Dip in orders force SMEs to cut IT spending

With the global meltdown taking a toll on outsourcing of work in sectors like manufacturing, engineering, pharma and textiles, the economic scenario has also taken a toll on information technology (IT) spending among small and medium enterprises (SMEs) in Gujarat.

As per industry sources, spending on hardware, software and other network solutions among SMEs in the state has come down by 50 per cent.

"SMEs form 40 per cent of our total business in Gujarat, followed by government, industry and small office home office (SOHO) segments at 30, 25 and 5 per cent, respectively. Among these, SMEs have seen the highest impact from the slowdown. This has discouraged them to budget enough on IT infrastructure," said KJ Thakker, president of Ahmedabad Computer Manufacturers' Association (ACMA).

According to Thakker, as against an annual budget of 10 per cent set aside for IT spending by SMEs, the same has come down to five per cent.

For KJ Enterprises that supplies industrial equipment to power and auto engineering companies, a decline in business has resulted in cut in IT spending. "We have now postponed expansion of our IT infrastructure and manage with the bare minimum such as maintenance. This is because we have not been receiving any outsourcing jobs from the large companies," said Kartik Patel, director of KJ Enterprises.

In other words, SMEs have been working with only business critical applications and have been avoiding any advanced automation.

"Most of the small and medium enterprises are in pressure to perform with the remnant cash flows. Add to that, business expansion is not happening. Resultantly, they have not been able to spend on new IT infrastructure and hardware. Currently, they are working with only business critical applications," said Nikhil Jain, director at Elitecore Technologies, adding that IT spending has reduced by 10-15 per cent.

In terms of hardware alone, Gujarat's IT industry does a revenue of Rs 4,500-5,000 crore, said Thakker.