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Indian SME Sector – Key Trends to Watch Out For

Indian SME Sector - Key Trends to Watch Out For

SMEs are the backbone of the Indian economy. As of 2013, SMEs collectively employed at least 42 million people in India. They are not only helping in growing more employment opportunities but also substantially growing Indian economy. The contribution of individual SMEs may seem small but collectively they have emerged as powerful players in the growth of the Indian economy. As the SMEs continue to grow, here are three key trends that are likely to have a strong impact on the growth of the Indian SME Sector in the coming years.

  1. Availability of Financial Credit
  2. Impact of Ecommerce
  3. Job Creation

Financial Credit to SMEs

The financial institutions are focusing on making loans available to SMEs required for their growth. Let’s talk about some of them:

  • SIDBI is one of the financial sectors whose vision is to meet financial and developmental needs of SME sector to make it more dynamic and effective.
  • On the other hand, the private financial institutions are also slowly and steadily showing faith towards SMEs and are coming up with new financing schemes. The best example would be EXIM Bank of India expects to do around 2,000-crore SME refinancing in 2013-14 (April-March), compared with 685 crore last year.
  • ICICI bank is also offering several schemes for SMEs and empowering them to make their business more profitable and efficient by utilizing their existing resources.

Impact of e-Commerce

E-Commerce platforms can help SMEs reach a pan-Indian customer base. Their products can be showcased without the need to invest highly in any distribution networks. Studies show that SMEs that have incorporated e-commerce as part of their sales model, are seeing higher revenues.

KPMG has collected the following facts from various sources that proves that e-commerce players are also focusing on SME growth. The e-commerce players are helping SMEs across Indian states connect to a larger and global audience.

  • A study by market research firm KPMG and Snapdeal, an Indian e-commerce entity claims that e-commerce sector in India is projected to cross $80 billion by 2020.
  • The study finds 85% of SMEs already using e-commerce believe it is a cost-effective channel for sales growth.
  • It also claimed that SMEs actively practicing e-commerce benefit from 51% higher revenues and 49% more profit.
  • They also have a 7% broader consumer base than SMEs who are still offline.

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SMEs Creating Jobs

SME sector’s ability to create jobs, especially in the rural sectors, is a key positive trend for the Indian SMEs who are estimated to add over 1.3 million jobs per year. The SMEs are contributing to an impressive manufacturing (18% YOY) and service (34% YOY) sector growth rate.

Conclusion
SME sector is expected to contribute towards GDP growth by adding more jobs and augment industrialization in rural India helping create a balanced socio-economic growth for Indians. It will be interesting to see its growth in the next 5 years.

What Services Should a SME Outsource?

SME Outsource Services

A small and growing organization can only do as much. To be able to focus on business growth and stability, it is essential for the SMEs to outsource some of their business operations. Here is a list of some of the key IT operations that an SME can consider outsourcing.

ERP and Infrastructure: As businesses grow, they need processes and robust platforms to support their growth. This also means a huge investment in hardware and resources to manage this. Outsourcing this means a huge saving on expensive hardware configurations. Outsourcing implementation of ERP softwares like SAP Business One also means that small businesses get a dedicated team of experts to manage their systems seamlessly. All your processes and systems are kept up and running, while you focus on your critical business goals.

Payroll: Now this is a very tricky piece. As the company expands, there are tons of statutory compliances and taxation norms that you need to take care of. How do you ensure that you file all your computations correctly and on time? Simply, outsource it! There are multiple companies that provide complete payroll solutions and can become your extended arm to keep your performances sorted.

Customer Support: As SMEs continue to gain more customers, it becomes increasingly important to keep all of them happy. Setting up an in-house team can become quite a task in terms of time and money. How about giving it out to a service center that is available 24X7 for your customers?

Cloud Hosting:  While cloud computing is a cost effective technology when it comes to use, setting it up can cost a fortune. Hosting a cloud system internally also poses data security risks. Outsourcing cloud services means that you get to enjoy all the benefits of cloud (anywhere, anytime, any device access) in almost one third (or lower) the cost!

Outsourcing these services have some clear benefits for the SMEs:

Cost Effective: You save money. Period.

Better Expertise: When things are run by experts, you get better quality and experienced supervision.

Flexibility: There are no fixed / permanent costs. You can expand or reduce your outsourcing services according to business requirements.

Focus in Priorities: No more operational distractions. You can focus in what’s important for you!

What other services can a SME outsource? Share your thoughts with us!

What can SMEs expect from the Budget 2016-17

budget-infographic

Some enabling initiatives are on the cards, in sync with the Make in India program. Here’s a quick dekko at what the small businesses can expect in this Union Budget.

In a recent post (The New Age SMBs In India Are Ready To Embrace Technologywe had mentioned that the SME industry in India is a very interesting case. The industry employs a major chunk of the total workforce in India (40%), and yet its contribution to the Indian GDP is meagre (17%). With programs like India Aspiration Fund and Make In India, it would be exciting to see how the SME industry shapes up in the coming years. There is a lot of speculation about what would be allocated to the SMEs in the Union Budget to be announced later this month.

Here is our list of what SMEs can expect:

  • Investment towards skill growth: Increased monetary incentives are likely to be given under the Skill India program. This would help small scale businesses to give required trainings to their workforce.
  • More power to technology: A large chunk of capital is likely to be infused into the Technology Acquisition and Development Fund (TADF) to enable SMEs to acquire relevant technologies and support mechanisms.
  • Loan Reimbursements: The Cabinet has already approved a whopping 3,000-crore Mudra Credit Guarantee Fund (CGF). This aims to support small enterprises reeling under loans ranging between 50,000 to 10-lakh.
  • Job Creation: With the SMEs already employing a large chunk of the workforce, greater focus is likely to be given to technology start-ups and traditional businesses, as employment generators.