Between 6 billion consumers and the 10,000 large companies of the world lies an expanse of about 25 million small and medium enterprises (SMEs). Think of this as the Middle-Enterprise, around whom the lives of the consumers and the large companies revolve. These SMEs employ anywhere from 1 to 1,000 people. They are the silent majority of the business world, the bottom of the corporate pyramid.
For many, their lives have changed little in the past few years even as technology usage has grown. They are hard to reach. Each day is a challenge for many SMEs – on the one hand are the daily battles which every entrepreneur accepts as part of the ride, and on the other is the desire for growth, to become Big, to have greater predictability and profitability.
The Middle-Enterprise is very often ignored because they are so distributed, small and hard to reach and market to. Yet, they are also the economic drivers for economies. They are like ants – individually, they may not be able to do much, but together, they can literally move mountains. It is this collective power which needs to be harnessed.
Technology adoption by SMEs typically lags that by the bigger companies by a few years. Many different technology pieces are now falling in impact SMEs. These developments have the potential to dramatically alter how SMEs go about doing their business and their quest for growth. What has been the visible aspect of the Internet and eBusiness revolution of the past few years has been how the real-time enterprise is being enabled. The SME revolution is nascent and, like an iceberg, remains largely hidden.
The adoption of computers by SMEs, especially those in emerging markets, has traditionally lagged that by the bigger companies. Consider some of the numbers in India. The installed base of computers in India stands at about 6.5 million, which includes both office and home, and of which at least 3 million are more than 3 years old. Most of the SMEs have penetration ratios of less than 10%.
One of the biggest inhibitors has been the total cost of technology ownership – of hardware, software and communications. Hardware is still priced in the rupee equivalent of US dollars (with a 30% tariff thrown in). Software for many has been zero cost, but obviously that cannot go on. Communications costs in India have been among high though they are now falling. Internet access on a dial-up line costs Rs 30 (60 cents) an hour.
If one looks at some of the analysis coming from the US as to the factors which have contributed to the short recession period, the investment in infotech and the consequent increase in productivity is seen as one key factor. This gap between the US and other countries is actually increasing. For emerging enterprises and especially those in emerging markets, their cheaper labour costs can sometimes be offset by the limited use of technology in their operations. Enterprises need to work cheap and smart.
In the coming columns, we will explore how SMEs can take advantage of many of the technological developments taking place and how a new form of “emergent” networks (where the whole is greater than the sum of the parts) can help alter the business landscape in the coming years.