Advertisment

Survey Report: Reality Of Challenges Facing MSMEs

author-image
Srinivasan
New Update

The MSME sector is critical to India's growth, with more than 45% of industrial output attributed to them. While large corporations in India are already embracing "software as a service" and enterprise mobility, the MSME segment in India is being left in the dust due to a set of specific reasons. Out of the 728 businesses surveyed, 597 of them were surveyed about the key benefits they feel technology provides. Here we discuss the results from the study.

Advertisment

Online Presence For MSMEs

Another important finding from the study is the adoption of online marketplace by MSMEs in India. Surveying 1000 B2B suppliers across 8 cities, the study discovered some positive signs for MSME online presence in India. Here are the key findings:

Advertisment
  • All B2B suppliers today use Internet for communication purposes.
  • 73% of the B2B suppliers surveyed use the Internet to run their own website.
  • 55% of B2B suppliers use the Internet to promote their products/ services online.
Advertisment
  • The penetration rates for online B2B marketplaces is 45-50% among MSMEs in India; this will further increase to around 80% in the next 4-5 years.

Adoption of Cloud Services

SaaS(Software as a service) is promising to make life easier for consumers and enterprises alike. It is especially attractive to small businesses as it can heavily reduce the cost of hosting their own infrastructure to run programs and software. Here are the key findings of the study:

Advertisment

5 Key Challenges To Adoption Of Technology By MSMEs

1) Lack of Skilled Manpower: According to the study, 26% of IT adopters and 21% of IT non-users responded that the lack of tech-savvy manpower stopped them from adopting technology. One of the main problems managers of small businesses face is the retention of technologically advanced staff. These employees are usually poached by large corporates who offer a better pay package. About 20% of the total respondents also emphasized that a lack of training and support to set up and use new technologies proved a stumbling block. Many organizations offering software to SMB markets often lack the channel partners to help set up new technologies for small businesses in tier II or tier III cities, and this hinders the adoption of new technology.

2) High Expenses: Cost was the No.1 concern for the sample group surveyed,with 35% of IT users and 41% of non-IT users saying "high cost of hardware" is the primary barrier. According to the study, the concern was not just with the initial investment in technology such as servers, but also the maintenance

cost associated with technology, such as license renewing and integration with current infrastructure. Arora pointed out in our interaction, "High cost is a stumbling block for many MSMEs, and organizations need to offer flexible plans for them to make payments, such as installments. Banks are also less willing to offer MSMEs credit because they do not provide solid documentation to back their application".

3) Lack of Awareness: According to the study,40% of respondents said that customer non-use of IT played a part in not adopting technology. Additionally, 23% were not aware of other small businesses that had benefitted from the use of technology. This raises a critical point about the mindset of small business owners. Many of them are "tech followers", in that they wait to observe the results of their peers adopting technology before they themselves invest in it. As Arora rightly said, "Even a plumber in the US might have a website. But that is because his customers are looking for him online. However, in India, we look for such a service through word of mouth, not online. Once the dependence on the internet reaches such a level in India, then small businesses will have no option but to build a web presence!". There is also a lack of awareness about government schemes for MSMEs. Some of the respondents only recognized 1-4% of specific programmes the government of India offers for them. "The Ministry Of MSME is doing a great job in getting the right kind of subsidies across.The challenge is to make the small businesses aware of these schemes. It needs to bridge the gap between existence and awareness of these schemes", says Arora.

4) Data Security: 28% of IT users responded that privacy and security of data are concerns as well. Although 79% of IT users are open to embracing cloud technologies, they still retain fears over the ownership of their data. Specifically, if there are financial data such as invoices or client details stored in the cloud, they still feel insecure about keeping it off site. While many small business units keep these details on external hard drives, those are also susceptible to loss and damage, and perhaps even less secure than when given to a cloud provider. One of the major disadvantages of storing backup of data in such a way is the fragmentation of data in various sources, making future analytics on the data much more difficult. According to Arora, "When i was in a call, the client made an analogy by saying "Would you keep your gold in the bank or in your home?", and in a similar way, small businesses feel more secure having data with them. In reality, it's probably more secure in a cloud data center rather than in your home!".

5) Poor Infrastructure: If you go to any tier II or tier III city, it is extremely rare to notice even a full day of uninterrupted power supply to any business. According to the study, 42% of respondents felt "broadband and connectivity reliability" is a major concern. The state of physical infrastructure is something that MSMEs are helpless about, and the government must take steps to improve the state of power supply and internet connectivity in suburban areas if they wish to stimulate the small business market. While mobile phone penetration is extremely high, with estimates of 900 million mobile phones in use, only around 44 million smart-phone subscribers are there in India. However, among the respondents to the survey, very few were using their phones for business purposes. Even tasks such as checking email on their phones were severely limited by the bad mobile coverage. With mobile penetration expected to reach 100% in the next few years, it is critical that mobile service providers improve internet connectivity to their customers so that MSMEs can leverage on their mobile devices to adopt basic technologies that will make their workflow more efficient.

Credits: "Understanding and Overcoming Barriers to Technology Adoption Among India's Micro,Small and Medium Enterprises" by Intuit. The complete white paper can be downloaded at: http://bit.ly/VI41tR

Advertisment