Indian SMBs remain wary of using Internet for business growth

by Sohini Bagchi    Apr 23, 2013

Internet gloomy

Today, every organization is looking for an online presence because the Internet has become the cheapest and the most effective medium to conduct business. Despite its potential, when it comes to the Indian SMB segment, the number of businesses using the Internet to expand their business is astonishingly disappointing. According to a recent report by Google, only half a million of India’s nearly 40 million small and medium business enterprises (SMBs) are leveraging the Internet to expand their business. This means that of the 40 million SMBs, only 500,000 use the Internet to boost their online business and connect to their customer base.

Karim Temsamani, Asia Pacific President, Google, believes that if Indian SMBs want to reach their consumers at the lowest cost and raise profitability, they should consider leveraging this medium effectively. He says that today, Internet is the most profitable medium for SMBs which involves low advertising costs and covers as many customers as possible in the geographies of their choice. For example, Google itself has supported over 200,000 small and mid-sized business entities realize their online potential with the help of their online advertising program Adword that allows enterprises to showcase advertisements to users who type in keywords related to the products or services it offers. However, this is still a very low number has to go up drastically if Indian SMBs are to realize the real benefit of Internet, believes Temsamani.

If Indian SMBs want to reach their consumers at the lowest cost and raise profitability, they should consider leveraging this medium effectively.
-Karim Temsamani, Asia Pacific President, Google

Poor broadband infrastructure

Experts have identified several barriers that dissuades SMBs from using this medium to expand their business and connect to their customers. According to Rishi Agarwal, Chief Executive Officer, Arvan Technologies lack of awareness around the benefits of how the Internet can help organizations expand thier business and doubts about the ROI often acts a barrier. Besides, lack of skilled labor and other resources hamper the adoption. Secondly, data privacy and security are becoming a major concern for SMBs, with increased online threats and also a concern that most customers are not accustomed to online payments in India.

There are also concerns over the reliability of infrastructure, namely broadband and connectivity. According to Lavanya Rastogi, President, Global Operations, OSSCube, poor broadband network in the country remains a concern in the Internet growth process. “For internet growth to accelerate, telecom operators must come up with high-speed internet networks and the government must extend the national broadband network,” he says.The Universal Broadband Service (USB), a government plan to ensure all citizens have access to Internet services should also be made available in India. Temsamani too notes in his report the lack of infrastructure that is hindering the online presence of this segment.

Since the basic infrastructure remains crippled, small businesses often prefer traditional medium to reach out to their customers.

Lack of local content

Another area of concern is the lack of local content, especially in the small business segment, says Google. “India being a country of diverse languages and dialects lacks representation of such languages on the Internet and this also restricts the growth of these businesses,” explains Temasami.

The report mentions that the Internet should be made available in variety of Indian languages with more content for SMBs and those emerging business that are present in rural and remote areas of the country. As a recent McKinsey report observes that unless the Internet is equally transmitted to smaller cities and rural areas, India’s GDP from the Internet economy will not see a significant growth. The report also predicts that even by 2015, with overall internet penetration likely to reach 28 per cent rural penetration is likely to be only 9 per cent.

According to Indian government data, Micro, Small and Medium Enterprises (MSMEs) accounts for about 45 per cent of the manufacturing output of the country and 40 per cent of the total exports. The sector is estimated to employ about 69 million people in over 26 million units across India, which offers more than 6,000 products ranging from traditional to hi-tech items. Temasami observes that as more businesses in Asian economies like India, China, Indonesia, Malaysia, etc are smaller in size compared to the Western economies and they are driving the change faster than the big companies, if Internet can be leveraged in a strategic and more effective way, these entities can witness huge profitability and growth and can be at par with their global counterparts.

For internet growth to accelerate, telecom operators must come up with high-speed internet networks and the government must extend the national broadband network
-Lavanya Rastogi, President, Global Operations, OSSCube

Mobile to boost Internet

One area where Indian SMBs should concentrate and which can provide a greater business advantage is Mobile. Temsamani states that low investment on mobile technology or platforms is also limiting the growth of SMBs from expanding thier business. “Today an increasing number of consumers are using mobile devices. For SMBs leveraging on these devices have will provide you a great business advantage,” he says.

As the McKinsey report notes, by 2015, nearly 75 per cent of the Internet population will mostly access the Internet on their mobile devices, such as feature phones, smartphones and tablet computers. Agarwal is optimistic. According to him, mobile devices and technologies will drive the growth and adoption of Internet. He believes that the increase of low cost mobile phones and tablet PCs in the market will enable more SMBs to enhance their presence online in the coming months.

Rastogi emphasized on creating an ecosystem consisting of multiple stakeholders including the government, service providers, SMBs and industry bodies who can encourage small and medium segment to increase their business opportunities with the help of the Internet. “Cloud, social and mobile are the key technologies that can encourage SMBs to take the Internet route to boost business growth. The market should have also affordable Web-based technology solutions as well as credits or easy financing options through government support to encourage online usage,” he says.

There should be a focus on campaigns that makes the SMBs aware on the ROI of the Internet for expanding thier business. At the same time SMBs should be trained on and to apply newer technologies such as cloud, social and mobile to reach out to thier customer base.