India SMB manufacturers to spend $3.7B on IT

Country's small and midsize manufacturing businesses will spend mostly on computing products in 2009, says AMI-Partners.
Written by Sol E. Solomon, Contributor

Small and midsize businesses (SMBs) in India's manufacturing sector will spend up to US$3.7 billion on IT infrastructure this year, according to a report by AMI-Partners.

The predominant IT spenders among them will be the medium businesses (MB), defined as companies with 100 to 999 staff, noted the report released Friday. AMI-Partners added that a typical Indian MB outspends its small business (SB) counterpart, which employs up to 99 staff, by a factor of 12.

Abhilash D.B., an analyst at the research company, said in the report that manufacturing SMBs in India operate in lean environments with limited resources and IT personnel.

Key drivers escalating their investment in IT infrastructure include increased competition, customer demand for high-quality products with reduced lead time, and the need to integrate different business functions, Abhilash said. As the majority of India's manufacturing SMBs have suppliers that are larger manufacturing companies, they are oriented to work within the specified standards of those larger firms, he added.

The competitive environment has forced many manufacturing companies to upgrade and revamp their basic IT infrastructure, making computing products an area this industry segment spends most on. Internet products make up the next most popular expenditure because manufacturing companies need to establish real-time connectivity with business partners, Abhilash said.

"There is still a significant scope of increasing Internet penetration within SBs, in particular, about one-quarter of PC-owning SBs have yet to deploy Internet access," he said. "This is mainly due to lack of Internet and broadband options, particularly for remote areas."

This provides Internet service providers a "golden opportunity to supply to this latent market", the analyst added.

According to the AMI-Partners report, various independent software vendor are entering the SMB manufacturing space with software-as-a-service (SaaS) offerings such as applications for managing accounting and payroll, materials movement and processing, logistics and order management.

"Increased broadband adoption will lead to a boost in the adoption of these types of on-demand solutions," the report said.

Last month, India's National Association of Software and Services Companies (Nasscom), said local SMBs can benefit from cloud computing, a platform that is projected to provide computing to the country's next billion IT users.

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