Emergic: Rajesh Jain's Blog

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TECH TALK: Alt.Software: The Market

October 8th, 2001 · No Comments

From the vantage point of India, it is next to impossible to create state-of-the-art software products for the world’s leading enterprises. To do that, one needs to be based in the US, closer to where the market for these products is. But if one looks beyond the Big Companies, a new market emerges. This consists of the Small and Medium Enterprises (SMEs) of the world, especially in emerging markets.

Small enterprises typically employ less than 100 employees, while medium enterprises have 100-500 employees. They are the equivalent of the corporate poor of the world. To borrow a phrase from C K Prahalad, they are at the “bottom of the Enterprise Pyramid.”

Why do SMEs matter? Compared to the 10,000 or so Big Companies of the world, there are 25-50 million SMEs in the world. They provide the bulk of the employment, they are the growth engine for economies.

There are many reasons not to bother about SMEs. They are hard to reach. They are not a homogeneous market. They are resistant to change. They are very cost-sensitive. They don’t spent money easily. They may prefer spending on people over technology.

At the same time, significant value in an economy lies with SMEs. They comprise 80% of the supply chain of the larger companies. They need to be integrated into the global economies – supply chains are only as good as their weakest links (in this case, the SMEs). They lag big business technology adoption by 2-3 years, which means they are likely to begin spending on new Internet-centric technologies soon. They need “whole products” – not part or piecemeal solutions. They need something which will work quickly and without the need for additional external expertise. Most importantly, SMEs do not want to remain S or M (small or medium). They want to grow.

In India, SMEs are only beginning to look at using technology for improving their businesses. So far, for most of them, technology investment was limited to a few computers with pirated versions of MS-Windows and MS-Office , an accounting package like Tally, email and some custom software for their specific needs.

The challenge that lies ahead is to make SMEs more productive and competitive by automating their businesses. There is an opportunity to create software which will, in the words of Clay Christensen, “delight them”. The initial market for such software is at the bottom: the world’s emerging markets.

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