The Covid-19 pandemic has disrupted business functions across the globe. The new social distancing norms as well as the work-from-home trend have prompted organisations to move towards digital solutions for meeting their emerging business needs. While large enterprises have more or less modified their digital strategies to realign themselves with the new normal, it is the small and medium enterprise (SME) sector that is bearing the brunt of the historically low levels of digitalisation.
SMEs have been key drivers of India’s growth engine and contributed over 30 per cent to the country’s gross domestic product (GDP). Before the Covid-19 pandemic, these entities largely resorted to using traditional, and often inefficient, methods of conducting business operations and had only limited adoption of digital technologies. However, the new digital wave triggered by the pandemic has left SMEs with no option but to jump on to the digital bandwagon in order to sustain their businesses.
The current environment created by the pandemic requires SMEs to switch to digital pathways for business engagement and create a strong and veritable online presence. These entities need to leverage the latest technological innovations such as collaboration tools, remote working solutions and cloud services to ensure their business continuity. Since SMEs have little or no digital penetration, the time is ripe for entities offering collaboration tools and digital solutions to help scale up the digital presence of SMEs.
Impact of Covid-19 on SMEs
Micro, small and medium enterprises (MSMEs) have been among the sectors worst hit by the onslaught of the Covid-19 pandemic. According to a survey of close to 500 MSMEs in India conducted by the Endurance International Group, around one-third entities have shut down their businesses temporarily, until normalcy resumes. Lack of technical expertise and the perceived costs of developing a web presence among MSMEs remained key challenges hampering their digital adoption.
However, there are others who are trying to embrace digitalisation in line with the changing business needs. As per the survey, 30 per cent MSMEs have started a business website or enabled e-commerce functionality ever since the lockdown started. MSMEs in the educational services segment recorded the highest jump in terms of using digital mediums. Further, more than 50 per cent of the MSMEs surveyed embraced videoconferencing tools and WhatsApp to keep their businesses running.
The switch to digital mediums has started showing an impact as MSMEs switching to e-commerce services witnessed an increase in revenue contribution from e-commerce to approximately 50 per cent of their total revenues. According to the survey, for MSMEs in retail and educational services, the increase in revenue contribution from e-commerce was 53 per cent and 65 per cent respectively.
Digitalisation – A gateway to opportunities in the post-Covid world
During the ongoing pandemic, SMEs have been grappling with challenges such as drastically reduced liquidity and disrupted supply chains. In order to overcome these challenges, they need to reimagine their business models and
swiftly adopt digital technologies. This would help them regain their position in the market in this new normal.
According to the Cisco India SMB Digital Maturity Study 2020, the digitalisation of SMEs could add about $158 billion-$216 billion to India’s GDP by 2024 and contribute to the country’s economic recovery post-Covid-19. Further, the study shows that SMEs that are more digitally mature enjoy twice as many benefits in terms of revenue and productivity, as against those that have an indifferent approach to digitalisation.
Most SMEs have realised that going digital is critical and are displaying eagerness to adopt disruptive technologies. The study highlights that 68 per cent of the Indian SMEs seek to digitally transform themselves to introduce new products and services, differentiate from competition and grow; 60 per cent recognise that competition is transforming and they must keep pace; while 50 per cent seek digital transformation due to customer demand for change. In terms of technologies, the study shows that cloud, a foundation pillar for digitalisation, is the top technology investment priority for SMEs in India (16 per cent), followed by security (13 per cent) and purchase or upgrade of IT infrastructure software (12 per cent). However, SMEs would require partners that offer innovative products in line with the changing needs and help them digitise quickly and sustainably.
Key digital agents
As SMEs face challenges such as a lack of technological expertise to enable digitalisation, entities that offer a suite of simple, secure and smart enterprise-class technology solutions, specifically curated for their evolving needs, can help them navigate these uncharted waters. These entities comprise telcos as well as global technology giants including Amazon, Google and Cisco.
Among telcos, Bharti Airtel has been helping over 500,000 SMEs across India in their digitalisation journey. Through its partnerships with Cisco and Google Cloud, the telco has been offering advanced connectivity solutions to MSMEs. Recently, the telco announced a multi-year strategic collaboration agreement with Amazon Web Services (AWS) to deliver a comprehensive set of innovative cloud solutions to large as well as SME customers in the country. Under this partnership, Airtel Cloud will build an AWS Cloud Practice supported by AWS Professional Services and develop differentiated Airtel Cloud products and capabilities leveraging AWS’s services, Airtel’s data centre capabilities as well as network and telecom offerings.
In the digital payments space, Airtel Payments Bank partnered with Mastercard to develop customised products catering to customers across the underbanked spectrum including SMEs, farmers and retail customers. Through this partnership, both companies will work together to create customised solutions for small businesses. These solutions will empower SMEs that have limited access to finance, to make assisted payments, manage their financial and transactional processes, and avail of the working capital during the Covid-19 crisis. In another key move, Airtel Payments Bank launched Suraksha salary accounts for MSMEs, which aim to enable them to make cashless payments and provide a financial security cover to their employees.
Reliance Jio is another telco that has been actively looking to tap the underserved SME space. Through its long-term partnership with Microsoft, the operator aims to tap 2 million-5 million SMEs in India. As a part of this alliance, Jio aims to set up a large network of world-class data centres across the country, which would enable Microsoft to offer its Azure cloud platform to SMEs. Further, Facebook’s recent acquisition of a 9.9 per cent stake in Jio Platforms would also help Reliance Industries to tap the SME segment. As a part of the deal, Reliance’s Jio Mart platform will work alongside Facebook-owned WhatsApp to bring over 60 million small-scale retailers and kirana vendors online.
Apart from telcos, global tech giants are betting big on MSMEs. For instance, Amazon has announced an investment of $1 billion to digitalise at least 10 million MSMEs in India. In addition, Amazon will set up digital haats providing services such as e-commerce onboarding, imaging and cataloguing and digital marketing in 100 cities, villages and communities in order to bridge the digitalisation gap in MSMEs. Further, Cisco recently launched a flexible portfolio of new solutions tailor-made for small businesses. The newly launched portfolio comprises offerings that address networking, security, collaboration, cloud and internet connectivity needs of SMEs.
Meanwhile, Google, through its suite of solutions including Google for Work and Google Cloud, has worked with over 23 million SMEs in India. Facebook has been catering to the digital marketing needs of MSMEs through its Facebook Ads offering. Moreover, WhatsApp Business has been helping Indian SMEs.
The way forward
While the SME sector has been a key focus area for numerous digital agents since pre-Covid times, the level of digital adoption in the sector still remains low. In fact, Covid-19 came as a bolt from the blue for the SME sector, which was digitally underprepared. However, all will not be lost if SMEs are able to jump on to the digital bandwagon with the help of digital agents and scale up their digital presence. The government can play a supportive role in creating a progressive environment for the accelerated digitalisation of SMEs that can help them bounce back as winners in the post-Covid world.
By Kuhu Singh Abbhi