Indian SMBs to invest US$1.2B in the Net

Small and midsize businesses (SMBs) in India will spend US$1.2 billion to beef up their Internet infrastructures and enhance their Internet access, according a new AMI-Partners study.

In its latest report, the research house said that compared to 2006, online spending will jump 33 percent to reach US$300 million this year, of which India's small businesses--defined as having fewer than 100 employees--will account for the lion's share of the investment.

The top priority of Indian SMBs is to build a basic Internet connectivity infrastructure that would serve as a backbone for future adoption of advanced technologies like virtual private networks, especially for larger medium-sized businesses, said AMI-Partners.

"Currently, almost two-thirds of India's PC-owning small businesses are connected to the Internet, whereas [medium-sized] businesses have already reached near saturation in terms of Internet adoption," said Kalyan Banga, a Kolkata-based analyst at AMI-Partners.

However, there is still a "substantial" gap in the adoption of more advanced Internet technologies--including e-commerce, e-purchase and intranet--that needs to bridged, Banga said.

According to the study, Indian SMBs are starting to view the Internet as an "intrinsic part of their overall business operations", instead of just another technology for facilitating business transactions. More than 60 percent of Internet-related spending by SMBs will be on Internet access technologies, and investments on Internet access are poised to grow 21 percent this year.

The research house noted that while more than 90 percent of midsize businesses consider broadband usage a priority, nearly 70 percent of small businesses indicated that deploying broadband access or enhancing broadband Internet speed is a "vital strategic focus area" in the next 12 months.

DSL (Digital Subscriber Line) technology is currently used by more than 45 percent of SMBs connected to the Internet, and this figure is expected to increase by nearly 10 percent this year, the study found.

"A significant factor driving DSL installations is the introduction of the Data One broadband service by BSNL, which has played a pivotal role in popularizing broadband usage within the SMB segment and making it more affordable," said Banga.

According to AMI-Partners, Indian SMBs are realizing the benefits of Web sites, and they are expected to increase their spending in this area. Ownership of Web sites is forecast to rise by 60 percent in 2007.