Damn! The Big SME Opportunity that Technology Entrepreneurs Ignore

SME Market in India is too big to be ignored. And while Indian entrepreneurs are chasing the big enterprise market (and consumer segment), here are a few data points for SME opportunity

  • India has the second largest population of small and medium businesses (SMBs) among BRIC countries and the US.
  • SMEs in India contribute to more than 40% of the total Industrial Output (35% of it is exported).
  • SMEs Provides employment to 75% of India’s workforce.
  • In Karnataka alone, there are more than 750 Large to Medium Enterprises with investments of more than 60,000 Crores and employing 4,00,000 people.
  • In comparison, there are more than 3,80,000 SMEs with investments of just about 10,000 Crores while employing 22,00,000 people!
Digging the Small Business Gold Mine
Digging the Small Business Gold Mine

SME – Opportunities for Small Players

The challenges that the SMEs face today seem to be primarily in the area of ICT and to quote specifically, ERP. The SMEs lament that when ever they approached the usual ERP firms, the first question they were faced with was that of their turn-over (they are quoted ERP package rates based on their turnover!).

Further, most do not even qualify to be served by these firms since they don’t measure up in terms of turn-over. Most of the practitioners wanted more simple solutions which could be used by the SME work-force, that is largely rural, with education levels being at most at Diploma levels, (in exceptional cases Engineering).

  • Only 12% of the SMEs use Computers and 90% for Word Processing – The terms used today was “Typewriter”.
  • One of the most startling take away was that in the last 55 years, the India SME manufacturing sector has clocked a steady GDP of 15% to 18%. No geo-political reason, economic downturns nor Policy changes etc seems to have affected this.
  • And to put this in perspective, the Indian IT companies are happy if they are 1% or 2% higher than the nation’s GDP!
  • SME’s spending on IT is only 30 percent of India’s total IT spending

Have the technology startups considered this space as an opportunity? Do you think the Indian SME presents an opportunity for Technology Startups to deliver smaller and much palatable solutions, which fit both the pocket and the background of the SMEs?

[The article is indirectly written by Raja, Founder of MoMo Bangalore. He had posted this in an email to the MoMo group, after a visit to MAIT Bangalore event.]

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