Small & medium enterprises to be next big IT spenders


In the late 90s India’s top business companies implemented enterprise software bringing about cost efficiencies. Companies like TATA Motors and Bajaj who outsource their components from SME now want their vendors also to be more efficient.

Bajaj wants suppliers to have up-to-date information on production schedules, raw material supply and other costs to ensure that its schedules run smoothly. Similarly, small IT companies are adopting enterprise software to ensure that they deliver projects on time to their principals abroad.

There was something different about German software company SAP three day conference recently held at Grand Hyatt in Mumbai, India. Conspicuously missing from the corridors and speaker sessions were suave and suited invitees, usually key decision makers for large companies. Instead, the 4000-strong crowd that thronged the halls seemed straight out of a computer exhibition in a small city. They hardly looked the kind to buy SAP software, which till recently counted only Fortunes 500 companies as its clients.

SAP was treating its invitees with all costs paid trip to the conference venue. SAP kept the invitees in good spirits, packed a well laid out lunch and snacks. A few Managing Directors and CEO from selected SEM were also invited for a business dinner. Not without reason. SAP visitors came from small and medium sized enterprises (SME) across the country. This segment the company (SAP) feels will be its biggest customer this year.

We are giving here a few cases of how SEM even in smaller cities has resorted to using software like SAP. In Karur, a small town in Tamil Nadu of India, the textile company Sabare International installed SAP software as it needed IT infrastructure to withstand its rapidly growing export business. Rajesh Plastics, Rs 25 crore ($ 6 million) company based in the mega city of Mumbai, India – a plastic specialty company, installed enterprise software as it wanted to empower its managers by giving them access to business information.

Then there is Rs60crore ($ 15 million) Acharaya group, at the outskirts of Mumbai, which wanted software to track its spending on research of specialty molecules. Rajesh Plastics head says that IT is no longer a cost. It is a now a part of business essentials.

KPIT Cummins Infosystems implements IT solutions for SME. The company’s key director says that the implementation of IT solutions is like a trickle down effect of the business chain.

Market research agencies are already waking up to the opportunity. AC Neilsen in a recent study estimated that SMEs spent Rs 21,369 crore ($ 5 billion) on both IT hardware and software in 2005. The expenditure is expected to increase significantly this year.

Boston consulting Group estimates that 20,000 SME having annual sales of Rs.5 crore ($ 1.2 million) and over are expected to spend more than Rs750 crore ($ 185 million) on just enterprise software by 2008.

AC Neilsen joined hands with IT majors Microsoft, Computer Associates, Hewlett Packard and Avavya Global to unveil a roadmap for technology for small scale sector companies. SAP’s Asian head clarified that SME are upgrading their IT systems across Asia with India and South Korea leading the way. IT is a symbol of how quickly these companies are integrating in the global economy.