Understanding and Overcoming Barriers to Technology Adoption among India’s Micro, Small and Medium Enterprises
Small and Medium Enterprises (SMEs) in India have seen exponential growth over the last decade. According to the latest reports by the SMB Chamber of Commerce and the Ministry of Micro, Small and Medium Enterprises, India currently has more than 48 million SMEs. These SMEs contribute more than 45% of India’s industrial output, 40% of the country’s total exports and create 1.3 million jobs every year2. Yet, these SMEs continue to struggle on multiple accounts.
Indian SMEs have grown at a stable pace of 4.5% in the last 5 years. According to the latest Annual Report3 issued by the Ministry of Micro, Small and Medium Enterprises, there are over 6,000 products, ranging from traditional to high-tech, which are being manufactured by the MSME sector for domestic as well as international markets.
According to Economic Survey, Indian SMEs employ close to 40% of India’s workforce1. After the agriculture sector, SMEs rank second in fostering employment opportunities. Over 4 Lakh jobs were generated in the SME sector during year.
Unavailability of Modern Affordable Technology
In an increasingly complex and competitive economic landscape, the need to align people, processes and technology is stronger than ever. Latest technology can help enterprises reduce cost and time taken to innovate and offer sophisticated products and services. This helps SMEs differentiate from peers, optimize cost structures and most importantly compete on a global level with other corporate giants.
However, SMEs in India face multiple struggles on account of accessing and using the latest technological advancements. While knowledge, access and funds continue to hamper implementation of technology, absence of an ecosystem that enables technology transfer and interaction with experts is a critical reason of limited adoption.
Lack of Basic Infrastructure Facilities
Adequate and modern technology infrastructure powers the steady growth of SMEs. The absence of proper infrastructure cause serious problems to an enterprise’s daily business operations of manufacturing, consumption, and distribution of goods and services. The lack of proper infrastructure affects businesses at every level and ends up being a deterrent to healthy growth.
Access to Modern Affordable Technology
SMEs have a unique problem to solve – while they are required to adhere to global standards and ensure compliance to regulations, they mostly have limited understanding (and budgets) for technology. This surely needs to change and Indian SMEs need to evolve to be aggressive users of technology. From being an enabler of productivity and quality, technology must be used for transformation and as a key influencer of competitive advantage.
Cost is the top barrier: Micro and small businesses are not yet convinced about the return on investment in technology adoption. Demonstrating the value add for the business is critical and should be done using cost–benefit analyses and simple comparisons of growth between traditional operations versus IT-based approaches.
Timing is important: Moderate tech adopters tended to embrace technology either in beginning stages of forming a company or when starting to expand. Supporting organisations must “meet the business at its comfort level” – that is, when and where they are mentally and financially open to adopting and investing in technology.
Technology adoption must be easier, more affordable, and implemented from a local perspective: Just less than 40% of moderate tech adopters went forward with IT plans because a credit or upgrade made the implementation affordable. Affordable solutions such as easy instalments, credit options, and pay-as-you-go options can provide sustainable solutions toward addressing cost concerns. Additionally, software should be easy to use and offered in local languages to breakdown the perceived complexity of IT.
Provide long-term support: It is essential to offer sustained IT support that meets the needs of the end-user, from a variety of sources including in-person support. Coupling these with user-friendly solutions and baseline IT training will go a long way in helping small business overcome the hurdles to technology adoption.
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