Digital enablement for small businesses offers an $11.6 billion opportunity for technology vendors
Bengaluru: With digital technology in the reach of small businesses, Indian tech start-ups, which traditionally had clients only in the US and Europe, are looking to sell more to small and medium businesses (SMBs) in India.
Pay-as-you-go models have become popular as a result of the explosion of cloud-based software-as-a-service products. These help small businesses use technology at prices they can now afford.
The small and medium enterprise sector, which consists of about 51 million businesses, accounts for 38% of India’s manufacturing output and 40% of its workforce as of 2012-13, but its adoption of technology has been low compared with other countries, according to a 2014 Ernst & Young report that quotes government data.
Digital enablement for SMBs presents a $11.6 billion opportunity for technology vendors, according to advisory firm Zinnov.
“We have just begun to focus on the small business space in India. I think in general we’ve all discounted India as a market for software products, but given the consumerisation of software, given the proliferation of smartphones, I think we are going to see the adoption of micro businesses in India and a very fertile ground for new software services companies to be created," said Alok Goyal partner at VC firm Helion Ventures, which has invested in companies such as Ezetap that lets anyone with a phone accept credit or debit card payments.
For instance, HapPay has come up with a way to help small businesses monitor their employees’ spending in real time. The prepaid corporate expense card developed by the expense management start-up helps employees record expenses on a mobile app linked to it while the company controls the amount of money permitted on each card.
“Enterprises have ERP systems that are expensive but small businesses didn’t have many options that catered to them, so we decided to launch this," said Anshul Rai, co-founder of HapPay.
Hyderabad-based start-up Nowfloats lets businesses boost their online visibility by helping them improve websites that adhere to the principles of search engine optimization (SEO), in as little as under an hour.
Small businesses in the retail, services, education and even manufacturing sector to a certain extent are seeing a shift towards technology-enablement. Out of 12 million SMBs which use technology heavily, 19% are in professional services, 18% in retail and 14% in manufacturing, Zinnov estimated.
It’s not just the tech start-ups that are giving more attention to small businesses.
Snapdeal, India’s second largest e-commerce firm, recently launched a commission-free marketplace app called Shopo that offers products from small and medium businesses (SMBs) that want to sell stuff online. Non-banking finance companies such as Capital First and Capital Float and lending start-ups such as LendingKart.Ltd are partnering with Indian online goliaths such as Flipkart and Snapdealto offer small sellers loans easily.
Paytm recently announced a $100 million investment in merchant support activities and a portal, GoBig, which lists Paytm partners, that can help small sellers increase sales and scale up.
“To sell online, traditional offline sellers need a lot of support like catalogue creation, online store management, website design. Our GoBig platform allows potential marketplace sellers to search for such service partners," said Renu Satti, vice- president, SME business and operations, Paytm.
Second- or third- generation entrepreneurs and businessmen who are setting up their operations today, are more tech-savvy than the earlier generations.
“I was fascinated by the success of e-commerce start-ups and am a keen follower of news about payment bank concept. Came to know about Mowa (mobite payment app) from Google play store," said Rahul Ghule, a small businessman from Pune who runs a 40-employee jaggery making unit, SwadVed Agro.
Ghule uses the app offered by mobile payment start-up iKaaz to send money to farmers from whom he procured sugarcane— directly on their mobiles—cutting down administrative costs.
“The playing field has now become level, there is more competition and more focus on customer service now in these (real estate, professional services, education) sectors. There is a renewed focus on ways in which they could use technology for their customer service," said Ambarish Gupta, chief executive officer of Knowlarity, a cloud-based telephone service start-up that counts about 12,000 small businesses as its clients.
“This has made them less averse to using technology like Knowlarity’s, which is cost-effective, but also helps them give an edge over their competition."