Small and medium businesses (SMBs, or companies with up to 999 employees) in India are set to spend US$9.7 billion on IT this year, up 22 percent over 2007. This spending is driven by a boom in the overall economy and a rise in the number of SBs (small businesses, or companies with up to 99 employees). This forecast is based on the latest study by New York--based Access Markets International (AMI) Partners, Inc.

“More than 80% of SMBs are confident in projecting revenue growth in 2008 over last year,” says Partha Sarathi Sengupta, Manager of Strategic Market Analysis at AMI-Partners. “The liberalization of India’s economic policy, de-regulation of key sectors, and progressive moves toward integrating India with the global economy have been key drivers of revenue growth among SMBs.”

As the level of IT investment increases, there is a change in the perceived role of IT from a support function to an enabler of competitive advantage. SBs have started maturing in terms of IT infrastructure. While a significant number of them are still at a basic hardware usage level, some are reaching higher levels in the maturity chain. There is an increased expectation regarding IT by SMBs. CIO’s are facing challenges in justifying the value derived from IT investments.

“Domestic demand for IT in India is witnessing a gradual transformation from being predominantly hardware driven, to being solutions oriented,” Mr. Sengupta says. “This will result in a growing emphasis on IT services.”

Services stand out in the midst of a huge range of offerings, value-added services and multiple brands. About 12% of the total IT spending by SMBs was on service and support in 2007. SBs spent the bulk of these funds on computing support services, while MBs (medium businesses, or companies with 100 to 999 employees) invested heavily in network management and development and integration services.

“Larger MBs (companies with 500 to 999 employees) are looking at end-to-end IT services and this will be a major growth engine for the market,” Mr. Sengupta says. “MBs are looking for total solutions which can help them achieve business goals which lead to the larger demand of tailor made services.”

There has been a considerable increase in mobile employees across India. About 42% of SBs and 72% of MBs in India have mobile employees. As the economy booms, business travel is on the rise, lending new meaning to the words “mobile connectivity.” This, coupled with the availability of wireless technology, has resulted in a mobile boom.

Notebook PC penetration currently stands at 22% among SBs and 86% among MBs in India. Affordable mobile computing products, the cellular explosion in India and wireless LAN have resulted in tremendous growth in the notebook market.

Improving Internet or networking bandwidth/connection speed and helping staff collaborate more effectively are two major issues for India SBs this year. SBs are adopting the latest Internet-related technologies now -- 63% of Internet-owning SBs are broadband-enabled. Comparatively, Internet penetration among all SMBs now stands at a little over 60%.

“The demand for firewalls and VPNs is expected to surge among MBs,” Mr. Sengupta says. “VPN solutions experienced a tremendous growth among MBs in 2007 due to increased broadband penetration, increasing notebook users, workforce mobility and a telecommuting culture. Customers are increasingly demanding industry expertise from IT suppliers. The knowledge of verticals is critical for any IT supplier who wishes to engage customers in a meaningful conversation.”

About this study

AMI’s 2007 India Small Business Overview and Comprehensive Market Opportunity Assessment and 2007 India Medium Business Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI’s annual surveys of SMBs in India, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

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