The Hindu Business Line : Software upgrades tough on SMEs

WHEN it comes to human resources, the IT industry seems to have a clear-cut food chain, with most employees in SMEs eventually gravitating to the bigger firms.

As an offshoot of this problem, some SME entrepreneurs complain that their companies become nothing more than training centres, which means that they find themselves spending a lot of money on upgrading software capabilities that are not really required in their business.

Mr K.S. Sudhakar, CEO of SwathiSoft, a company that offers software solutions for knowledge management, sales management, and training, said that he faced this problem.

"I just had to upgrade to Flash 8, because my employees demanded it for their own development. In this way, I have to keep updating my software because they do not want to be technologically backward. And while it does add value, my customers don't really need those value adds right away."

The cost of such upgrades is no joke - Flash 8, for example, costs Rs 20,000 a seat, and Mr Sudhakar has acquired five licences.

He said that there are three different tools in use at the office, and approximately three upgrades are required each year. Assuming that each upgrade for each tool costs him the same amount per licence, he ends up shelling out Rs 9 lakh a year.

In a year of unexpected decline in revenues, that could spell disaster. And that's not all. "There is also the cost of training and the time that employees take to learn this new software," time that could have been well spent on developing software using current tools.

Catch-22 situation

This puts the entrepreneur in a Catch-22 situation. If he does not constantly upgrade, the employees are left unhappy, and as and when the employees are trained in the upgraded versions, they become more attractive to bigger firms.

Opting for open source software saves firms some trouble. Mr S. Prashanth, CEO and MD of Akmin Technologies, said that as his company works almost exclusively on open source software (in which case, most software is inexpensive or is available for free download on the Net), he did not face the problem to the same extent.

However, when the problem does come up, he asks his employees to analyse exactly why the tool is required, and in what way it adds value to the customer. He said that sometimes employees say that they don't actually need those features.

Niche market attraction

Being in an acutely niche market may also help stem the exit of employees. Mr Venky Baboo, Managing Director of Mayabimbham Media, which is in the 3D animation business, said: "Software used for 3D animation are few in number. Every 6-12 months a new version comes up on the market. We have to upgrade or purchase new versions for taking up projects from abroad. Clients specifically ask for the use of the latest available software."

The cost ranges from Rs 1 lakh to - Rs 5 lakh per system licence. The upgrade would cost from Rs 70,000 to Rs 1 lakh.

His employees don't leave in hordes to bigger competitors since "ours is a pioneering effort, involved in the production of the first 3D animated feature film in Tamil. We encourage an employee to think of himself as a creator, and not as one among thousands in a company."

Finally, the need to know more, for employees, seems restricted to their own narrow line of work. For instance, there is a chance that Mr T. Chandramohan, Director of BharatPlanet Consulting, might be happy doling out a few bucks more for new software if only some employees of his show an eagerness to know what is going on beyond the world of J2EE or C++.

"Recently, I asked an employee for an update on something I had wanted. He told me that his Outlook wasn't working and that he was waiting for the system administrator to fix it."

Stunned, Mr Chandramohan asked him why the employee himself, who was equally qualified, did not attempt to fix it. "After all, I expect all geeks to fiddle around with hardware and software. That is passion. In this case, all I got back was a vacant stare."

Are you a CEO of an SME? Have a grouse? Write to us at eworld@thehindu.co.in.