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Spurred by the recessionary environment of the last couple of years, the Indian IT bazaar is emerging out of its ‘Cinderellaesque’ existence and some wise men have estimated the overall market opportunity to be over $ 100 billion during the next few years. With India being home to over five million MSMEs (Micro, Small and Medium Enterprises) that are by and large underinvested in IT, it is little wonder that this market segment is fast turning into the Holy Grail of the Indian IT industry.

Getting MSME users to increase IT consumption has become the new growth mantra for IT firms with hardly a day passing without media coverage of an IT firm extolling the uniqueness of its MSME specific offerings. From esoteric technology paradigms such as cloud computing, SaaS and Web 2.0 to the more mundane financial incentives, IT firms are leaving no stone unturned towards creating an IT nirvana for the MSME user. While MSME users attribute their poor IT adoption levels to high software costs, lack of suitable products and poor service levels, IT firms cite inability of the users to realise the benefits of IT coupled with a reluctance to pay ‘fair prices’ for software & services by the MSME users. The truth lies somewhere between these extremes.

Before discussing remedies, it will perhaps not be remiss to examine the poor IT usage levels in MSME firms through the 3A prism — is IT Appropriate, Affordable and Adopted?

Is IT appropriate?

Many nationally branded IT products available in India have been created for a context which is different from the Indian MSME usage context. To overcome this contextual gap, product vendors tend to launch India versions of their products which typically involves nothing more than stripping away some features of their core products without making any genuine attempts to address the user’s fundamental issues.  Additionally, managing even a basic IT environment involves multiple vendors — hardware, software, network and services – which is often beyond the internal capabilities of most MSME firms. With IT talent at a premium, MSME firms are hardly likely to attract and retain IT skilled staff which leaves them often dependent on suppliers for IT investment advice thereby inhibiting secular decisions.

Is IT affordable?

While hardware prices have shown a downward bias recently, software and service prices have tended to move northwards. While many may disagree and point to the recent trend of software product vendors offering special India prices, it is important to evaluate IT costs from a lifecycle Total Cost of Ownership (TCO) perspective rather than as one time cost. The on-premise license fee model which underpins most software products sales creates a vendor lock-in for the customer through expensive annual maintenance contracts and product upgrades which leave the customer often facing a Hobson’s choice of ‘take it or leave it’. Thus while the initial price of IT products may appear low, the economics get distinctly unattractive when evaluated from a lifecycle TCO perspective.

Is IT Adopted – For IT to provide sustainable business value to the user, from either growth or efficiency perspectives, it is important to differentiate between IT deployment and adoption. A firm may be invested heavily in IT assets but still have sub-optimal adoption levels if its core business processes are not adequately IT enabled. For example, if order and inventory management are key processes of a manufacturing firm, IT investments by the firm will provide business value only if these processes are IT enabled vis-à-vis IT enablement of non-core processes such as payroll and HR. Unfortunately, most MSME firms have a poor correlation between their IT deployment and IT enablement of core process resulting in a widely prevalent attitude of ‘I get no value from IT’.

Updated on: 29 Apr, 2010