News Analysis

AMI: SMBs to invest $7.7 billion

SMBs will spend 26 percent more this year on IT says an AMI-Partners report

Small and Medium Businesses (SMBs) across the Indian subcontinent are set to spend $7.7 billion to beef up their infotech infrastructure and solutions, up 26 percent over last year. A third of all SMBs in India say they anticipate about a 20 percent increase in their annual revenues and will therefore boost their IT spending, according to the latest study carried out by New York-based AMI-Partners.

“Increased competition and the challenges brought forth by globalisation are forcing medium businesses to fine-tune their IT implementation,” says Partha Sarathi Sengupta, Research Analyst at AMI-Partners. “The majority of Indian MBs are in the second wave of IT adoption, though several progressive ones have already moved into the third wave and are competing with large businesses in terms of IT usage.”

The Indian economy flourished in 2005, posting a growth rate of nearly 8 percent. Growth in the tourism and financial sectors, and strong performance in manufacturing, have given a big push to the Indian economy, making it the second-fastest growing economy in the world.

Need to connect

Networking has emerged as the primary focus area among India’s MBs. As the Indian economy surges ahead, businesses are anticipating strong hiring over the next year, and are planning to open new branch offices. These factors automatically create a need to effectively connect with branches and remote locations, thus enhancing the importance of networking. Storage is also a promising sector, and expenditure on it is expected to grow 44 percent this year. “The growing volume of data and data security are two influential factors in determining storage needs in this business segment,” observes Sengupta.

SB market potential

The Indian SB market comprises approximately 7.5 million businesses of which 21 percent currently utilise PCs. “The market has tremendous growth potential as a large section is still untapped,” Sengupta points out. The AMI study shows that 40 percent of non-PC SBs are planning to purchase 1.4 desktops on an average next year, allocating a future planned hardware budget of over $570 per business. Being price-conscious, the SB PC market is currently dominated by assembled PCs. Computer manufacturers are attempting to introduce cheaper devices in the market leading to stiffer competition. Adoption of computers, use of software and updating of Web sites has enabled SBs to strengthen their position. “Indian SBs’ IT adoption has been delayed because they earlier viewed IT as a support tool for business functions rather than as a growth driver,” observes Sengupta.

However, the growing complexity of business has changed their outlook. Now SBs are increasingly viewing IT as an essential strategic tool for their business instead of just another technology investment.

[Highlights from AMI’s 2005-2006 India Small Business Market Overview and Comprehensive Market Opportunity Assessment and 2005-2006 India Medium Business Market Overview and Comprehensive Market Opportunity Assessment Studies. Analyst: Partha Sarathi Sengupta.]