Technology for MSMEs: SMEs are likely to play a significant role in the government’s $5 trillion economy vision by 2025, provided technology adoption becomes their key focus ahead. In fact, SMEs are likely to add $158 to $216 billion to the country’s GDP by 2024 on the back digitalization of their businesses.
Technology for MSMEs: As India observed National Technology Day on Tuesday amid pandemic for the second consecutive year to celebrate the technological prowess it has achieved across multiple fronts especially to fight Covid, its MSME base has witnessed the biggest behavioural change towards technology usage and adoption. The shift towards digital channels for communication, marketing, team collaboration, payments, hiring, procurement of goods and services and storage, registration of new business verticals, etc., was more evident than ever or even during the post-demonetization phase. The move towards technology, hence, has been by choice rather than by chance. According to experts, while this shift is bound to gradually move up, the transformation may take more time to be significantly visible in foreseeable future.
“Last year, new norms of doing business evolved that also affected MSMEs. Technology adoption became a necessity to enable businesses to survive in a remote working environment. The majority of MSMEs started using technologies in areas such as communication, e-commerce, marketing, and sales. Select MSMEs with access to knowhow on the internet of things (IoT) had adopted it for manufacturing processes as well. However, most of these enterprises continue to work on Jugaad mechanism where they have been using varied technology platforms for their survival,” Sandeep Gupta, Managing Director at Protiviti Member Firm for India told Financial Express Online. Protiviti is a global network of independent consulting firms focusing on solutions in finance, technology, operations, governance, risk, and internal audit.
To corroborate the increased adoption of digital means of business among MSMEs, multiple surveys have been conducted in the past few months. For instance, 82 per cent respondents, in a survey of over 250 small businesses released last month by Dun & Bradstreet, said that they have digitized their daily operations during the pandemic which helped in cost reduction for 54 per cent of them and enhanced competitiveness for 51 per cent. Likewise, a Crisil survey published in December last year noted that the adoption of digital channels such as online aggregators or marketplaces, social media, and mobile marketing has increased from 29 per cent micro-enterprises using them before Covid to 47 per cent as of November. Another study released in September last year by technology company HP focusing on SMEs’ outlook for the post-Covid scenario highlighted that 73 per cent SMEs said they would survive the Covid downturn in comparison to average 60 per cent SMEs in Asia. In fact, a healthy 61 per cent SMEs claimed that they would thrive in their operations in the post-Covid world.
Among existing digital tools, cloud computing has been the prominent go-to solution for small businesses during the pandemic to secure their data and enable a remote work environment. “Cloud adoption by MSMEs was already reasonably healthy before the pandemic as many were using cloud-based file-sharing or backup solutions. However, implementation of cloud services and solutions increased by double digits during the pandemic across all categories including video or web conferencing and security. This shift helped MSMEs as they lacked the technical skills needed to integrate cloud services with their existing IT infrastructures and manage their IT Security,” Suresh Venkatachari, CEO, SecureKloud Technologies told Financial Express Online.
Importantly, SMEs are likely to play a significant role in the government’s $5 trillion economy vision by 2025 as well, provided technology adoption becomes the key focus for enterprises ahead. In fact, SMEs are likely to add $158 to $216 billion to the country’s gross domestic product (GDP) by 2024 on the back digitalization of their businesses, a Cisco study in July last year had said. Here, the role of technology providers also assumes great significance with a vastly untapped market opportunity. From an estimated $30 billion in 2019, the market size rising from digital technology adoption among MSMEs will grow at around 25 per cent CAGR to around $85 billion in 2024, according to a December 2019 Zinnov study.
However, lack of measurable return on investment (ROI) on high capital expenditure, unavailability of right technology talent, and fundamentally being averse to the adoption of the latest technologies to improve existing business practices have been and would remain among key challenges. “Every small business first thinks of ROI. MSMEs in both manufacturing and services will not move to the information technology bandwagon except for taxation and basic accounting purposes if they don’t have scale-up requirements. While there will be more transition towards the adoption of technology but it doesn’t mean that MSMEs will become 90 per cent digital right away. MSMEs will increase their usage for compliance. What has got accelerated due to Covid is the retail connect with customers digitally such as food or medicine delivery. If MSMEs don’t work on it, they will lose out. Video or web-based interaction is another big example of this disruption due to Covid and it has become a very critical component in terms of digital adoption,” Naresh T Raisinghani, CEO and Executive Director at India division of global consulting firm BMGI told Financial Express Online.
On the other hand, there has been a slew of services in place for MSMEs by the government towards its Digital India vision such as delayed payment tracker MSME Samadhaan, public procurement policy monitoring portal MSME Sambandh, placement portal for MSME Technology Centres trainees MSME Sampark, new registration portal Udyam Registration, grievance registration and management portal Champions for MSMEs issues around finance, raw materials, labour, regulatory permissions, etc. and more. “Indian MSMEs generally operate as a mini community, hence to take any technology solution which is complex needs to be taken at their group forums. Pilot projects success is generally quickly replicated across the community members. MSMEs mostly prefer solutions that are less complex to operate and have low maintenance cost,” added Gupta.