Here we present key factors that need to be addressed in order to drive digital adoption among SME/MSME.
Over the past few years, Indian businesses have taken massive strides in adopting new-age technology innovations across sectors. Further, supported by progressive government initiatives like Start-up India, Digital India, Make-In-India, and the recent Vocal for Local, and supportive financial framework, the Indian start-up and entrepreneurial ecosystem has boomed. This is partly also due to the ease of doing business, supported by technology. All one requires now is a disruptive idea, the vision to take it ahead, access to the internet, and a few supporting service providers, also available over the internet, and a start-up may be ready to flourish! One no longer needs to put big initial investment in office space, furniture, or machinery to start a company. Take examples of Google which was started in a garage; or Facebook which was started in college; or even Flipkart which was started in an apartment of Bansals!
Speaking of ancillary services, a start-up in the e-commerce space can now have access to third-party service providers like logistics and warehousing companies which can offer to take care of their inventory. Or even social and digital media platforms that offer ‘design your own campaign’ at home, with the click of the mouse, mapping geographic, demographic, and a social-economic class of your target audience! Or even social and digital media platforms that offer ‘design your own campaign’ at home, with the click of the mouse, mapping geographic, demographic, and a social-economic class of your target audience! The same goes for cloud and data hosting service providers, where one can skip the massive 5-year hosting retainers and get a spot on a cloud server on an hourly basis. The best part is that you can get hundreds of servers on the click of a button, use them for a few hours (perhaps to run a machine learning model) and you pay only for those hours.
However, despite these technology enablers, the Indian SME/MSME and start-up sector still remain one of the slowest adopters of technology. As a sector that contributes 24% to the national GDP and is one of the largest employers in the country, it also continues to battle challenges like inadequate credit and financial facilities, lack of skilled labor and access to affordable and effective technology solutions, while facing tough competition from domestic and international players.
While the recent pandemic and the resultant slowdown have impacted business, it has also forced the sector to recognise the urgent need of having an effective technology-enabled business infrastructure that could help them survive. As per a survey by Nasscom, only a little over 18% of all Indian start-ups are leveraging deep technology, as of November 2019*. This is a 40% CAGR from 2014 when it was only 8% of all start-ups. The Indian SME/ MSME sector, on the other hand, also offers a market opportunity from technology adoption that is set to grow at a CAGR of 25%, from $30 billion in 2019 to $85 billion by 2024. From efficient cloud computing infrastructure that can allow secure work environments for work-from-home settings to data privacy and cybersecurity have all become major priorities for businesses to sustain during this period of crisis.
While supportive policies, tax holidays, and financial relief packages are all in the pipeline to help salvage the sector which is the backbone of the Indian economy, the government’s vision of enabling it to raise its GDP share from 29% to 50% in 5 years, seems like an uphill task and will depend on a number of factors, including fastrack digital adoption.
Key factors that need to be addressed in order to drive digital adoption among SME/MSME can be listed as under:
One of the key reasons for the poor adoption of technology is a lack of knowledge about the potential of a solution and a poor understanding of technology processes. This often leads to miscalculated decisions that prevent them from adopting new technology. This is true especially in Tier 2 or rural enterprises, which also face a challenge with English language communication and thus often find technology to intimidating. Structured digital literacy programs coupled with solutions that are accessible to non-English language natives, can go a long way in breaking the barrier and making technology more user friendly and understandable.
Apart from gaining an understanding of technology solutions, making them affordable is another key factor that largely impacts the decision-making process. While most players in the sector are already battling economic slowdown, moving from a conventional to the digital format of business can be viewed as an additional investment that may not appear as a top of the list priority. Creating solutions that are affordable, add more value, and help generate better ROI for SME/MSME’s, would help drive faster technology adoption.
While making technology accessible and affordable is an important step to drive technology adoption, customisation of these solutions is a vital aspect that is often a major roadblock for SME/MSMEs. Creating solutions that offer tailor-made solutions to address the specific needs of small businesses can go a long way in encouraging wider and faster technology adoption. From solutions for operations, CRM, HR to more complex solutions for data analysis and management and integration AI and ML for business, technology as a solution needs to be effective, efficient, and impactful, even when dealing on a smaller scale.
Apart from affordability, accessibility, and customisation, technology solutions for small businesses are also restricted due to the lack of a skilled workforce. Even after adopting the best solutions, setting up a workforce that can operate and leverage the same effect on a daily basis, can be a challenge. Unlike MNC’s and larger corporate businesses, SME/MSME’s employ limited labor and may not have the bandwidth to recruit candidates with specialised expertise to access the technology solutions. A technology infrastructure that is in line with the ROI and business solutions needs to be supported with a trainable workforce that can access the same effortlessly.
While all of the above factors impact individual entrepreneurs, the presence of a robust digital infrastructure across the business ecosystem is imperative to not only drive initial adoption but to ensure sustained practices and eventually lead to permanent migration of businesses to digital platforms. From a strong fintech infrastructure to the seamless integration of new-age technology innovations across communications, HR, CRM, and Data management are the new foundation stones for a digitally empowered economy.
Even as India gears up to become an economic superpower by harnessing the people, technology, and global business opportunities across sectors, it’s SME/MSME and start-up sectors continue to grow as the key driving force of the economy. The entrepreneurial spirit, when supported by financial policies and focussed technology solutions, can go a long way in building India as an economic superpower.
This article is written by Deepak Singhal, Enterprise Architect Director for DEMS Business, Capgemini.