Cloud Learning Curve Looms for India's Small Businesses

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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.