India SMEs IT Services Spending Is Growing At 17% YoY

As end-users based in Metro cities in India reach saturation vis-à-vis adoption of most IT products and services, Tier-II and III cities are gradually reaching the next wave of technology adoption. IT Services plays a major role in this increased adoption.

Consequently, major IT vendors and service providers are setting their sights on these India Tier-II and III cities for marketing their service offerings. IT Services account for a substantial 16 percent of total small and medium business1 IT spending in India indicating its importance for future SMB growth. While Product Support Services and Professional Services account for a huge majority; over three-quarters of the total IT Services market, Remote Managed IT Services (RMITS) has displayed a much faster CAGR and is fast becoming accepted as a mainstream service delivery model.

These are some of the key highlights emerging from AMI-Partners study - 2013 India SMB ICT & Cloud Services Tracker

Overview

The services and solutions segment in India is in a gradual growth-phase, especially within the mid-market segment. There is a basic difference between SBs & MBs based on their business needs. Typically SBs needs are centered around ad hoc problem resolution with little focus on going services concept. When considering which service provider to use both SBs and MBs state that scalability as well as total cost of ownership are important factors. In spite of this similarity, there are subtle differences as well. India SBs indicate that pricing and a well-known brand influence their decision while India MBs stated they consider a providers ability to align with their overall business processes and business road map to be important factors.

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These medium businesses also indicated that meeting regulatory compliance standards is a key factor when purchasing IT products and services. The conflict regarding IT adoption still persists in the minds of many India SMBs. While there is a definite need for simplifying business operations – the vision towards technology adoption is myopic. “These companies often feel they are not ready for large scale IT deployment and that the investments necessary are too great in an already tight financial situation,” says Rati Ghose, Director – Market Insights, AMI-Partners India. However, the tide is changing.

“With the business environment becoming increasingly competitive, there is a need for India SMBs to become highly cost competitive and lean. As businesses expand, there is a strong need for integration not only of physical entities such as branches and outlets, but of data, information and work flows. For instance, with centrally managed services, development and expansion percolates to other regions at a faster pace,” continued Ghose.

A majority of firms utilising cloud/hosted solutions have indicated that their service and support needs have remained unchanged, however about one in four have indicated that their support needs have actually increased. This is somewhat counter-intuitive since service and support is inherently built into the Cloud. However, this has probably occurred for India SMBs in the initial stage of cloud adoption who need significantly high service and support levels related to training, handholding, data migration and overall cloud-related know-how. It can be well surmised that as these firms progress in their cloud adoption path the need of service and support will gradually diminish. Remote Managed IT Services (RMITS) is at an initial stage of adoption for India SMBs at penetration levels of 19 percent and 28 percent for SBs and MBs, respectively. However, future adoption plans exist as SMBs’ gradually appreciate the benefits of RMITS, e.g., greater ROI due to hassle-free, quick problem resolution from a distance.

RMITS growth is also likely to be boosted due to factors like improved networking/connectivity and broadband infrastructure, as well as greater availability of RMITS management tools. Another factor fueling the growth of RMITS is that channel partners are progressively adding RMITS to their product/services offerings in order to cater to interested potential customers. “The costs are constantly being evaluated at each stage by both the service providers and clients and there is an understanding that this delivery model is a more feasible and sustainable option,” said Ghose.