Technology adoption: A catalyst for MSMEs growth

We know that MSMEs play a vital role in most economies around the world – contributing a significant portion of the economy and employing most of the available workforce. In India too this is our reality – MSMEs contribute 45% of overall export as per msme.gov.in and 14.9 million people are being employed in the MSME sector per annum, according to a survey conducted by CII. As we look at the next few years of continued economic growth, a key pillar will be to see how MSMEs across India become more efficient and grow faster, directly helping the growth of the nation. In this article, we will look at seeing how technology can play a key role to achieve this objective.

In order to understand how technology can play a key role, we must first understand what the state of technology adoption amongst the Indian MSMEs is today. A recent survey was conducted by Tally and Kantar amongst 2250 MSMEs of different industry verticals across 34 cities in the country. The study revealed that 35% MSMEs has adopted business management software and among them more than 40% of the MSMEs already use digital banking and payment services with another 40% likely to adopt soon. However, less than 25% business management software users have adopted business applications like financial applications, customer relationship management applications, etc, but a strong 45% looking to adopt these in the near future. While the adoption of online services is relatively on the higher side, the adoption of applications that can greatly help improve business efficiency and effectiveness has been disappointing. If technology providers recognise the reality of the MSMEs that we serve, there is a strong possibility to increase the adoption rate of these applications.

In order to understand what it takes to build applications and even business models that can successfully serve the MSMEs of India, one must look at beyond just the business and look at the circumstances that surround the entrepreneur and the business.

The first observation is that MSMEs are typically seen as unorganised, or disorganised businesses by technology vendors and so business applications are architected to organise the business. But by going a little deeper, we will realise that most businesses are actually adaptive because of circumstance - they are under the pressures of the way of working of their customers and suppliers. By building technology to organise the business, many products and solutions ignore this reality, and this soon renders the solution unusable.

The second observation is the realisation that while MSMEs remain small, their buying behaviour mimics that of larger enterprises, especially when it comes to technology. This means that to a large extent, MSMEs will still expect sales and service of technology products at their offices or establishments, requiring an innovative sales and distribution strategy, and appropriate business model supporting the same. Digital distribution, and digital servicing has been on the rise, still however remains at a nascent stage for this sector.

Overall, MSMEs remain more enthusiastic about technology adoption than ever, and by keeping the above in mind, technology providers can be key players in helping MSMEs become more efficient and grow faster.

Tejas Goenka
Managing Director, Tally Solution