What M'sian SMBs should emulate

A couple of weeks ago, ZDNet Asia released its SMB Handbook, a special report aimed at helping small and midsized businesses (SMBs) think through some of the recent technology issues and challenges facing the industry.

It was an informative guide touching on topics such as SMBs and cloud computing, SMBs and social media, and SMBs and IT security.

But what caught my eye really was the lead story originating from India on how technology was used to help an SMB there to not only grow its business, but also how it could benefit the entire manufacturing value, thereby, giving a better livelihood to all people in that chain.

The story tells of how Jaipur Rugs Company implemented an enterprise resource planning (ERP) system in 2007 and grew its revenue by over two-and-a-half times from US$5.5 million (INR 250 million) to US$14.3 million (INR 650 million) in 2010. The company also ramped up its manufacturing capacity from about 20,000 carpets a year in 2006 to nearly 100,000 carpets and rugs last year.

Two things struck me when reading this story. First was how lives of people further down the manufacturing chain are improved through the implementation of technology. According to the story, carpet-weaving traditionally took place through contractors. Unfortunately, the weavers were invariably exploited at the hands of contractors who gave them measly wages in return for highly-skilled labor.

Jaipur did away with the middlemen by establishing a direct link between the company and its weavers. This way, it created a unique business model wherein the company now engages 40,000 independent weavers located across India, mostly in remote villages. None of these artisans are on the company's payroll but are provided with training and professional help.

Second, technology was used to organize an industry that depends on a supply chain that is large and complex. Sourcing of raw materials required Jaipur to import from countries all over the world. In all, there are 85 processes involved from procurement to marketing of the carpets.

All in all, Jaipur Rugs spent US$110,314 (INR 5 million) to deploy Microsoft Dynamics Navision with 100 user licenses. The ERP system integrates functions such as finance, manufacturing, distribution, CRM and e-commerce data.

"Life has become much easier after the ERP implementation," said Yogesh Chaudhary, director of Jaipur Rugs, and 24-year-old son of Jaipur's founder. Noting that the application provides real-time information and is linked with several Web sites, Yogesh said the system gives them the status on various job orders. It has 20 to 25 live Web sites where these updates are put up and this provides customers live information on the progress of their carpets."

In my previous post, I argued that this was the decade for the SMB to embrace technology and move up the value chain. This story is one good example of how an SMB has not only successfully implemented technology to increase revenues, productivity and efficiency, but also improved the livelihood of people in the manufacturing chain.

It would do well for SMBs in Malaysia to take note of how this could be done and the benefits that can be derived therein. True, it cost Jaipur quite a fair bit of money upfront to invest in an ERP system but the company, led by the founder's young and IT-savvy son, must have seen it as an investment for the long-run.

He kept his eye on the ball and focused on the total cost of ownership rather than upfront investment cost per se, something that SMBs in Malaysia need to realize when dealing with IT and associated technologies.

That said, I believe the future bodes well for many local SMBs as many of them, traditionally run by family patriarchs, are also turning in their reins to the younger generation to run their companies, like how Jaipur is doing with Yogesh.

These young people not only have a well-rounded education and the appreciation of what technology can do, they also have the drive to take their businesses to the next level.

Though Malaysia has its own challenges, the country--unlike India--has far fewer people and geographical land mass to deal with. For example, the story did highlight that one of Jaipur's challenges was establishing connectivity in rural villages for it to communicate with, something the Malaysia is not so hard-pressed to do.

Malaysia is blessed in that reaching the rural is not as tough as a country like India. Thus, it should capitalize on all it has to offer--its natural resources, its modern and fairly up-to-date IT infrastructure, its multilingual and skilled workforce--to its advantage.

Hopefully, by doing so, technology can truly help realize the promises that Malaysian SMBs have to offer and be able take them to the next level--regional and on the world stage.