SMBs In Smaller Cities To Spend More On IT

by CXOtoday News Desk    Jan 03, 2014

small town

Indian SMBs are increasingly their IT spends, especially in the tier II and III cities in the next few years, where they see increased sales and profit. According to a new study by AMI-Partners, “India SMB City Opportunity Analysis – an IT-based Forecast Model,” SMBs in Tier II and III cities are likely to spend US$9 billion on IT by 2017. The study states that these entities will invest in various areas of IT including Server, Storage, Software and cloud based services.

According to Subrata Sarkar, Senior Analyst at AMI-Partners, as economic and investment policies continue to boom, the Tier I cities are the ones that are primarily inundated with the burgeoning investments in the industrial and services sector. However, in the process, the overall infrastructure in the metros also compelled respective governments and many companies to seek out alternative smaller cities for their future investments.

At present, SMBs in Tier II and III cities account for 26%, a little more than one fifth of their overall IT Investments. This study also notes an increase by approximately two-three percentage points within the next five years.

As second tier cities will contribute a bigger slice to the IT market pie in next few years, it is only natural and essential for IT vendors to plan for entry into other nascent cities in India. The sooner ICT vendors realize this and act; the better will be their prospects going forward.
-Subrata Sarkar, Senior Analyst at AMI-Partners

Sarkar sees second-tier cities such as Kochi, Trivandrum, Nagpur, Vadodara, Vizag among others form the next rung behind eight metrossuch as Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Ahmadabad and Pune, and are anticipated to ride the growth wave in areas such as formation of new businesses and expansion of current businesses. Consequently, it is predicted that the IT investments by SMBs within these cities will also intensify.

He also reveals that SMBs in smaller cities exhibit a substantially higher growth-rate in terms of their IT spending compared to their compatriots in Tier-I cities. Therefore, they are likely to be the future growth-engines of SMB – in terms of IT spending.

In addition to investments in basic IT infrastructure, SMBs in smaller cities are anticipated to leverage advanced technologies which AMI-Partners call the Wave II & III technologies. While they increase in areas such as storage and server, there will be an increased uptake in the adoption of cloud-based services in the coming years, says Sarkar.


[Read: Cloud adoption among Indian SMBs to increase]