The Hindu Business Line : Big window to the small guy

SMALL has suddenly become beautiful for the Indian IT industry. Until recently, IT customers were associated with only large corporates in India, which assured vendors of healthy topline as well as bottomline growth. In contrast, catering to smaller players was a game based on volumes, as ICICI Infotech's Head, Non-banking Products, S. Sriramane, points out.

(Not that the IT revolution was not happening there. The success of accounting packages such as Tally and the mushrooming of a number of Indian software products for accounting a few years back all owed their existence to small customers).

But today, there is a perceptible increase in interest in the small customer. "Small business is big business for IBM," declares R. Dhamodaran, Country Manager, Small & Medium Business, IBM India.

That is because large corporates have reached a kind of saturation point as far as IT-enablement goes, believes Sriramane. "Large corporates formed the low hanging fruit and in the process, what got missed out was the SME segment."

The SME sector is a sizeable market, forming 34 per cent of the total IT market in India. Today, it is increasingly open to investing in IT, as there is a growing recognition of IT as a productivity tool. There is a new emphasis on productivity improvement as competition creeps in from global players.

The late adoption of IT has its reasons. SMEs (described by IBM as those with less than 100 employees and by others as companies in the Rs 20-30 crore bracket) have traditionally been unable to afford IT solutions. Vendors too had no infrastructure to cater to the segment.

"The reach into the SME segment has remained limited, because of the lack of a direct presence of IT companies and/or channel partners in the area," says Wipro Infotech's Marketing Manager, Kiran Rao.

The segment continues to be price-sensitive, and vendors have started to draw up strategies that are unique to it. Solutions are distinctively differed. "There were no `value-for-money propositions' for the segment," says ICICI's Sriramane. The company is trying to make amends with its two products, an ERP package and a CRM package, specially for the SME segment priced "at very affordable rates," with minimum implementation time.

IBM, too, offers solutions that have been scaled to meet the needs of small businesses. Pricing is competitive for products and services, according to Dhamodaran. The company helps out small customers with competitively priced leases and financing help.

Riding on affordability

Affordability is the plank that Zenith Infotech, like its parent Zenith Computers, is riding on. The company has banking software solutions, but unlike the bigger players in this game, it has decided to go after the small cooperative and rural banks.

Zenith Infotech is telling these potential customers that they need to be on their guard against competition from private banks, which are moving towards the semi-urban and rural areas. The company is offering to cater to even single-branch banks and has made its product modular so that customers can pick and choose features that they can afford. With 65,000 rural lending institutions in the country, Zenith sees a huge market ahead.

Wipro Infotech recently put in place a two-tier distribution system to expand its reach into the SME segment and geographically into the B and C class cities. The company plans to focus on two verticals: manufacturing and finance. "The penetration of the Internet among Class B and C towns has increased over the last two years, providing greater access to the Web," says Kiran Rao.

ICICI Infotech has made all efforts to keep implementation time down to a minimum. Instead of the usual 12-18 month time-period, implementation is around 3-4 months. The company customises its ERP package for specific verticals such as sugar, textiles and pharma. Orion for the sugar industry, for instance, is 90 per cent ready for use and requires very little customisation for individual companies, which in turn means keeping implementation time low.

Zenith solutions for rural and cooperative banks take into consideration unique conditions such as the lack of a network or even a branch. The solution is not as high-tech (even Chief Executive OfficerSaraf promises only "50-60 per cent computerisation") as those for larger banks. In case branches are not networked, the solution provides for back-ups to be taken on CDs that are couriered to the main office at the end of the day. Zenith is also planning a mobile banking solution for areas that have no physical branches. It even has bank stations, a scaled-down version of the Zenith PC specifically for banking operations.

In early 2002, IBM launched an initiative for the Very Focussed Business (VFB) within the SMB space to cater to the non-metros and smaller towns. The company has also been tying up with partners in smaller towns and cities, training them and holding roadshows in these areas. "Very small business" in IBM parlance refers to those with less than 100 employees.

The company's `Point of Sales' terminals for the retail industry are also slowly being targeted at the unorganised retail market, which still forms 90 per cent of the total retail market. The segment is "slowly graduating to a prospective customer base," says Dhamodaran.

More effort, more rewards

Selling to SMEs comes with its set of problems. "Yes, the effort required to sell in this segment is relatively higher as they are fairly late adopters of IT," says Rao. Sriramane agrees that there is concept-selling to do but believes that ICICI's verticalisation strategy makes it easier to sell.

The company also depends heavily on word-of-mouth recommendations. News spreads fast within industries and its first sale of Orion to Chamundeshwari Sugars has generated two more orders, in addition to more enquiries.

Zenith has other problems to deal with. The cooperative banks segment is notorious in its resistance to technology for more reasons than one. Besides the affordability factor, a lot of them are prey to political pressures to block the transparency that could come with implementation of IT.

Zenith too is banking on the testimony route to sell its Banc724. Its biggest success story has been its sale to a cooperative bank in Nasik with four branches and four ATMs. The bank was looking at increasing the number of ATMs to 300, according to Saraf, something that was made possible only by technology.

Interestingly, while all the companies describe the SME segment as a "huge untapped market" and a "tremendous opportunity" for business, each one also sells a higher version of the solutions to larger customers.

Companies such as Sonata information Technology Ltd are offering IT consultancy within the domestic market to over 50 customers.

Even in the IT industry, there is a new interest in the small and medium players. Organisations such as the Welsh Development Agency, Eurofind and Dubai-based Interface LLC are all seeking out the SME IT companies in India to offer partnerships of various sorts with them.

Finally, there is the opinion that India cannot really be called a superpower unless IT permeates to the smallest of organisations.

The argument that exports cannot be sustained unless there is a strong domestic market is echoed now and then. This could be the beginning of a new movement.

Picture by Parth Sanyal

chitphad@thehindu.co.in

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