Internet Spending among Indian SMBs Grew by 33% in 2006

May 23, 2007; 05:19 AM
Small and medium businesses (1-999 employees) in India are set to invest US $1.2 billion to boost their overall internet infrastructure and solutions in 2007, a rise of US $300 million over last year. Within the overall spending pie, SBs dominate in terms of total expenditures. However, an interesting finding is that MBs comprise roughly a quarter of the overall Internet expenditure in spite of the fact that they account for a mere 4% of the overall Internet business universe. These findings are available as part of the latest report by New York-based Access Markets International (AMI) Partners, Inc.

“Currently almost two thirds of India’s PC-owning small businesses are connected to the Internet, whereas medium businesses have already reached near saturation in terms of Internet adoption,” says Kalyan Banga, Kolkata-based Analyst at AMI-Partners. “However, there still exists a substantial scope for bridging the adoption gap in the case of more advanced Internet technologies such as e-commerce, e-purchase, intranet, etc.” In fact, SMBs are gradually beginning to view the Internet as an intrinsic part of their overall business operations, rather than as just another technology tool for facilitating business transactions.

Building a basic Internet connectivity infrastructure is still the priority for India’s SMBs. Since robust connectivity serves as a backbone for future anticipated adoption of advanced technologies like VPN and WAN, this is especially true for larger medium businesses. A detailed analysis of the Internet-related spending components of Indian SMBs show that over 60% of SMB Internet-related spending is devoted to Internet-access technologies. Within the different high-speed internet access technologies, DSL is currently used by over 45% of Internet SMBs; this penetration is anticipated to rise by nearly 10 per cent this year. “A significant factor driving DSL installations is the introduction of Data One broadband service by BSNL, which has played a pivotal role in popularizing broadband usage within the SMB segment and making it more affordable,” says Mr Banga. Broadband usage is also a priority for over 90% of MBs and close to 70% of SBs whose attitudes indicate that deploying broadband access or enhancing broadband Internet speed is a vital strategic focus area in the next 12 months.

As Indian SMBs become increasingly aware of the multiple benefits of possessing and maintaining websites, the latter’s share of SMB Internet expenditures is set to gradually increase. Websites enable a typical SMB to showcase its products and services for customers and also reach out to the global business community at reduced marketing costs. This aspect is vindicated if we take a look at the website usage by India SMBs – the number of website-owning SMBs is set to take a giant leap by over 60% this year. Growth of e-commerce is also on the rise.

Indian SMBs use multiple varieties of websites. Within the search engine category, the most frequently used website is Google, which 46% of Indian SMBs have used in the past year. Among mail services, Yahoo leads the way followed by Rediff, Gmail, Hotmail and Indiatimes.

A city-wise analysis of the ISP scenario reveals that BSNL is a major player in almost all major cities – however there is some variation within the cities. Bharti provides tough competition in cities like Delhi.

About the Studies

AMI’s 2006-2007 India Small Business Market Overview and Comprehensive Market Opportunity Assessment and 2006-2007 India Medium Business Market Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI’s annual surveys of SMBs in India, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, and service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. These data point to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, please call 212-944-5100, e-mail [email protected], or visit the AMI’s Web site at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a strong focus on global small and medium business (SMB) enterprises and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and “go-to-market” solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets, its annual retainership services based on global SMB tracking surveys in more than 25 countries, and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.