, business process management, and subcontracting services while the shift to digital services and the prevalence of digital-native SMEs has grown at a rapid 80 per cent CAGR since FY20, the report added.
The digital technology SMEs (in contrast to technology SMEs) have taken up cloud transformation through hyperscaler and SI (system integrator) partnerships, platform solutions, advanced analytics platforms, and AI/ML solutions as their core offerings, it added. Hyperscaler is referred to large cloud service providers as demand increases for cloud and storage while an SI is broadly an entity such as IBM, TCS
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These digital technology SMEs have grown 4x since FY19 with a focus on cloud migration, SaaS, digital engineering, and advanced analytics and AI-based solutions, the report said. By FY30, the revenue of digital technology SMEs is expected to grow by 15-20 per cent to $12-16 billion with a share of 35-40 per cent in technology SMEs’ revenue of $35-40 billion.
In fact, while it is “expected that traditional technology demand will not only grow at a slower pace and will be outgrown by digital growth rate on a faster-rising base, many legacy services will also cease to exist in light of newer technology demand, more flexible hiring arrangements, and a shift to a product economy,” the report said.
Speaking at the launch of the report, Debjani Ghosh, President, Nasscom said, “For traditional tech SMEs to navigate headwinds, shift to digital is eminent. Fast-tracking innovation, supportive government policies & incentive schemes and dedicated SME-industry–academia connects will further augment the sector’s growth and help achieve double digital revenue growth vision by FY30E.”