Through the looking glass: Are Indian ITeS SMEs ready for growth?

10 January, 2019

  1. 40% of Indian technology SMEs have growth aims of over 40% per annum in the coming 2 years.
  2. 27% indicated that a key challenge to the growth of Indian technology SMEs is funding.
  3. 42% of the Indian IT/ITeS companies mentioned they faced issues in attracting and retaining talent.
  4. 48% of Indian IT/ITeS companies felt they were just fairly prepared to handle technological disruptions.

This survey was supplemented by focus group discussions that PwC and NASSCOM held with 90 leaders across five cities – Delhi, Mumbai, Kolkata, Bengaluru and Hyderabad – in November 2018. Our conversations and survey were structured around the principal business drivers shown below.

What are Indian technology SMEs’ growth aims for the coming two years?

  • 40% of Indian technology SMEs have growth aims of over 40% per annum in the coming 2 years.
  • 25% of Indian technology SMEs expect growth between 30% and 40%, while 23% are expecting growth between 20% and 30%.

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What are the challenges to Indian technology SMEs’ growth agenda?

  • 27% indicated that a key challenge to the growth of Indian technology SMEs is funding.
  • Respondents noted that the main challenge with PE funding was the investor preference for start-ups rather than for established SMEs.
  • 22% said that lack of talent was a major challenge to the growth of Indian technology SMEs.
  • Respondents mentioned that external market forces, including price sensitivities and the regulatory environment, were hampering growth aspirations of IT and ITeS SMEs in India.
  • Technological changes and innovation for Indian IT SMEs is a concern, specifically in the fields of deep technology.
  • Protection of patents and intellectual property (IP) is also a concern.

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How do IT and ITeS SMEs in India plan to finance future growth?

  • In terms of source of funding for growth, 48% indicated that business earnings would be sufficient to allow aggressive growth.
  • 19% technology SMEs said they were open to private equity funding.

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Do technology SMEs face a challenge in attracting and retaining talent?

  • 42% of the IT and ITeS companies surveyed mentioned they faced issues in attracting and retaining talent.
  • A related challenge faced by technology SMEs is skilling and re-skilling resources which, coupled with difficulties in accessing trainers, hinders the growth of Indian technology SMEs.

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To what extent is your business enabled to handle technology disruptions?

  • Less than one-third felt they were fully equipped to handle technology disruptions.
  • 48% of IT and ITeS companies in India felt they were just fairly prepared to handle technological disruptions.

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What are the views of Indian IT SMEs on innovation?

  • About 45% of the companies surveyed mentioned they had a dedicated team for innovation.
  • 28% expressed the need for establishing a culture and an ecosystem which supported innovation.
  • It is seen that growth for Indian technology SMEs usually becomes a challenge, particularly when it comes to scaling up.

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How equipped is the business to handle a cyberattack?

  • Nearly half the companies surveyed mentioned that they were fairly equipped to deal with cyberattacks.
  • 38% indicated they were moderately equipped.

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Is your company people dependent or process dependent?

  • 13% of the respondents felt their business was completely process driven.
  • While 27% of the respondents felt their business was process driven to a large extent.
  • However, for 25% of businesses, people dependency was high.

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How open is your business to setting up and enforcing processes and standardisation?

  • Nearly half the IT and ITeS SMEs in India mentioned that they welcomed, established and enforced processes and standardisation.
  • While, the remaining technology SMEs seemed more reluctant.

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How does your business rank in terms of exploring new strategies?

  • 70% of IT and ITeS SMEs in India ranked their businesses high when it came to exploring new strategies for markets, clients, geographies and products.
  • 24% ranked their businesses moderately in terms of exploring new strategies. 

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How does your business rank in terms of investing in soft infrastructure?

  • More than half of the IT and ITeS SMEs in India rated their companies high when it came to investing in soft infrastructure.
  • 31% respondents rated their companies moderately when it came to investing in soft infrastructure.

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How does your business rank in terms of protecting your intellectual property?

  • 18% ranked their businesses 5, which was the highest rating, in terms of protecting their IP.
  • 27% ranked their businesses 4, while 21% ranked their business 3

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How does your business tank in terms of corporate governance structure?

  • 16% of the technology SMEs rated their businesses a 5, which was the highest rating on the scale, for their corporate governance structure.
  • 35% rated their businesses a 4, while 17% rated their businesses a 3 on the scale. 

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Fast forward

Emerging technologies can be used to generate better business results. Our report clearly indicates that IT and ITeS SMEs in India are interested, aware and excited about the current technological disruptions.

An interesting trend which emerged from our survey is that when we asked businesses to rank themselves, those businesses that ranked themselves high on, say, welcoming processes and standardisation also tended to rank themselves high on investing in people and culture and developing employee goals. The converse is also true.

In a nutshell, here are our key recommendations:

  • The majority of IT/ITeS SMEs in India are aware of technological disruptions, but budget is a constraint. A clear demonstration of a potential use case has to be in place to ensure a good return on investment (RoI) on emerging technologies.
  • The government could play an important role in structuring grants to support technology advancements.
  • An amalgamation of SMAC technologies should be adopted by IT/ITeS SMEs in India to bring in operational efficiencies and transform customer experience, thus increasing revenue in the process.

Contact us

N V Sivakumar

Partner & Leader - Private & Entrepreneurial Business, PwC India

Tel: +91 80 2558 5663

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