/dq/media/agency_attachments/UPxQAOdkwhCk8EYzqyvs.png)
Follow UsKrishna Kurup is a worried man, very worried indeed. As the
CIO of the South Indian Shipping Company in Kochi, he has been pleading with his
top management for months for the purchase of two servers and a NAS box in his
organization. Otherwise, he is certain that there would be a major data crash
leading to serious disruptions in his business. He also feels the need to deploy
an ERP as it is becoming increasingly difficult for him to manage disparate data
in the organization.
However, he is not getting audience with his MD, and,
therefore, is not able to explain to him the gravity of the situation.
Unfortunately, his CFO too is not very interested in acquiescing to his
requests. Kurup is today in a major conundrum-if something happens he would
have to bear the maximum repercussions, but no one is keen to help him in
ensuring that nothing happens./dq/media/post_attachments/4ee068ec3fc2eaeffc3206a4c1f7f8e4192857fed8728f872137732a6c8f36fc.jpg)
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Automation
Some
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Kurup's dilemma is not an isolated instance. Akash Parikh
of Vadodara Auto Suppliers, Bakul Gala of Gala Brokings & Mutual Fund in
Mumbai, Sachin Ahir of Perfect Courier in Aurangabad, Mohit Srivastava of Shri
Ram Metals in Lucknow, and Pramod Rathi of Triveni Engineering in Kolkata are
all facing the same predica-ment. In fact, whatever the marketing pashas of the
IT vendors might claim, automation has still some way to go amongst the Indian
midsize enterprises, otherwise referred to as SMBs. As the DQ-IDC Survey on
'Midsize Enterprises' shows, while IT penetration level is fairly advanced,
in patches, amongst this sector, there are areas where the automation level is
still well below the critical level.
Is IT Strategic for Indian SMBs?
This is the most crucial question for the Indian growing enterprises, one
that is on the lips of vendors, analysts, researchers et al. And going by the
DQ-IDC Midsize Enterprise Survey, the answer is a resounding 'NO'. Any
organization is considered to have a strategic IT department in case it fulfils
the following four criteria:
-
The CIO/CTO should be involved either in decision
making or in influencing during the process of IT purchase. -
CFO/VP-finance should not be involved in the decision
making process in IT purchase. -
The organization should have a separate IT department.
Any organization having more than one personnel involved in IT function is
considered to have a separate IT department. -
And, last but not the least, the CIO/CTO must report to
the CEO/COO/MD of the organization.
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| Source: DQ-IDC Midsize Enterprise Survey BFSI shows a surprisingly low IT spend as a percentage of turnover. And, IT Services/Software leads all the way |
/dq/media/post_attachments/4ee0bd5f7a43e55d799b5077df2ef3d62dc6c369372663ad395d63944d23770d.jpg)
Going with these criteria, only 39% of the total 413
respondent organizations confirmed that IT is indeed strategic for them-on the
other hand, more than half of the organizations across all of manufacturing,
services, education, IT services/software, BPO, and BFSI verticals do not look
at IT as strategic at all. However, there are some silver linings too; nearly
four out of every five enterprises do have a separate IT department, though this
number could have been influenced by the BPO and IT services/software verticals
where the figures are 100% and 91% respectively. Also, in 70% of the
organizations, the MD/CEO/COO takes all decisions related to IT and almost 80%
believe that IT could help in smoother functioning.
Who's Spending What on IT?
The best measure of IT's strategic importance for a Midsize Enterprise
could only be gleaned from the level of IT penetration and the corresponding
spends, and the budget allocated under these heads. The overall IT penetration
was found to be fairly low-though, as expected, BPO and IT services head the
list. IT penetration was measured by how organizations have adopted 56 different
types of technology solutions. These 56 solutions defined by the DQ-IDC Midsize
Enterprise Survey span across technology related to telecom infrastructure,
hardware, software applications and IT services. Software penetration is fairly
low in the services and BFSI sectors, though, hopefully, IT services penetration
seems to be better across all verticals. Storage adoption shows the gulf in IT
penetration between large and growing enterprises-while NAS/SAN are today's
hot technologies in large organizations, network storage has weak to negligible
penetration amongst SMBs.
IT's
Strategic Importance
Any organization is
considered to have a strategic IT department in case it fulfils the
following four criteria:
-
The CIO/CTO should
be involved either in decision making or in influencing during the
process of IT purchase. -
CFO/VP-finance
should not be involved in the decision making process in IT purchase. -
The organization
should have a separate IT department. Any organization having more
than one personnel involved in IT function is considered to have a
separate IT department. -
The CIO/CTO must
report to the CEO/COO/MD of the organization.
/dq/media/post_attachments/29b8b0ab038af2dcd6e6ad4fe68932b8e127dd55312268cbe6bf42a97295dd73.jpg)
As expected, existence of strategic IT Department is highest in the BPO
vertical, followed by IT Services/Software.
Source: DQ-IDC Midsize Enterprise Survey
/dq/media/post_attachments/bc0c490df9739391a68be4bbde93a464222526fad4c8e14b45daccb7d6d5bb97.jpg)
Fourout of five midsize enterprises have IT department. The hit rate is nearly
100% for BPO and the IT services, while education sector scores the least
on this front.
Source: DQ-IDC Midsize Enterprise Survey
/dq/media/post_attachments/3f901c8928cd038ac1dc5fed86732972dbd0f57b6e14799c79595da8b079fa52.jpg)
In7 of 10 enterprises the MD/CEO/COO has the final say in It purchase. In a
fourth of the companies IT heads and IT staffs are the primary influencers
while purchasing any IT related products and services.
Source: DQ-IDC Midsize Enterprise Survey
/dq/media/post_attachments/a45874674ab77fa2ab0418274f43b5ead1c6464c7ce6cfa09b259a1091b5a8bb.jpg)
Source: DQ-IDC Midsize Enterprise Survey   Source:
DQ-IDC Midsize Enterprise Survey
enterprises not having a separate IT department is that they don't feel
the need for it. Those who do, say that having a separate IT department is
expensive with low RoI and they can easily outsource people. Those
organizations are likely to use IT consultants.
that an IT department helps in boosting employee confidence in tackling IT
related challenging
/dq/media/post_attachments/d51e7a2c8dd328fe30d5074aa0614c877f1017d54b848de7c87ca6b47afd8a2c.jpg)
Source: DQ-IDC Midsize Enterprise Survey
I/dq/media/post_attachments/653b9bb8e8411ae64fa9b48dd990886516da795e0e9f1971c687a6ff6065ca41.jpg)
n
9 out of 10 organizations, decision
 for purchasing IT products or services is centralized at the head
office, which invariably delay the process of purchase. In case of the
Services vertical, the figures are a little lower.
At an overall level, only one in every
ten organizations utilize the services of IT consultants, being high in
the case of BFSI and Education.
                                                             Â
Source: DQ-IDC Midsize Enterprise Survey
There is bound to be a direct correlation between IT as a
strategic department for an organization and the level of IT penetration and
spends on IT incurred by the growing enterprises. The average current IT spend
of an or-ganization having IT as a strategic department is Rs 53 lakh and that
of organizations not having IT as a strategic department is Rs 30 lakh. A
similar trend is also seen in case of planned spend on IT for 2006-07, ie Rs 60
lakh and Rs 31 lakh for organizations looking at IT as strategic or otherwise,
respectively. Therefore, it can be safely concluded that organizations having a
strategic IT department, spend more on IT-not surprisingly, therefore, IT
services/software spent the highest average amount of Rs 66 lakh amongst all
verticals in 2005-06, and at Rs 69 lakh, plan to do so again in 2006-07.
| Top Pain Areas for Midsize Enterprises |
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The DQ-IDC Midsize Enterprise Survey findings also
dispelled some commonly prevalent myths-unlike larger enterprises, BFSI is not
really so hot a sector amongst growing enterprises. Not only does it have the
second lowest IT penetration amongst all verticals, at Rs 31 lakh, its average
IT spend can at best be called moderate. Maybe the smaller co-operative banks
and stock brokers who constitute the BFSI sector amongst growing enterprises are
yet to catch up with their big brothers on the IT front. Hopefully, with a
planned expenditure of Rs 39 lakh, BFSI will have the expected second highest
growth percentage amongst all verticals in 2006-07. Also, as expected, being
consistent with the current year, the IT services/software vertical will also be
spending highest on IT in the next year.
Pains and Gains
The levels of IT adoption across all verticals amongst growing enterprises
are fairly conservative; even IT as a strategic business enhancement tool scores
fairly low on the radars of most of them. The logical conclusion is that there
are several pain areas related to IT faced by most of these growing enterprises;
the DQ-IDC survey findings help in delineating these pain points. Incidentally,
all of these are restricted to problems in IT procurement, deterrents in IT
adoption and problems in IT integration.
|
Where They're Putting |
/dq/media/post_attachments/e90e3d41be6b335936f36787d9b1296df2d954bd7931b69223c8252bc9a7904d.jpg) ITServices/Software spent the spend the most on IT this year followed by Manufacturing. This is in contrast to larger enterprises where BFSI is a top spender of IT. Spend on hardware is nearly half of the total IT spend across verticals, except BFSI, where it is a little lower.
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| IT Services/Software will continue to be this highest spender on the coming year. And BFSI will be spending the second highest next year! |
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/dq/media/post_attachments/49e3b1bb7a8dafa3685c88992c34a057f14818fdd0c02c459dac70bfb9197844.jpg)
It's time for vendors to take note that most growing
enterprises feel that they need a demonstration of the product function rather
than only listening about it. Also, they want tailor-made customized solutions
from vendors that should come as a bundled product, making it cheaper and easier
to manage. And as highlighted initially by the predicaments of Kurup, Parikh,
Rathi et al, in majority of emerging enterprises, IT management is done by the
IT manager, but all the decisions are taken by proprietor or people from non-IT
backgrounds. Also, there is a general lack of technical know-how among most
employees of growing enterprises.
| Top Five Drivers |
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| Why IT is Still Not A Hit |
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Top 5 IT Procurement
Top 5 Problems in IT
Top 5 Deterrents in
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IT procurement seems to be posing the most serious
challenge for these growing enterprises. In fact, there is almost a consensus
that MNC vendors do not understand the specific requirements of Indian SMBs. The
fact that most of these vendors are pitching IT as utilities now-a-days, is also
acting as a deterrent against increasing penetration in this sector. The BFSI
sector seems to bear particular grudges against IT vendors-vendors with tall
claims and expensive products often lead to post-purchase dissatisfaction; there
is a general lack of after sales support; not enough technical inputs are
available from the suppliers; and most seriously, different quotations from
different vendors for addressing similar problem of an emerging enterprise,
often creates confusion in the decision maker's mind, while even external
consultants give biased solutions in their own interests.
Notwithstanding the pain points and the low rate of IT
adoption, the DQ-IDC survey also found that automation is gradually finding an
increasing band of takers amongst growing enterprises. The two biggest drivers
seem to be the belated realization that IT could help even these organizations
to improve their employee productivity and serve customers better. IT could also
help in more mundane business chores such as reducing inventory and building
better relations with partners/vendors thereby improving even company
bottomlines. Some of the growing enterprises have even started looking at IT as
a branding tool-it improves the company image, enables it to move with the
current trend and foresee future trends.
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Methodology |
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The DQ-IDC Survey on The survey was Out of the 413 |
Rajneesh De
rajneeshd@cybermedia.co.in
Graphix: Paras
Jain
Telecom
Infrastructure (Usage in Percentage)
Â
All
Manufacturing
Services
Education
IT Services/Software
BPO
BFSI
Base
413
168
97
30
43
33
42
DSL
69
70
67
73
77
70
61
PSTN
48
41
41
57
74
73
35
ISDN
50
49
43
21
65
70
55
Domestic leased line
42
39
41
24
49
52
57
V-Sat
13
8
12
14
14
30
19
International leased
line
12
8
6
3
21
52
5
WAN (wide area network)
28
34
18
3
35
44
26
Data centre (In-House)
26
20
23
11
40
50
38
Audio / Video/ Web
conferencing
19