Triggers & Barriers for MSMEs Sectors

MSME Sector in India

Part 27

Triggers & Barriers

Benefits from increased IT adoption are manifold. While internally, increasing ICT penetration can improve collaboration and efficiency, externally it can provide access to markets which would have been otherwise inaccessible. In a study done by IDC, the top drivers for adopting ICT were around:

Triggers & Barriers

a) Improved communication within the organizationb) Stronger linkages with Customers and Suppliers c) Get an edge over competitiond) Future growth and expansion e) Creation and delivery of products + services f) Reduction in Inventory

Triggers & Barriers

The survey evidently pointed out that accounting functionalities no longer figure in the top- 7 drivers for IT adoption. This may be because accounting functionalities mostly come out of the box and most organizations have already implemented solutions that can fulfill their basic accounting needs. The need now is more around customization and reliability to increases scale of implementation.

Triggers & Barriers

Exhibit 18:Triggers & Barriers

Triggers & Barriers

The benefits of technology are undisputed and yet MSMEs in vast numbers are not adopting it to the extent needed. We now look at some key barriers that hinder pervasive use of ICT:

a) High Cost - Given the financial tightrope, IT budgets are generally very small. In addition, adopting IT is not a onetime cost because it also requires ongoing costs of maintenance, upgrade and human resource. Cost concerns are exacerbated by low awareness of devices and solutions, such as software, systems and processes. As a result, micro and small businesses have little faith in their return on investment.

Triggers & Barriers

b) Poor Infrastructure - Most of the MSME clusters are around Tier-2, Tier-3 cities, which completely lack adequate information and communication infrastructure, be it high speed broadband connectivity or basic power outages.

c) Privacy & Data Security - IT users worry about storing sensitive data, such as invoices, bills and client documents, on certain technology platforms without knowing how the information will be used. In fact a lot of units keep a physical backup of their data on CDs or external hard drives, exposing them to the risk of damage and subsequent loss of data. This also limits the use of data for making informed decision making. The issue is further compounded by the lack of awareness around the subject.

Triggers & Barriers

d) Lack of Awareness - Technology is currently perceived around heavy devices and thus seen as more of a distraction than value-add to the business. MSMEs are also not aware on what products are available in the market and if the same can be customized to meet their needs. They require agility both in product features and usage. Most technology vendors have been unable to provide enough customization.

e) Steep Learning curve/ Lack of access to skilled manpower - Clear communication and advanced planning at the start of any IT initiative are keys to ensuring successful implementation of any IT services or solution. Firms and employees need to be educated and trained on the application and use of the IT and the policies of using IT. This is often the hardest step, but if done perfectly it ensures that the firm derives maximum benefit.

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