In recent years, micro, small and medium enterprises (MSMEs) have emerged as a key growth engine for the Indian economy. At present, the segment accounts for nearly 30 per cent of India’s GDP, 33.4 per cent of manufacturing output and 45 per cent of total exports. However, the use of traditional inefficient methods in business operations and the low adoption of digital technologies have prevented the sector from achieving its true potential. As per industry estimates, digitalisation can help the vibrant MSME sector increase its revenues by nearly 51 per cent. Further, a recent study conducted by YES Bank revealed that digital empowerment can help MSMEs improve their profits, operational efficiencies and customer engagement.
While most SMEs are aware of these benefits, digital adoption remains largely restricted to a few players. The MSMEs that are waiting to jump on the digital bandwagon have opened up a plethora of opportunities for players in the IT and telecom domain. In addition, MSMEs will play a key role in achieving the government’s target of a $5 trillion economy. Therefore, the government has assumed a proactive role in promoting the digitalisation of MSMEs.
As per industry estimates, the number of SMEs in India is projected to increase from 75 million at present to 105 million by 2024. Of these, 90 per cent are projected to be digitally influenced SMEs, which are expected to scale up technology adoption in the coming years. A recent industry report estimated the market opportunity arising from digital technology adoption among MSMEs to grow at a CAGR of 25 per cent, from $30 billion in 2019 to around $85 billion in 2024. That said, of the existing $30 billion opportunity, only 53 per cent (worth around $16 billion) has been tapped so far.
Government leading the way
For the government, the MSME sector has emerged as a major driver of overall economic growth, and has helped strengthen the country’s economic position. Recognising this potential, the government has taken initiatives to promote the digitalisation of MSMEs. In fact, the Ministry of MSMEs has recently announced its goal of increasing the sector’s contribution to the country’s GDP from around 30 per cent to 50 per cent over the next five years. As per the ministry, the adoption of digital technologies will be crucial to achieve this goal.
To this end, the government has set up around 18 technology centres called “tool rooms” to help MSMEs learn and adopt digital technologies. These 18 technology centres located across the country aim to provide access and advisory services on modern technologies while functioning as skill development centres. In the coming years, the government is looking to increase the number of centres to 153, which will help train around 800,000 youth in different skills.
In August 2019, the government in partnership with the Confederation of Indian Industry (CII) launched a three-year project called Tech-Saksham to enable technology adoption among MSMEs. The project has attracted participation from technology giants such as Dell, HP, Intel, Vodafone Idea Limited, WhatsApp and YES Bank, which will work with MSMEs and help them overcome challenges in technology adoption. Under the project, training programmes and workshops on the latest technological solutions are being organised in cities with industrial clusters. The project is expected to impact around 10,000 MSMEs across the country. Further, a technology portal with e-learning modules is being conceptualised to reach around 500,000 MSMEs.
SMEs a new growth avenue for telcos
At a time when telcos’ conventional mobility business is not generating enough revenues, the SME space has emerged as a new growth avenue. All three private telcos have been actively looking to tap opportunities in this space. Bharti Airtel has been offering voice, data and videoconferencing solutions to small and medium businesses (SMBs). The company caters to over 500,000 SMBs across India. Further, the operator has recently entered into partnerships with Cisco and Google Cloud to offer advanced connectivity solutions to MSMEs. The partnership with Cisco entails offering managed software-defined wide area network (SD-WAN) services, including real-time analytics and inbuilt safety, as well as Cisco’s Webex services. Under the partnership with Google Cloud, Airtel will offer G Suite, a set of intelligent apps including Gmail, Docs, Drive, Calendar and more, designed with real-time collaboration and machine intelligence.
Vodafone Idea too has been offering tailor-made solutions to a diverse range of SMEs. The operator’s key offerings include communications solutions, managed internet of things (IoT) connectivity, SuperIoT, analytics, Wi-Fi, conferencing, field force automation and cloud telephony.
Following suit, Reliance Jio has announced its plans of foraying into the SME market through carefully curated offerings, which would enable the operator to access technology at highly affordable rates. These offerings will include enterprise-grade voice and data services, videoconferencing, security solutions, marketing and sales solutions and many more productivity tools. All these will help SMEs run their business efficiently. Further, the company’s JioFiber services will offer a combination of fixed line connectivity and cloud applications in partnership with Microsoft’s Azure cloud services. According to Jio, it will offer SMEs a range of technological tools, which will be plug-and-play and easy to handle. The company is reportedly targeting 2 million-5 million SMEs.
Opportunities for global technology giants
Apart from telcos, global tech giants including Amazon, Google, Facebook, WhatsApp and Cisco are betting big on MSMEs to drive their business in India. Recently, Amazon announced an investment of $1 billion to digitalise at least 10 million MSMEs in India. In addition, Amazon will set up digital haats in 100 cities, villages and communities to aid the integration of MSMEs into the digital economy. These haats will provide services such as e-commerce on-boarding, imaging and cataloguing, and digital marketing to bridge the digitalisation gap in MSMEs.
Google, through its suite of solutions including Google for Work and Google Cloud, has worked with over 23 million SMBs in India. Facebook has been catering to the digital marketing needs of MSMEs through its Facebook Ads offering. The company recently introduced features such as multicountry lookalike audiences, dynamic language optimisation, multicity targeting, and Facebook IQ cross-border insight finder to expand its global reach. Further, the company has launched its VC Brand Incubator Program, under which it is collaborating with venture capital (VC) funds to accelerate the growth of SMEs. The programme is focused on providing technology skills and support to SMEs.
WhatsApp, through WhatsApp Business, has been catering to Indian SMEs. The platform provides ease-of-use and merchant-focused features such as business profile tags with name, address, contact details and description; automated messages and greetings; message labels similar to Gmail; and quick replies or template messages that can be saved by the business owner beforehand.
Cisco too has been involved in the SME space. Through its Cisco Start portfolio, the company offers cloud-based solutions. According to the company, around 30 per cent of its business in India comes from SMEs.
The way forward
While the government, along with IT and telecom players, has been working towards promoting digitalisation among MSMEs, some challenges continue to hamper adoption. These include the small scale of these enterprises that restricts their investment in newer technologies, the lack of technical knowledge and the want of funds for undertaking digital investments. In this scenario, the government needs to assume a proactive role and introduce reforms that push technology start-ups to hand-hold these enterprises and enable them to adopt technology-driven business practices. The improved performance of digital MSMEs will propel the country towards greater economic growth and help in anchoring this segment as the linchpin of the trillion dollar economy.
By Kuhu Singh Abbhi