The Hindu Business Line : `SMBs may spend $1.2 b on Net infrastructure'

`Internet is still perceived as an enabler in India, rather than a driver of growth and opportunities. The Internet is not supporting new avenues for growth but is supporting a growth that is evident.'

Kolkata , July 3

Small & medium businesses (SMBs) in India are poised to invest up to $1.2 billion in augmenting their Internet infrastructure and solutions in 2006, according to a study conducted by the New York-based Access Markets International (AMI) Partners Inc. This would account for about one-sixth of Indian SMBs' total projected IT spending of $7.7 billion this year.

The AMI Partners study states that much of the impetus in this regard has been propelled by initiatives taken by the Central Government, whose focus has been on facilitating the growth of broadband services in India. The idea has been to boost applications, including tele-education, tele-medicine, e-governance and entertainment. All these were being achieved through Government initiatives geared towards the improvement of infrastructure and terrestrial telecommunication facilities.

Biggest spenders

According to the study, among small businesses, those in the retail sector were among the biggest spenders on Internet technologies. Among medium-sized businesses, it was the manufacturing sector that spent heavily on Internet technologies. In the days ahead, the demand for Internet technologies would also be driven by Indian business process and knowledge process outsourcing outfits. SMB spending on Internet access is estimated to go up to $830 million in 2006, a jump of 24 per cent from 2005.

At present, almost all medium businesses and more than half of the PC-using small businesses have access to the Internet. However, nearly half of these small businesses use dial-up access, an indication that there exists an untapped market in the broadband Internet arena.

Untapped potential

Further, with low operational margins, Web site and e-commerce penetration continues to remain comparatively low among small businesses. It is hoped that as small businesses increase their contacts with end-consumers, Web site and e-commerce penetrations would go up correspondingly alongside margins.

The study states that 70 per cent of medium businesses and 14 per cent of small businesses have multiple branches. Internet access provides a cost-effective communication link between firms without them having to set up their own communication infrastructure. In the future, more firms are expected to operate from multiple sites, thus providing a boost to Internet demand.

Despite all these factors, however, the Internet in India is yet to be viewed as a facilitator of business growth and opportunities among SMBs. "This is because the Internet is still perceived as an enabler in India, rather than a driver of growth and opportunities. The Internet is not supporting new avenues for growth but is supporting a growth that is evident, and therefore, it is embraced ," says an AMI Partners analyst.