Amid increasing talk of an emerging competitiveness in Indian manufacturing, there is evidence that the winds of change have now reached small and medium enterprises also.
They are rapidly IT enabling themselves not just by using PCs or even networking them but going in for enterprise solutions in order to face up to competitive challenges which are both domestic and global.
This is creating considerable traction for various IT segments in India -- ERP (enterprise resource planning) solutions and hardware vendors on one hand, and service providers who deploy those solutions on the other. The market was always there but a clear strategy for it has emerged only in the last 18 months.
Among the earliest to enter the field is SAP, the leading global ERP vendor. SMEs have been a "strategic focus" area for SAP India for four years now, says Srinivas Rao, industry head, SMB Business Unit.
"Today we have a market leadership with over 160 customers in the small and medium business space and around 35 per cent of market share."
SAP India estimates that the SME market in India is around euro 130 million (almost Rs 700 crore) amounting to about 47 per cent of the overall enterprise application market.
The potential number of companies in the SME segment is over 20,000, estimates SAP. Oracle puts the figure at 10,000.
"These new players are in the Rs 100-500 crore (Rs 1-5 billion) turnover range and are led by the pharmaceutical and automobile sectors," says Pallab Talukdar, director of BSC and solutions marketing of Hewlett-Packard in India.
As a result SMEs in manufacturing figure as one of the five main drivers for demand for servers in India which HP services.
SAP is targeting companies with up to Rs 400 crore (Rs 4 billion) in turnover. Oracle, another leading enterprise solution provider, is also targeting this emerging market segment - SMEs in manufacturing - though under the SME umbrella Oracle includes a slighter wider range of companies, those in the $ 5-150 million (around Rs 20-650 crore) turnover range.
K S Suresh, senior divisional director for SME business and CRM, says that Oracle has been addressing this segment for two years now and created a product specially for it, the Oracle e-business suite special edition.
"This segment is actively deploying enterprise business applications and make up 40 per cent of our sales in the past couple of years," adds Suresh.
Oracle is promoting the core ERP application, both front and back office. It is particularly trying to the combat the feeling among SMEs that they are too small to be able to make the best use of enterprise software by providing them with scalable applications.
SAP also emphasizes scalable applications in order to help SMBs grow. These pre-packaged solutions not only lower total (IT) project cost, but also help SMBs implement comprehensive solutions to meet their current and future requirements. Installation takes place in 6 - 8 weeks. Oracle also ensures rapid installation, in 10-40 days.
SAP India has come out with mySAP All-in-One for small businesses. "Our solution strategy for SMBs is based on the principle that they need and use solutions to grow and become large organizations. Our solutions based on mySAP business suite allows them to scale their solutions as they grow," adds Rao.
IDC estimates that globally midsized companies spend around 3 per cent of their turnover on IT and account for around $25 billion IT spend.
This is growing at 10-12 per cent and accounts for 40 per cent of the IT industry turnover. In Asia manufacturing companies typically spend 1-3 per cent of their turnover on IT but insist on a bigger bang for their buck than elsewhere.
Indian SMEs are somewhat in the middle -- along with China, Taiwan and Hong Kong -- of the Asia-Pacific league table for IT utilisation, with Australia and Singapore ahead.
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