Cloud Learning Curve Looms for India's Small Businesses

Sudha Nagaraj Bharadwaj, Journalist | 11/19/2012 | 16 comments

Sudha Nagaraj Bharadwaj
The cloud is capturing the attention of the most tech-savvy of India's 26 million micro, small, and midsized businesses (MSMBs). For others, however, the cloud is shrouded in confusion, according to a recent study.

MSMBs collectively employ 60 million people and contribute more than 45 percent of India's industrial production and 40 percent of the country's total exports. The ability to function as efficiently as any large enterprise through cloud-based infrastructure/platform/software-as-a-service (I/P/SaaS) solutions is an attractive proposition for tech-savvy MSMBs.

These users are drawn by the benefits of cloud computing, namely:

  • Flexibility
  • Scalability
  • Storage
  • Virtualization
  • Automation
  • Pay-per-use pricing models

These benefits appear to outweigh concerns about security, data privacy, servicing, and integration with existing and legacy systems for this group of users. Nontheless, there remains a great deal of hesitancy regarding the cloud when it comes to less tech-savvy MSMBs. According to a recent Intuit study "Understanding and Overcoming Barriers to Technology Adoption Among India's Micros, Small and Medium Enterprises," 728 MSMBs in 12 cities in India revealed only the most tech-savvy companies are open to adopting new technologies. And even among these tech-savvy firms -- which are predominantly found in the services sector -- the companies tend to be classified as "moderate tech-adopters."

In contrast, the study found, manufacturing firms were even more cautious "tech aspirers" who showed low engagement with the cloud and only adopted solutions that have been tried and tested by others. The "technology laggards" were the most-established old MSMBs, and tended to use manual methods to handle data.

So, what's holding back all but the most tech-savvy MSMBs from cloud adoption? The five barriers, according to the study, were:

  • Cost
  • Lack of skilled manpower
  • Concerns about security and privacy
  • Poor infrastructure
  • Low awareness of benefits of technology/government and institutional schemes available

This fifth barrier, in particular, bears further exploration. Over the past few months, India's Ministry of Micro, Small and Medium Enterprises has taken several steps to encourage cloud adoption. The organization has set in place a collaborative effort involving stakeholders in government, industry associations, IT vendors, and MSMBs. Cloud service-level agreements were to feature prominently in the discussions between the cloud vendors and the government.

The government has also been urging large cloud vendors to ensure "fair, equitable and transparent" contracts with MSMBs.

The Ministry has launched surveys and reports in association with the industry. A detailed survey called Project Baadal is now in the field with the Confederation of Indian Industries and supported by the National Small Industries Corporation and the National Institute of Entrepreneurship and Small Business Development.

Meanwhile, based on the recommendations of the "Barriers to Adoption" study, the government has announced that it would provide "substantial subsidy" for cloud computing to MSMBs. It has suggested that MSMB associations should create special-purpose vehicles to implement technology upgrade schemes. In addition, the government has floated several schemes for bank credit, collateral free loans, risk capital, and micro finance on which awareness programs are being launched.

Yet, as the "Barriers to Adoption" study shows, awareness of these undertakings is sorely lacking among MSMBs. One wonders where the communication breakdown is happening. Vendors such as SAP India and Aircel/NEC India, among others, are moving full speed ahead in their efforts to promote cloud services to MSMBs. Indeed, most cloud service providers never forget to mention the government subsidy at conferences, industry meetings, and in the media. Cloud vendors are now stressing the need for a "cloud ecosystem" -- complete with power, connectivity, bandwidth, real estate, awareness, local language support, special financial provisions for cloud infrastructure, tax incentives... and land.

Vendor enthusiasm is likely bolstered by reports that promise growth of cloud adoption and overall IT investments nationwide. For example, consulting firm Zinnov predicts that through 2015, IT spending by small and midsized businesses in India will increase at a greater rate than it will for large enterprises. According to Zinnov, overall domestic IT spending is expected to grow at a CAGR of 12 percent to $36 billion by 2015. However, domestic IT spending among small and midsized businesses will grow at a CAGR of 15 percent to $15 billion by 2015. Zinnov also gave an overview of the kinds of technology solutions that could be deployed by small and midsized businesses. Yet another Zinnov report estimated that revenue for the cloud market in India could reach $4.5 billion in 2015.

Zinnov isn't the only organization predicting positive cloud growth in India. According to the Forrester Consulting -- VMware Cloud Index, 50 percent of the 1,220 Indian corporate decision makers polled have already adopted cloud solutions or strategies, and another 30 percent said they planned to deploy cloud solutions in the next 18 months.

It's going to take a concerted communications effort, along with success stories from those MSMBs that have already embraced the cloud, to make these predictions a reality in India's small business sectors. Likewise, it's up to small and midsized business operators to spend some time educating themselves about the potential of the cloud if they have any hope of competing for business with tech-savvy enterprises of all sizes.

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Sudha N Bharadwaj   Cloud Learning Curve Looms for India's Small Businesses   11/26/2012 8:41:50 AM
Re: Hey, Wait a Minute
The learning is more to do with exposure and adaptation. For those who are technology -shy, some amount of hand-holding is required initially. Those who have progressed to wanting to use cloud, will ask a different set of questions altogether.
Gigi   Cloud Learning Curve Looms for India's Small Businesses   11/26/2012 1:50:14 AM
Re: Too early?
HH, yes. Some of the government affiliated societies and apex bodies under commercial departments have already started initiatives for short term trainings for individuals, who are interested in starting their own company.  Small & medium scale entrepreneur board conducting a 4-6 week courses for the new entrepreneurs is the live example.
Sudha N Bharadwaj   Cloud Learning Curve Looms for India's Small Businesses   11/21/2012 5:39:28 PM
Re: Too early?

I think it would be left to cloud vendors and perhaps some workshops by industry associations. As I mentioned earlier, some element of education on clouds would trickle down through skill development programs of the government and entrepreneurship institutes --also under the government. If the education or training sector spots an opportunity here and trains talent to join the SME workforce, it is still possible I guess.

Susan Nunziata   Cloud Learning Curve Looms for India's Small Businesses   11/21/2012 4:25:52 PM
Re: Too early?
@Sudha: It seems there would be opportunity for education development here as well once the government solidifies its initial policies. Would the government or the cloud vendors be expected to take the lead in educating MSMBs about the cloud? Or are there educational institutions that could be called into the mix here to participate?
Sudha N Bharadwaj   Cloud Learning Curve Looms for India's Small Businesses   11/21/2012 1:13:55 PM
Re: Too early?
There are skill development programs and entrepreneur institutes under the Ministry which could take up such initiatives in the future. Right now, it is more about policies, schemes, interactions with vendors with a view to getting fair service level agreements and a study of the sector to guage resistance, perception, interest in cloud services.

Sudha N Bharadwaj   Cloud Learning Curve Looms for India's Small Businesses   11/21/2012 12:58:42 PM
Re: Cloud Model
@Gigi, The savings on capex and opex argument can be made when a person is already sold on technology. Otherwise it is still a cost. The tech-adapters do not need to be sold the pay-as-you-use model.  
Sudha N Bharadwaj   Cloud Learning Curve Looms for India's Small Businesses   11/21/2012 12:56:23 PM
Re: Awareness to Adoption

The single-most challenging part would be to awaken them to the possibility of moving things "away" to the cloud! Technology adoption is a big enough challenge even with computers, software and servers on the premise, imagine data going outside and residing in the cloud. Also the mindset: "This is not for me. My business can run fine without complicated and costly technology."
Salik   Cloud Learning Curve Looms for India's Small Businesses   11/20/2012 9:35:34 AM
Re: Too early?
It is nice to see that the government of a developing country is giving so much support to the MSMBs.
Hospice_Houngbo   Cloud Learning Curve Looms for India's Small Businesses   11/19/2012 11:01:51 PM
Re: Too early?
Gigi, thanks for elaborating. That is a good initiative by the government. Does the government devise training programs to help the MSMBs learn about the technology?
Gigi   Cloud Learning Curve Looms for India's Small Businesses   11/19/2012 10:52:15 PM
Re: Too early?
HH, the basic intention in promoting cloud technology for MSMB is very clear. Government is promoting it like incubator, where anybody can start up their company with the help of cloud technology and later if businesses model is success, they can migrate to their own infrastructure. So the loss can be minimized to a great extent.
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