the SME market Part II
The Indian small and medium enterprise first came into focus during the economic recession of the nineties. When vendors packaged and repackaged solutions to meet the elusive needs of this untapped and vast market segment. In the second part of our DQ Insight Survey, we look at the extent of IT usage amongst employees, application penetration and leading brands and the profile of the enigmatic SME CIO. Read on for some never expected IT revelations in this concluding part of our analysis.
The great ERP opportunity
Supply chain and logistics are among the weakest automated areas in the
multitude of SMEs, indicating an untapped market opportunity area for vendors.
From the sample of organizations surveyed, less than 5% had deployed
applications automating supply chain, procurement, material planning and
logistics. This can be looked at as two sides of the same coin. With most ERP,
SCM and MRP packages price positioned for the large enterprise, it is not
surprising that there is such a low penetration of these backend applications.
Hence the need for such applications at low costs for the SME. However, vendors
also need to assess whether a realistic demand base exists for these
applications, considering the lack of criticality attributed to these
In the large number of SMEs that
exist, financial accounting is an application area that is almost completely
automated. 95% of the organizations surveyed indicated that finance and
accounting had been automated and this is the single largest area of application
deployment. The next most automated area is billing and invoicing.
invoicing, top application areas by size
Finance and accounting and invoicing are consistently the most automated areas
in SMEs, when segmented by revenue size. By segmenting the organizations
surveyed in terms of their revenues, from Rs10 crore to Rs100 crore, the most
automated application areas are finance and accounting, billing and invoicing.
Other top areas include customer service, sales and marketing and front office.
Application areas like inventory, quality and project management are relatively
more prevalent in larger SMEs.
Desktop productivity, most
For the SME, applications built around desktop and personal productivity are
the most critical. From the sample of organizations surveyed, office suites as
an application area was ranked as the most critical. Database and email
applications are amongst those ranked as the next most critical. Financial
accounting, sales and marketing and invoicing are also ranked as next most
A surprise element is the low
level of criticality given to ERP, MRP, groupware and supply chain management.
This can be interpreted in two manners. The first is the lack of IT maturity
across SMEs, leading to low levels of automation in business critical areas. The
other possibility is the lack of suitable applications for this segment, leading
to a latent state of market potential. In reality, a combination of these two
factors is probably a safe explanation for the lack of penetration of business
invoicing, top application areas by verticals
Finance and accounting and invoicing are consistently the most automated
areas in SMEs, when segmented by vertical markets. In terms of vertical markets,
the most automated application areas are finance and accounting, billing and
invoicing. The other top applications are dependent on the vertical markets
For SME organizations addressing
manufacturing markets, some differentiating applications areas include sales and
marketing, trading and distribution, inventory management and production
planning and control. For SMEs addressing services, finance and IT or telecom
markets, the differentiating application areas include customer service, front
office and helpdesk. For SME organizations addressing trading markets, the
differentiating application areas include trading and distribution, inventory
management, procurements and materials planning.
Office suites as omnipresent
as the PC
Similar to the PC, the penetration of office suites in SMEs was found to be
100%. The next most deployed application software was accounting followed by
email and database applications.
Since the importance of business
critical applications like ERP, SCM, MRP, groupware and messaging have been
indicated to be low by SMEs, the penetration of these applications is also
equally retarded. The penetration of ERP, groupware, messaging and GIS was found
to be less than 5% in the sample of surveyed organizations.
Looking at specific brands in
these application categories–in database and RDBMS package software–Oracle
has the highest presence in the sample of SMEs organizations surveyed. Close to
56% of the SMEs surveyed were using Oracle as their database followed by
FoxPro/dBase at 32%. A surprise in database software was the low penetration of
MS SQL Server at 6%.
Among financial accounting
software, Tally had the highest share in the sample of organizations surveyed.
Close to 80% of the SMEs surveyed use Tally as their financial accounting
software, followed by FACT, used by 10% of the surveyed organizations.
Looking at desktop productivity
tools and specifically office suites, the brand which appears to be in a
monopolistic position in the SME market is Microsoft. Close to 98% of the SMEs
surveyed use Microsoft Office followed by a slender percentage of Lotus
SmartSuite. It may be mentioned that one of the reasons for the high penetration
of MS Office is the extent of software piracy. More than 60% of the
organizations surveyed were using unlicensed MS Office software. Unlicensed
software was virtually absent amongst the Lotus SmartSuite users.
While the incidence of ERP,
CAD/CAM and GIS is low among SMEs, the following brands were detected in the
sample of SMEs surveyed. For ERP–SAP, Oracle, XMAS, Infopac; for CAD/CAM–Autodesk
and for GIS–ArcInfo brands were detected.
IT usage limited to quarter of
The usage of IT amongst the employees of an SME is quite limited. 41% of the
organizations indicated that IT usage was limited to 25% and less of their
employees. On a more significant scale, about 70% of the organizations indicated
that IT usage was limited to 50% and less of their employees. Only a handful of
companies stated that all employees had complete access to IT.
Looking specifically at usage of
applications across the SME workforce–this can be best described through a
combination of two factors. The first defines the percentage of staff in an
organization, which has access to IT applications and the second defines the
percentage of organizations demonstrating that access. For example, for office
suites, in 43% of the surveyed organizations, 25% and less of the total
employees have access. In 38% of the surveyed organizations, between 25% and 50%
of the employees have access to office suites. For financial accounting
software, 76% of the surveyed organizations indicated that 25% and less of the
employees had access to this application. For database management applications,
50% of the organizations indicated that 25% of the employees had access.
IT usage most retarded in
The usage of IT amongst employees also shows marked difference among SMEs from
different vertical segments. The usage of IT in manufacturing SMEs is relatively
most retarded. Close to 80% of the manufacturing organizations surveyed indicate
that IT usage was limited to 50% and less of the total employees. In
comparison, IT usage was found quite extensive in organizations from the finance
and IT and telecom vertical segments. In finance, 54% of the surveyed
organizations indicate that IT usage is restricted to 50% and less of the total
employees. It also indicates that for 56% of the surveyed financial SMEs, IT
usage is available to more than 50% of the total employees. Also, for SMEs from
the IT and telecom markets, 9% of the surveyed organizations indicate that IT
usage was available to all employees.
Increasing IT usage with
The usage of IT amongst employees increases with the size of the SME
organization. In organizations with turnover between Rs10-25 crore, 18% of the
surveyed sample indicated that IT usage is restricted to less than 10% of the
employees. In comparison, for organizations between Rs75-100 crore, only 8% of
the surveyed sample indicated that IT usage is restricted to less than 10% of
the employees. Similar increases in IT usage amongst employees can be witnessed
with increase in turnover of the SMEs.
IT usage more balanced in
The size of an SME can increase in at least two important ways. The first is
revenue turnover. And we have seen that IT usage increases amongst employees
with increasing revenue size of an SME. The other way that the size of an SMEs
can increase is by an increase in the number of employees. As the number of
employees increases in SMEs, we see a more proportionate balance in IT usage.
While the number of organizations with low usage of IT increases, the number of
organizations with high usage of IT also increases, thus leading to a more
balanced IT deployment amongst employees.
The mysterious SME CIO?
In SMEs, it is unlikely that the CIO title would be found easily. However,
the IT professional with the responsibility of IT purchases, steering the IT
direction of the organization and assessing business information needs exists in
The typical CIO of an SME is
between 25 and 30 years of age, a graduate or post graduate, has 3-6 years of
work experience and is part of the top or senior management. In other words, the
CIO of an SME is a young IT professional, most probably the entrepreneur
himself, trying to steer the IT course of his venture.
The other breed of the SME CIO is
above 30 years of age, has a diploma or post graduate diploma in computers, has
over 6 years of experience and is again part of the senior or top managament.
So what does the CIO of an SME read? Amongst the
Indian IT publications read by the CIO of SMEs, Dataquest was ranked as the most
read publication with 40% of the surveyed organizations indicating their
readership. PC Quest and Computers Today were the other well read Indian IT
publications, ranked by preference. Among business magazines, Business India,
Business World and Business Today were again ranked by preference.