SME Survey: Small industry wants Modi govt to make technology cheaper, accessible

Technology is the heart of businesses today and a business that doesn’t leverage technology often misses the boat when it comes to capturing opportunities, and gaining a competitive advantage. In a globalised economy, this often makes the difference between success and failure.

While larger Indian businesses are on par with the rest of the world when it comes to technology use, small and medium enterprises (SMEs) in India still lag behind when it comes to the adoption of technology, and this often proves to be a bottleneck in the path of catching up with their global peers. Unfortunately for India, SMEs employ nearly 40 percent of the Indian workforce and experts are clear that SMEs are the backbone of the Indian economy. So when SMEs don’t do well the entire Indian economy suffers.

A path breaking new survey conducted by Firstbiz with knowledge partner Greyhound Knowledge Group has now revealed the extent of the technology problem Indian SMEs face and what the new Narendra Modi-led NDA government needs to do to set this problem right and make Indian SMEs globally competitive. The upcoming Union Budget 2014-15 may be a great opportunity to start by setting old wrongs right and providing the policy framework for Indian SMEs to soar.

The Indian SME Survey: Analysing Indian SME Perceptions Around Union Budget 2014-15 reached out to over 540 SMEs and their decision makers across 9 Indian cities, which included a balance of Tier 1 to Tier 3 Indian cities, and a carefully chosen sector portfolio to ensuring a right balance of representation.

The study revealed that unavailability of modern and affordable technology is one of the biggest challenges faced by Indian SMEs and despite the many government schemes that seek to address this concern. SMEs from Tier-2 and Tier-3 cities also find it harder to access suitable technology as compared to those from Tier-1 towns, which should come as no surprise given the vast gaps between metros and smaller Indian cities, which goes beyond infrastructure to industry ecosystems and even sources for funding.

“SMEs in India face multiple struggles in accessing and using the latest technological advancements. While funds, access and knowledge continue to hamper implementation of technology, absence of an ecosystem that enables technology transfer and interaction with experts is a critical reason for limited adoption,” the report claimed.

The Firstbiz-Greyhound Knowledge Group SME Survey also found that 83 percent of SME organisations in Nasik and 80 percent of SME organisations in Ahmedabad felt that accessing suitable technology was a key challenge, as compared to just 72 percent of organisations from Chennai. A majority (71 percent) of the surveyed respondents believed limited interaction between technology providers and seekers as one of the key reasons why they fail to adopt the latest technology.

Lack of funds to support innovation and R&D (67 percent), lack of effective information systems (65 percent), unavailability of e-governance systems (63 percent), minimal knowledge about upcoming technologies (62 percent), access to modern technology being expensive (62 percent), and absence of an ecosystem for technology transfer (59 percent) were some other critical challenges stopping this growing sector from being able to leverage modern technology.

While the trend comes out as most important across all cities, smaller organisations face this challenge relatively more (74 percent) when compared to mid-market organisations (68 percent), revealed the survey.

Some other interesting highlights of the report are:

Accessing funds serious problem for SMEs in Tier 3 cities: About 75 percent of organisations from Indore and Kanpur quoted this as a key reason for their slow technology adoption, while only 62 percent of SMEs in Mumbai believed that funds were an issue.

Minimal knowledge: While 61 percent of mid-market organisations quote knowledge as an inhibitor to adoption of technology, 63 percent of small organisations face the same. Furthermore, 68 percent and 67 percent of SMEs from Indore and Ahmedabad respectively stated this as a challenge.
High cost factor:
Compared to the national average of 62 percent, about 70 percent of SMEs from Indore and 67 percent from Kanpur see cost as a key issue for active adoption of latest technology.

Awareness continues to be a challenge: There are multiple government schemes and programmes under which SMEs can access technology. However, education and awareness about these initiatives is dismally low. 90 percent of organisations remain unaware about Technology Business Incubation (TBI), one of government’s key initiatives.
What SMEs expect from Budget 2014

“SMEs have a unique problem to solve - while they are required to adhere to global standards and ensure compliance to regulations, they mostly have limited understanding (and budgets) for technology. This surely needs to change and Indian SMEs need to evolve to be aggressive users of technology. From being an enabler of productivity and quality, technology must be used for transformation and as a key influencer of competitive advantage,” the report said.

At this point of time, it’s not clear what the new government’s first Budget will hold for SMEs. But expectations are massive as they expect the new Modi government to focus on key challenges and provide definitive schemes and programmes to help solve pending matters.

Nearly all surveyed organisations (98 percent) expect this Budget to lay onus on making technology cheaper and accessible to SMEs. In addition, 98 percent also want the government to enable ecosystem to facilitate technology transfer. 96 percent of respondents expect strong Information and Communication (ICT) systems to be developed.

Further, 94 percent want more government incentives for technology upgradation. “In comparison to mid-market organisations, smaller organisations are lobbying hard for government funding and incentives,” the report highlighted.

About 92 percent of organisations also stated they expect the Budget to revitalise the role of the Small Industries Service Institute (SISI); and 88 percent of them feel the need for a platform for technology providers and technology seekers.