The commonly held wisdom was that India has around 40 mi SMEs. The level of penetration of digital workflows, adoption of SaaS / business apps has been extremely low (< 1% of revenues allocated to IT spends) and challenges of network access, talent access and capital access was keeping these SMBs from adopting cloud & collaboration / productivity and business workflow software. Payment capacity was low and cost to acquire these customers thru traditional sales / distribution was fairly high leading to poor CAC:LTV ratios.
At the recently concluded India Internet Day 20202, Jasminder Gulati, co-founder of NowFloats, a SME focussed startup that takes SMEs online (now acquired by Jio) and Puneet Chandok, President, India and SE Asia at AWS put the SMB number as 75 mi today going to 100 mi SMEs by 2024!
That’s a much bigger number but would still be meaningless if folks were still not ready to go digital.
Here is the BIGGER news — Karan Bajwa, Managing Director of Google Cloud India said that “We’ve seen unprecedented growth in SME tech adoption in the past 3–4 months in 2020”. “ Covid has been a massive tailwind. The beginning of true transformation of local shops is starting now. The next 5 years will be super exciting” said Akanksha Hazari, co-founder of LoveLocalIndia, a startup taking local shops online.
What is driving this adoption under COVID / pandemic conditions ?
Firstly, many SMEs faced extreme challenges with national lockdowns and unavailability of on-prem computing. They did not have VPN, IT tools/folks to configure their solutions/access. Cloud became a “must have” computing solution. Since the SMBs had no “legacy” of enterprise tech, they quickly started adopting SaaS for IT planning.
SaaS products that are truly simple to use, don’t need too much IT support, low-cost, speak the language of business are seeing adoption across the board.
Most of the 60% of the SMEs are located in Tier-2 & Tier-3 towns & cities spread all over India and are actively looking for business applications across sales management, CRM, HR processes, expense management, operations, accounting, cash flow planning, security, data analytics, call management among others.
So if you are looking to enter Indian markets and have a truly simple, low-cost product, Indian SMBs may be a good target segment to go after. Find a partner that understands the SMB markets and buying habits, build content that talks to the SMB paint points and watch as the 75–100 mi cohort starts adopting Saas. There are pots of gold for all who can crack this opportunity.