Author's Picture Issue: India 2008
Article no.: 3
Topic: ICT and the Indian SME
Author: Bikky Khosla
Title: CEO
Organisation: Infocom Network Ltd
PDF size: 222KB

About author

Bikky Khosla is the CEO of Infocom Network Ltd. Mr Khosla began his career as an exporter. Based upon this experience, he created Tradeindia. India’s largest online B2B e-marketplace. Tradeindia provides Indian export-import sector, comprising mostly of Small and Medium Enterprises (SMEs), with easy access to international trade related information through its database of buyers, sellers, price quotations etc. Mr Khosla is the Chairman of ASSOCHAM SME Expert Committee and is a member of ASSOCHAM’s Planning Commission Working Group for the 11th Five Year Plan (2007-2012) for Micro & Small Scale Enterprises and Agro & Rural Industries.

Article abstract

The role of Information and Communications Technology (ICT) in India’s growth is widely known. Nevertheless, the majority of India’s smaller companies do not use ICT for more than basic accounting, inventory control and administrative systems. They have little appreciation for what ICT can do to make their operations and their product marketing more effective. Many of these firms have little contact with how ICT has been used by other companies, little capital to invest and few, if any, workers with the needed ICT skills.

Full Article

ICT will play a crucial role in the industrial restructuring and interlinking of Indian firms across the entire value chain. ICT is the single most important prerequisite to facilitating the integration of global supply chains and enhancing a company’s competitiveness. True, ICT has often had a disruptive impact on India’s companies but today ICT provides anywhere, anytime access to enterprise information by creating an easy to deploy, scalable, cost-effective, common information infrastructure. ICT not only provides rapid and effective communication at all levels for individuals, business and government, but also serves as the infrastructure for commercial transactions. ICT provides tools for efficient and effective business. Many studies by international institutions confirm that ICT is a major driving force in a nation’s economy. Despite the marginal slowdown and slump in the ICT sector, its economic benefits have by no means eroded. ICT is increasingly used to improve the performance of business sectors throughout the world; it is an important driver of modern development and the foundation of the ‘global village’. ICT, the digital convergence of telecommunication, computing and broadcasting – reaches into almost all aspects of our lives, both personally and professionally. However, the telecommunication infrastructure plays an important role in determining the success of ICT in that particular nation. ICT provides companies with quick access to information and applications that builds their productivity. These same tools are being increasingly used for personal information processing by people of all sorts around the world. A recent study claims the global market for ICT will exceed US$3.7 trillion this year and touch US$4 trillion by 2011. Today the top ten countries in terms of ICT spending are the United States, Japan, China, Germany, the United Kingdom, France, Italy, Brazil, Canada and Spain. China’s spending is accelerating rapidly; it jumped to third place from fifth place in 2006, spending of US$ 327 billion to surpass Germany and the United Kingdom. ICT – an Indian perspective It is an irony of sorts that, despite India being a global information technology hub, the current scenario of ICT adoption is not encouraging. India has witnessed the rapid technological growth of its information and communication technology-based sectors. Although in recent years this has led to widespread adoption of ICT products and services in many industry sectors, India Inc’s still lags in global competitiveness. This is partly due to the slow incorporation of ICT in the day-to-day processes and management practices of a great many businesses. Indian industries have begun to adopt ICT tools and technologies to improve their operational efficiency and productivity. Though many firms understand the need and value of adopting ICTs, they are faced with a variety of difficulties to do so, and this has hampered the growth of ICT penetration in India. The slow growth of Indian ICT usage has, to some extent, limited the country’s competitive growth. Key challenges to adoption of ICT by Indian firms include: Limited exposure to ICT – India’s National Manufacturing Competitiveness Council recently stated that, despite the clear business case in favour of adopting integrated enterprise-wide ICT applications in the manufacturing sector, the use of ICT in most organizations is still limited to specific functions like inventory control, external communication, etc. A majority of the micro, small and medium manufacturing enterprises are just beginning to adopt ICT. They are not aware of how ICT can enhance business performance, so they still use it mostly for office administration and accounting. Then too, most smaller enterprises have not been able to adopt ICT on a greater scale due to the costs involved in such a radical change to their businesses. So many of India’s industries are based in geographically isolated regions, so they have little exposure to the sweeping changes and benefits that ICT is bringing to other business and industries. Low exposure to ICT remains one of the critical challenges in Indian industry. Less IT spending – Many firms are unsure of the benefits of ICT and thus spend little to increase its presence in their operations. Smaller enterprises often do not have the resources to invest in ICT or to go global, nor do they appreciate the value of investing in ICT. These firms, quite often, do not view ICT as a tool to enhance productivity, competitiveness and growth; this discourages firms from investing in ICT and restricts its use to basic communications and data processing. Lack of skill – Due to these firms’ concerns about spending on ITC, they distance themselves from IT training and education and lose the benefits it can bring in terms of increased performance in the market, increased earnings and greater operational and financial transparency. Despite the Internet’s ability to make detailed and timely knowledge readily available to all, the acquisition of IT skill sets is still the basic challenge organizations face in adopting ICT. Indian firms need to develop action plans to improve their ICT skill sets and increase the level of ICT in their business processes to enhance their production systems, strengthen their interaction and coordination with local partners and effectively put into practice the firm’s commitment to transparency. System development – Effective ICT systems go a long way to helping companies, for example, to adapt to changes in multilateral trading systems, to reviewing internal business processes to increase competitiveness, to respond rapidly to changes in product demand and the like, etc. The use of ICT can make it possible – indeed, at times necessary – to develop strategic alliances including exchange and management of information based on a fast and accurate medium. Firms that do not use ICT in their operations lack the information, the vision and ability to respond rapidly to changing conditions in the market. The adoption of ICT by developing specialised tailor-made IT systems, however, invariably requires the support of hardware and software application vendors, IT service providers for maintenance and trouble shooting, IT infrastructure, perhaps data centres, ISPs and technical training for the staff. ICT in India The government has a vital role to play creating awareness about ICT applications amongst Indian firms, above all in mirco, small, and medium enterprises (MSMEs). The National Manufacturing Competitiveness Council of India has recommended that the government focus on encouraging the implementation of a planned model for ICT adoption by the Indian manufacturing sector. In its recent National Strategy for Manufacturing the council rightly noted that in many countries government and industry associations have played a vital role in ICT adoption amongst the industries. Proper adoption of ICT requires knowledge transfer efforts and the implementation of a common ICT infrastructure for the development of specific programmes for industry clusters. To compete successfully in today’s dynamically changing environment, manufacturing firms need to address several strategic issues. ICT has been fundamentally changing, even disrupting, the way organizations conduct their business and compete in the market place. ICT can significantly improve the productivity of the manufacturing sector. To improve business activities, the role of ICT in the manufacturing sector, and the business challenges faced by specific industry sectors, need to be evaluated so they can be addressed by ICT. By driving industrial restructuring, rapid innovation, improved productivity and enhanced competitiveness in global markets ICT is changing traditional market equations. ICTs also play a crucial role by integrating the interaction of Indian firms with domestic and international value chains.