Project Vikas Spearheads ICT Revolution Among SMEs

Historically, India has been a well-scouted destination for sourcing all kinds of raw materials and a large market for sale of finished goods. This means we practically never functioned as a close-bordered economy. So globalisation is not a new phenomenon for Indian organisations though the term has wide-ranging implications in today’s scenario. Evaluating the globalised economy, one may conclude that SMEs, which lie at the heart of Indian trade, are facing cut-throat competition and are struggling to cope with demanding conditions. There are about 8 million SMBs in India, which contribute to around 50 percent of the country’s GDP and 60 percent of the export. Almost 40 percent of these 8 million are involved in some sort of industrial production (manufacturing). SMEs serve as one of the largest employing sectors of the economy too and thus in many ways are the drivers of the economy.

So what is the most effective way for SMEs to cope with their larger counterparts? ICT can play a very crucial role to bring transformation in this sector and make SMEs truly global players. In order to bring the benefits of ICT to the SME sector, the Government of India established the National Manufacturing Competitiveness Council (NMCC) in October 2004. With a sole aim of improving the competitiveness of SMEs, NMCC along with Microsoft, set up Project Vikas in 2006. Here Biztech2 traces the journey of Project Vikas and documents how it has steadily brought about an ICT revolution among SMEs.

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Why are SMEs apprehensive of IT?

According to Rajiv Sodhi, director, Emerging Geographies, Microsoft, it is not surprising that SMEs are not big users of technology as they suffer from a lack of awareness and the right skills. They often can’t afford to invest and maintain expensive IT solutions. Thus, it becomes clear that if SME IT usage has to be encouraged, there should be some mechanism to address the above issues.

Project Vikas is a five-year programme, which aims to improve the adoption of IT among SMEs by addressing core issues. Approximately 400 modern SMEs and 2,000 rural and artisan-based clusters exist in India. These clusters contribute up to 60 percent of India’s manufactured exports. A cluster is nothing but a large group of small and medium businesses focussed on a particular vertical. Some prominent manufacturing clusters in India include Tirupur textile, Puna-Auto components, Chennai leather etc.

“Microsoft is currently involved with 10 clusters and by the end of the five years, it aims to cover all 25 clusters, which were initially identified by the NMCC,” informs Sodhi. Microsoft uses a three-fold approach to encourage IT adoption in these clusters. The first step is to thoroughly understand the cluster’s business and operations. “It is important to know how these clusters operate, how does their supply chain work and then come up with relevant solutions, which can address their particular issues,” explains Sodhi. Secondly, Microsoft has strongly involved local partners so that they can come up with targeted IT solutions for these clusters. Training and education of the cluster and spreading awareness about the benefits of using IT is the third aspect of the strategy. While NMCC helps Microsoft to select clusters, understand their business models and work out local relationships, the IT major concentrates on programme execution.

In order to achieve prime objectives of this project, an e-readiness centre is set up in each cluster, which provides technical training, consulting services, business incubation services, and knowledge-sharing platforms to SMEs.

How does IT serve SMEs?

IT can play a major role in improving competitiveness of SMEs by enabling them to offer better quality products and services. Like any other business, desktops, e-mail, Word, Excel, basic OS and networking are the base to start with. “In manufacturing, the number one need that comes to mind is ERP. They need ERP to manage their cash flow, supply chain and the entire business in efficient way,” says Sodhi. CRM solutions can help SMEs to understand customers better, have their entire customer data in one repository and also to observe the trends and patterns of customer behaviour.

The Internet also presents huge opportunities for small enterprises as it can not only help them to get much-needed exposure to information but also to reach new customers across the globe. One of the main deliverables of Project Vikas is to create a dedicated cluster portal, which carries all the information about that cluster, its members, products and offerings. It also carries local as well as global news on the industry and other relevant information.

Considering that a large number of SMEs are yet untapped by IT vendors, it is obvious that Microsoft will highly promote its own products, especially the ERP solution Dynamics. Sodhi, however, has a different opinion, “If we had to just sell Microsoft Dynamics to all these SMEs, then we can use our other regular business channels. Here we are dealing with a cluster, concentrating on particular verticals. As a result, we are working with local partners to come up with vertical-specific solutions. Dynamics should be considered more as a horizontal platform, on which further customisation can be done.”

Cluster Updates

Tirupur textile cluster is one of the first clusters where this project was initiated. With Microsoft’s help, this cluster has built the required infrastructure and e-readiness centre. Tirupur is one of the more advanced clusters in India today. While conducting a study of this cluster, Microsoft found that getting more business was not a big deal for the cluster. Instead, the major issue was to service thr orders received as quickly as possible. Tirupur mainly produces garments and earlier after receiving the order, every garment had to travel 15km within the cluster before it could manifest itself as a finished product.

Each garment had to go through various stages and the earlier manual way of working made the job of tracking orders extremely cumbersome. Sodhi goes on to say that Microsoft developed a mobile-based order tracking solution with the help of partners, which was named ‘sub-contracting manager’. This solution has brought down the order cycle time to 60 days from 90 days.

Tirupur Cluster is currently busy in short-listing vendors for a hosted ERP solution. Sanjay Gupta, MD, Tirupur Cluster, says that although Microsoft is a strong contender as it helped them to come up with an e-readiness centre, they are also looking at other players like SAP and Oracle. The cluster will implement one ERP solution, which would be available to all the companies under the cluster on a subscription basis. “That is the only way we can bring down the cost,” says Gupta.

“The ERP solution will help to improve information flow, process standards and MIS reporting, which will bring a lot of transformation in the cluster,” he adds. The cluster is also planning to roll out a special purpose vehicle, which will completely own the solution and look after its support requirements.

The leather cluster in Chennai is also on its way to have an e-readiness centre as well as a dedicated portal for the cluster. The official spokesperson for the cluster says that currently due to lack of information companies often face problems in buying raw materials and getting better prices for their products. “The new portal will enable better information exchange and marketing of products and also reduction of supply chain cost,” he says.

Hosted solutions and training programmes have helped to address the key issues of affordability and skill availability faced by SMEs. While most clusters under Project Vikas are still building the basic infrastructure and e-readiness centres, the actual benefits of the programme will be more visible after the implementation of cluster-wide ERP solutions. ERP, CRM, Internet and B2B collaboration technologies are going to be of prime importance in making SMEs take stock of global markets and develop operational efficiencies.