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SMEs set to spend $8 bn on IT infra this fiscal

August 02, 2007 11:32 IST

The Indian SME segment can offer huge returns to IT companies. The sheer number of SMEs, around 8 million, make this sector a good bet for IT firms

According to a recent study by Access Markets International Partners, this emerging sector is set to spend over $8 billion on its IT infrastructure this fiscal.This would be a 24 per cent rise over the previous year's spendings.

The rise in spending provides the IT companies with huge incentives to invest in the sector. The sector provides a host of opportunities for the IT companies from data security to storage and hardware.

With the realisation of the importance of data security among the SME sector, it is estimated that $161 million will be spent on providing security solutions this year, a rise of 41 per cent over the previous year. To cater to this segment, companies like Internet networking major Cisco Systems, had recently announced the launch of 30 new products for the SME market.

The company had earlier lauched the Easy Lease program for SMEs and the Network on Wheels program to cater to SMEs.

Commenting on Cisco's foray into the SME sphere, Pramodh Menon,senior vice-president, Commercial, Cisco India & Saarc said " The SME segment in India is highly fragmented, it poses a challange for us, while at the same is a tremendous."

It is estimated that the SMEs would need an estimated $4 billion to be spent on computer hardware alone to be competitive.

So, the companies in the hardware segment have targetwed this client-base in recent months. Recently, Dell launched its Vostro range of products.

Identifying that the main problem faced by SMEs with less than 25 employees, was the lack of knowledge of information technology and IT management, Dell launched three laptops and two desktops to fulfill the customised needs of the SMEs.

Lenovo, another big PC manufacturer, which acquired IBM's PC business a year ago, is aggressively positioning its ThinkPad brand of notebook products for the small and medium enterprises in India.

The company also launched its Lenovo 3,000 products targeted at individual customers and lower-end SMEs. Hewlett Packard(HP) is another strong player in the field.

A study conducted by AMI showed, that the bulk of the fresh demand in the printing space comes from small businesses. These are expected to account for 75 per cent of the country's total SME printer expenditure this year.

Servers provide more potential for the IT service providers. Partha Sarathi Sengupta, senior analyst at AMI-Partners said "branded servers enjoy far more widespread usage among India's medium businesses," Sengupta says.

"HP and IBM were the market leaders in the Indian MBs segment, we expect server spending to grow exponentially over the next three years. SME expenditures are set to grow at a Compounded Annual Growth Rate of about 30 per cent over the next three years. Advances in 64-bit, dual-core, and virtualization technologies will also result in increased momentum in server market growth."

To cater to this segment HP had recently launched its Proliant DL180 server which could meet the needs of network service providers looking to manage networking, gaming, mail and other functions of SMEs.

SMEs are also set to invest $1.2 billion to boost their overall Internet infrastructure and solutions in 2007, a rise of $300 million over the previous years.

Within the overall spending pie, small businesses dominate in terms of total expenditure. However, an interestingly medim businesses comprise roughly a quarter of the overall Internet expenditure in spite of the fact that they account for a mere 4 per cent of the overall Internet business universe.

According to industry estimates, of over 500,000 SMEs, only 50,000 are actively using business portals. Another 2.1 million are registered with various portals and are yet to invest serious time and money ,on marketing.

The rise in e-commerce has promoted a bunch of online trade sites. Portals such as and do not just offer a database of the Indian SME sector comprising manufacturers, exporters, importer and service providers, they also offer companies the platform to conduct their businesses through the Net.

Ishita Russell in New Delhi