July 21, 2008

SMBs in India to Cross US$1B on Internet Spending in 2008

India's SMBs (small and medium businesses, or companies with up to 999 employees) are boosting investments on Internet-related products & services, and are on track to reach US$1.26 billion this year, up a whopping 35% over last year, according to a recent study by New York-based Access Markets International (AMI) Partners, Inc.

"The Internet is a multi-faceted tool," says Kalyan Banga, Research Analyst at AMI-Partners. "It is both a facilitator for simple tasks, as well as a key differentiator among organizations that provides them with a competitive edge in this digital era."

For medium businesses (MBs, or companies with 100 to 999 staff), the Internet has become a way of life and has reached near-complete saturation. However, a significant growth opportunity exists within small businesses (SBs) since only around 25% of them currently possess an Internet connection.

A year to year usage analysis reveals a similar finding - that SBs are embracing the Internet by leaps and bounds. The penetration of Internet-enabled SBs is anticipated to rise by more than four percentage points this year.

"Technology penetration for most Internet-related technologies is significantly higher for MBs, since almost all of them have stepped into the second wave of technology adoption," Mr. Banga says. "However, there is potential here for a rise in penetration of Internet-related technologies for SBs and even for MBs in case of e-commerce, intranet, etc. For example, the strategic technology adoption attitude of SMBs indicates that adding or enhancing e-commerce capabilities is a priority of almost 28% of SMBs in the next 12 months."

Improvement of Internet speed is a must, as mentioned by more than 50% of SMBs. About 37% of respondents would like to opt for a total revamping of their Internet-access infrastructure, such as replacing or upgrading their Internet access routers. Broadband usage has taken a forward leap, thanks to the efforts of ISPs who have significantly increased its affordability and availability. A glimpse into ISPs reveals the dominance of BSNL/ MTNL and Bharti, which enjoy an SMB penetration of 44% and 33%, respectively. They are followed at a distance by VSNL/ Tata Teleservices and Reliance.

"Web 2.0 is one of the revolutionary Internet-related technologies that have taken the world by storm," Mr. Banga says. "Indian SMBs have not been too far behind in following this global trend. Web 2.0 technologies - like social networking, blogs, podcasts, etc - are gradually being adopted by India SMBs for information dissemination, marketing & communication modes, etc." For example, currently almost 10% of SMBs use social networking services. An additional 33% are aware of this technology. Usage of blogs & podcasts for advertising & promotional activities is higher among MBs.

SMBs are also heavily dependent on information sources like vendor websites and search engines for gaining awareness about IT products and services. These are used by about 45% of SMBs. The importance of online advertising also displays an upward trend within SMB media-related activities. The two websites that show maximum usage for online ads by SMBs are Google and Yahoo.

Related Studies

AMI's 2007 India Small Business Overview and Comprehensive Market Opportunity Assessment and 2007 India Medium Business Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI's annual surveys of SMBs in India, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail [email protected], or visit the AMI Web site at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence--with a strong focus on global small and medium business (SMB) enterprises and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and "go-to-market" solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets, its annual retainership services based on global SMB tracking surveys in more than 25 countries, and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.