The 'IT' Factor For SMEs

Indian SMEs have always been street smart, but the IT wave is now forcing them to become tech smart. With operations in all large enterprises not just getting automated, but also sophisticated in terms of data storage, warehousing and information analysis, SMEs are catching up by increasing IT spends at a fast growing rate in a bid to scale up, stay in competition and offer the best to customers. A recent Microsoft – AMI report on IT adoption in Indian SMEs mentioned the main reasons they favored spending more on IT were managing rapid growth, improving efficiency, and to meet the need for regular interaction with large Indian or international customers. 56% confirmed that being perceived as ‘hi-tech’ or IT savvy gave them a competitive edge.

With ‘Technology Planning’ now an essential part of most Business plan templates, even start ups cannot manage without IT. As opposed to earlier times, when computers were evolving and internet was just coming into picture, there are some basic needs today that start ups just cannot ignore. The AMI report also mentions the adoption wave of small enterprises going through the first wave of building basic infrastructure like PCs and notebooks equipped with internet, anti virus and office productivity suites. Medium enterprises adopt connectivity, using their websites commercially and deployment of LANs and servers. And the third wave of development with ERP, intranet and managed security solutions can also be observed. As Nupur Pitkar, Director, S.H.Pitkar Orthotools who has experienced all three stages puts it, “We bought our first computer in 1988 and worked on DOS using Lotus. We went live on SAP’s ERP last year, and have used a lot of indigenous software in between. Today’s start ups however, must at least have computers with connectivity and some basic software like accounting. It makes life a lot easier by saving time, reducing manual errors, the cost of employees and making existing employees more efficient and skilled.”
‘IT’ is all about the Right one

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While IT does make life easier after staff gets used to the system, the process of adoption including determining objectives, choosing the right solution, allocation of funds, bringing in external funds and then implementation can be a nightmare for the largest of enterprises. How do SMEs deal with these dilemmas? Hiring an experienced CIO from the start can prove to be a key decision in solving some of these. Quikjet, a cargo airline based in Bangalore has exactly that with Vivekanand Heble, who had worked with Kingfisher airlines and Indian Airlines in the airline industry earlier. He took some radical decisions like the use of SaaS and outsourcing IT functions like ERP to Kale consultants. It may throw up questions of control over IT from the start, but not to Heble. “Our roadmap and strategy of keeping our internal IT lean is very clear. The ERP solution, although hosted by Kale, the encryption and security will be taken care of at our end, giving us the control. Secondly, outsourcing gives us the benefit of cutting down on the number of people we recruit for support”, he says. At the set up stage, there is a need for manpower, but workload dramatically reduces after set up. It becomes unjustifiable to retain an employee without enough workload or lay them off. Heble substantiates, “If I fall short of support at a later stage, it’s easier to hire. Also if I need 24 hour field maintenance, that would mean 3 people. And to be able to compensate for shifts, sick leaves, etc, I will have to hire 2 more. So I’m employing 5 people, and getting the output of 3. On the other hand, by outsourcing, I only pay for 3 trained professionals.” The fact that Kale has a pan India presence makes it easier in case of scalability to just increase the number of supervisors as well.

‘IT’ is all about the Money

Keeping the budget tight is the topmost concern for startups and SMEs alike. Experience can help cut down the budget through making the right choices – of the solution and the vendor. Pitkar explains, “We had deployed a solution from an indigenous company that closed down in 2006. The system had a lot of bugs, and data corruption was a problem we faced very often. Their support and maintenance was not up to the mark at all. That is when we decided to go for a more robust option.” Saving money by going for a smaller solution provider may seem like a tempting proposition, but it is imperative that the servicing factor be kept in mind. If it is an e-commerce company making sales through the website, any downtime can impact on sales.

Open source is a smart option that is cost effective as well as been proven to deliver results depending on the vendor. The Maharashtra Government used Red Hat Linux, which does not involve proprietary fees in its e-governance projects covering the vast state of Maharashtra. The National Information Centre (NIC) created a secure online platform for citizens to access and share information as well as conduct transactions with it. Issues of cost, project scalability, support and security are major concerns, and any downtime, viruses or system failures can result in unrest among taxpaying citizens. This places high pressure on the Government to create a system that is robust and well maintained as well as cost effective so that citizens are satisfied with the use of their money. The use of Linux has been able to achieve that so far without any major reported problems.

While allocating internal resources is one factor, the need for external investment is always a need for start ups and SMEs. Whether it is applying to venture capitalists, angel investors, or banks and financial institutions for loans, companies need to be able to demonstrate a strong business or project plan with a convincing RoI and benefit analysis. Bhuvnesh Khanna, head of SME business, HSBC bank explains, “A strong IT platform implies that the SME has good financial and accounting controls. The IT system would allow them to monitor stock/inventory levels, payment due dates, loan repayment due dates and receivables and their ageing analysis - which in turn will lead to better and more efficient management. If the startup can provide this important information, Banks will be better placed to conduct a financial analysis.”
‘IT’ only gets Bigger

Growth is what everyone aims for from the start and it is important to factor it in while planning IT as well. Spreading out in different geographic locations, means an increase in the need for communication tools, and knowledge management apart from ERP. It may be smart, even if separate locations have disconnected operations, to have a centralized knowledge management system and cut down logistics and travel costs. Miditech, a production company till recently had operations in different locations that worked in isolation. Milind Naik, the CTO explained, “We set up a central repository for the production house so that we could utilise the resources across the multiple locations we have. There has been a shared talent pool for the production, but that was more of a people movement. Now we are trying to harness the technology so that we can have resources operation across any location and still be able to deliver top class production.” Movement of meta data is definitely easier on the budget than movement of physical objects or people. The use of widely available web 2.0 and social networking tools can also be harnessed for encouraging internal communication and easier data sharing, although it is hard to regulate and control it in some cases.

Intelligence is inherited, but smartness is gained with experience. While the ‘IT’ factor can help create and edge, constant review of its findings is what will help sustain and improve on it.