Rajendra S Pawar: Small, the new big for IT industry

Indian IT industry is all set to achieve its projected revenue target of $100 billion in 2011-12 and is projected to achieve revenues of $225 billion by 2020. This is an ambitious target that will require all the stakeholders in its eco-system to collectively innovate and catalyse growth. What this means is that besides the large players, the industry's rapidly proliferating small and medium enterprises (SME) segment must also come forward, actively contribute and help deliver enduring growth to the sector.

During the last year, revenue from SME companies was about $5 billion. However, during the last three years they have witnessed a growth of about 40 per cent, well ahead of the average industry growth. Start-ups which commenced operations a few years ago are already entering a high growth spiral. Disruptive innovations in the areas of technology, revenue and delivery models are creating a level playing field for these new players globally, enabling them to come into their own.

Over the last decade, the Indian IT industry has witnessed a steep jump in the number of its SMEs, including start-ups and product companies. By the end of 2011, there were over 2,400 product firms, compared to just 74 in 1995.

The eco-system simply abounds with some of these success stories. Eko, Zomato, Edserv, mChek, Gradatim, eTechies, Flipkart, Mobme, Zoho, Kinetic Glue, InMobi and Dhruva are companies that have come up over the last few years and created a niche for themselves in the market.

Small is going to be the new big for the industry. A growing recognition of this trend has led the IT-BPO industry as well as its industry body, NASSCOM, to launch several initiatives in 2011 targeted exclusively at emerging organisations.

In last one year, I have travelled across India, meeting over 150 SME companies to understand the challenges they face and to elicit their views on how these can be addressed.

The feedback of NASSCOM's SME members indicates that these companies are constrained by their inability to participate in government tenders, and therefore the domestic market. They have poor access to working capital and government loans and are also excluded from government schemes meant for smaller players. On the operational front they are constrained by low awareness about best practices, shortage of skilled resources and inadequate policy and regulatory support.

While policy makers have initiated action to resolve these problems, strategic efforts to address these issues need to be scaled-up significantly over the next few years. Hopefully, this year's budget proposal will have some specific incentives for the segment.

NASSCOM has provided a "stage" and developed "platforms" to spur the SME momentum, and the government and industry are working to provide an environment conducive for the emerging and start-up landscape. Clearly, there are great expectations from the industry's smaller, nimbler and innovation-led companies that will be the engines of growth for the sector over the next decade.

 

The writer is chairman of Nasscom and NIIT Group. Views expressed are his own.