Retail drives SMB market in India

Zinnov Management Consulting released the findings of an in-depth study on IT Opportunity in Indian SMB Sector. The study provides a detailed analysis of the Indian SMB market and revealed that the total size of the Indian SMB space today is about 35 million units, with retail contributing 52 percent of the total landscape. Divulging specifics of the IT spend in the segment, the study reports that the spend on IT in 2007-08 by the segment was $6.6 billion, which is around 30 percent of the total IT spend in India.

The study clearly divides the SMB segment into three main categories namely retail, manufacturing and services. Of this, the report states that the present retail sector has maximum contribution to the SMB landscape with about 15 to 18 million units. The next sector that significantly contributes to the landscape with 9.5 million units is the services sector, closely followed by the manufacturing sector contributing about 7.3 million units to the same.

The study states that ease and affordable availability of technologies is driving the overall technology adoption among the SMB fraternity, which is evident from the fact that India already has 5,000 IT/ITeS companies that have 100 percent PC penetration. Also, Internet is growing with a CAGR of 46 percent for the last seven years, according to the study. The work identifies a number of macro and micro economic factors that would impact the technology adoption in the sector and would become the reasons for growth. Deep diving into the IT opportunity of the sector, the study highlights that India has seen an increase in the interest among many IT majors to cater to specific needs of SMB sector. Growth in Internet and mobile penetration even in tier-3 cities and rural areas has led to awareness and affordability of technology. Globalization in trade is further increasing the pressure for better efficiency with the help of IT, according to the study.

Industry sector wise distribution of SMBs in

Total= ~ 35.1 million units

Talking about the report Pari Natarajan, CEO, Zinnov said, “India's explosive growth today is driven by its burgeoning SMB sector, which is experiencing revenue increases and double digit growth. Greater employee mobility, increased competition and expansion in terms of office locations have further pushed more SMBs in India to embrace IT and the Internet. In fact government today has realized the potential of this growing segment and is now trying to further develop this sector. Most of the big players in the industry, irrespective of the vertical they belong to, are eyeing this ever-growing lucrative market and are aggressively formulating strategies to tap it. All-in-all, the Indian SMB sector surely promises a very positive growth story.”

Globalization in trade is further forcing SMBs to improve their efficiency of conducting business, highlights the study. Indian SMBs are exporting their products to the global market and are in direct competition with global players especially from low-cost countries such as China and Bangladesh. The exports for the SMB in India has been growing with a CAGR of 12.5 percent over the last 10 years while total imports have been growing with a CAGR of 16 percent. The study also reveals that a large number of MNCs are entering into the Indian market and thereby offering a direct competition to the local players.