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Technology

A New Business Technology Paradigm: The New Promise of IT

S. Balasubramanyam
Dec 2011

With business happening at the speed of thought, which is much higher than the speed of light, scale of business has been replaced by speed in every gamut, every sphere, and every function of business. The information era we live in, only way we can grow big is by growing small. That is, making smaller mobiles, smaller cars, smaller gadgets, that contain more data, have more applications, and more utility. Today, our mantra is: Get more from less. This is how Information Technology has changed our lives, our business, and our industry. This is how IT makes the world go round. This is how IT has changed the way Small & Medium Enterprises Sector function in industry.

In industry, the SME sector has gained by leaps and bounds by embracing IT. For any small scale industry to attain Best Practices, IT is inevitable. It is no more a question of if, but when, and how.

Why is IT important?

In some ways, IT is more critical to SMEs than even its peers, the large industry. For example, a textile mill may survive even if it continues to rely on labour for its production, but a small scale industry may face extinction if it does not adopt IT. This is because the SMEs face intense competition, unlike earlier, because of integrated global markets. IT is the first and foremost Chapter in the SMEs Cope Book for Survival, with a possible heading for the book such as Adopt IT or Perish!

When smaller players face the heat in the market from the big players, it is like David vs. Goliath. But IT has helped – remarkably, consistently – the minion to fell the giant. There are many examples to show how this paradigm shift has taken deep roots in the SMEs. The venerable Britannia Encyclopaedia ignored an offer for a tie-up about its works from a small, unknown player, believing smugly that Size Does Matter, and was felled by it. “It” here is both the company and Information Technology.

What is the nature of the paradigm shift in industry that arises out of adopting IT in SMEs? That SIZE DOES NOT MATTER. Today, anyone with a PC, with an idea, can conquer the world, out-compete in the market.

In fact, the best way to scale is by adopting IT. Some of the world's best companies started small and grew big by riding the IT highway. Steve Jobs started Apple in a garage. Like Bill Gates started Microsoft. It was only because of their vision, their understanding of technology, and how it can be leveraged to give shape to their ideas that they succeeded in taking over the world.

In the context of Indian SMEs, the transformation of the SME sector is also visible. Today, the Services sector is a significant contributor to our GDP. In fact that is why the Government decided to levy Service Tax sensing it had a growing revenue source! This growth was possible because many small entrepreneurs quickly adopted IT in their business model and thrived. India's small lanes are dotted with thousands of such small businesses who feel empowered with a PC, a mobile, an IT application, and run successful businesses.

Need for IT Adoption amongst SMEs

Of course, there are many SMEs who are yet to embrace technology in the cutting edge. The slow adoption of Information technology by such SMEs to further enhance their businesses, automate their processes, provide a more efficient service or provide quality and affordable products can be attributed in my view to lack of knowledge, perceived cost implication, low levels of IT literacy, lack of access to affordable computers, and a lack of general awareness.

For an SME, the focus should be on producing quality products that are required by the consumer in the most cost efficient manner or to provide a targeted service at low costs ensuring that operational and distribution costs are minimal; which all contribute to influencing the pricing of a product or a service and in turn, making it more affordable.

In running a profitable business, which needs to be enhanced and made more efficient using Information technology, an SME needs to be focused on ensuring that all the relevant information, from financials to HR data, through to stock inventory, supplier information, customers details/buying patterns etc, are captured to ensure that you can target the relevant services or products accordingly.

Also, an SME should incorporate appropriate IT applications to successfully reduce operational costs or overheads, widen the distribution/sales channels, inculcate flexibility, innovation and the ability to react accordingly to all relevant factors from changing government policies, new duties or taxes, competition etc.

There is a view that cost is an inhibiting factor for SMEs to adopt latest IT practices. Multinational companies and other companies who can afford to utilize expensive technology are able to avail of off-the-shelf customized application packages, such as for example, Enterprise Resource Planning products like SAP, JD Edwards, PeopleSoft, Data warehousing modules, statistical applications and Siebel CRM application modules.

But SMEs may not necessarily be able to afford these so called off-the-shelf packages. However, cheaper alternatives are available in the market. For an SME, a simple Excel spreadsheet or a Microsoft Access database application with the relevant formulas and macros can be implemented to capture expenditure, income, HR information, maintain stock inventory and capture your supplier's details.

The more an SME can use technology to streamline or automate their inherent business processes, the less they will have to spend on operational costs, less manpower will be required and the more efficient the operations will be and which can all in turn translate to producing better quality, affordable products or providing a more consumer focused also affordable service. For example for an airline ticketing business if the relevant applications are in place you can have only one member of staff sell the required ticket to the customer, bank the money, issue a receipt and still capture all the relevant details of the customer to ensure there is a repeat sales.

Technology can also assist in providing other avenues to sell your product or service such as sales via the Internet, via mobile telephony technology outside your conventional methods of selling, marketing, advertising or distributing your product, though this obviously depends on the kind of product or service in question.

In short, SMEs that need to scale, need speed first, and only IT can fuel their need of speed to scale. Think big. Think IT.

The author is the President of Peenya Industries Association, Bangalore.

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