India SMEs Show 14% YoY Rise In ICT Expenditures

At a time when overall business growth in India has slowed significantly and the national GDP shows only a marginal rise the India small and medium business segment (SMEs, 1-999 employees) can be viewed as a beacon of hope. India SMEs show a 14 percent year-on-year rise in Information and Communication Technology (ICT) expenditures and their adoption of technology is likely to continue to increase. This is a direct result of their need to utilize ICT tools to overcome nagging business challenges. An analysis of these markets reveals that small businesses are likely to marginally overtake their medium business compatriots vis-à-vis annual ICT spending growth rate. These findings have emerged from the 2013 India SME ICT & Cloud Services Tracker Overview study by New York-based Access Markets International (AMI) Partners, Inc.

India SMEs are in an expansion and transition mode in terms of escalation in business and workforce. ICT is likely to play a vital role in their continued growth. “Basic computing and networking hardware dominates the IT spending portfolio of India SMEs. This is especially true for the small business segment which is gradually enhancing their ICT backbone serving as a platform for future adoption of higher-end technology solutions”, said Dev Chakravarty, Research Manager at AMI–India.

Cloud computing has brought about a paradigm change in the ICT adoption pattern of SMEs worldwide. India SMEs are no exception to this statement. “Using AMI’s Global Market Forecast Model, the SME market sizing tool, AMI has found that expenditures on cloud-computing within India SME ICT portfolio are on the rise. These expenditures comprise almost 10 percent currently and are predicted to increase by a CAGR of 23 percent over the next five years”, added Chakravarty. It may not be an exaggeration to term cloud computing as a key future growth-enhancer in terms of India SME ICT adoption since cloud-based ICT solutions display greater future growth-trends compared to their on-premise cousins.

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There are many questions regarding cloud computing usage by India SMEs; e.g. - What are the larger spend components within the cloud? Which cloud categories will grow faster? AMI analysis finds that the top two spend-components within the SME cloud-portfolio are for website-related expenditures and Remotely Managed IT Services (RMITS). These SMEs have become much more aware of the benefits of hosting their own websites since it provides them multiple benefits such as better brand-building and cost-effective marketing to mention just two. A number of web-hosting firms have emerged to assist India SMEs in this endeavour. As mentioned RMITS is also an up and coming trend for these companies. Many India SMEs are indicating a greater preference for this alternative, sometimes in conjunction with the age-old on-premise service options. In the near future, IaaS and SaaS-based solutions such as Productivity, CRM and Business Intelligence are forecast to show considerable growth.

Cloud computing has been instrumental in alleviating many problems that India SMEs face during ICT adoption - specifically those related to a lack of funds and non-availability of a dedicated ICT-workforce. Other key advantages of the cloud that appeal to SMEs include automatic updates, flexibility and scalability.

The external environment is also ready to support the migration to the cloud, with ISPs and Telcos having invested heavily in building an adequate bandwidth infrastructure. A mature Channel Partner community of ISVs and SIs have equipped themselves with relevant cloud computing tools and techniques enabling them to offer their services to SMEs. “Future growth opportunity in the arena of more traditional ICT solutions are somewhat limited,” stated Chakravarty. “Hence, in the face of stagnation, a significant proportion of channel partners have been adding cloud computing to their product and service lines in a bid to increase versatility and to meet the rising ‘pull’ from their SME customers.”

The importance of channel partners cannot be overstated. They represent the ‘Route-To-Market’ for India SMEs in terms of ICT procurement. Moreover, the role of channel partners in cloud computing is further emphasized by the fact that SMEs require a good deal of hand-holding and guidance in order to understand what cloud solutions suit their businesses best. In addition, significant shifts have occurred within the cloud-partner ecosystem with the advent of new cloud-focused partners a.k.a. ‘Cloud-brokers’ who are specialists in the arena of facilitating cloud computing transactions between buyers and sellers.