The digital transformation of small and medium businesses (SMBs) could add up to $216 billion to India's GDP by 2024 and contribute to the country's economic recovery post COVID-19, a new study said on Tuesday. According to Cisco India's ‘SMB Digital Maturity Study 2020,' 68% of the Indian SMBs seek to digitally transform to introduce new products and services, differentiate themselves from the competition and grow.
"While 60% recognise that competition is transforming and they must keep pace, 50% seek digital transformation due to customer demand for change," the report mentioned.
There are an estimated 42.5 million registered and unregistered SMBs in India, a staggering 95% of the total industrial units in the country, according to Nasscom.
In these tough times, "small businesses have been grappling with drastically reduced liquidity, disrupted supply chains, and lending challenges. To bounce back, they need to pivot and adapt swiftly, reimagine their business models, and identify their place and role in the new normal,” said Panish PK, Managing Director, SMB, Cisco India and SAARC.
Most small businesses have realised that going digital is critical and are displaying a willingness to disrupt themselves.
The study, based on a survey of SMBs from across the Asia-Pacific region conducted by the IDC and commissioned by Cisco, showed that Cloud is the top technology investment priority for SMBs in India (16%), followed by security (13%) and purchase or upgrade of IT infrastructure software (12%).
However, SMBs are also facing challenges on this front.
According to the respondents, a shortage of digital skills and access to talent, and lack of necessary technologies are the top hurdles for SMBs in their digital transformation efforts (16% each).
"To help address their challenge of talent, our networking academy has so far trained more than 182,000 students across India in FY20," informed Panish.
For the Asia Pacific region in general, SMBs continue to make progress in their digitalisation journeys, despite challenges.
According to the study, 16% of SMBs in the region are now in the advanced digital maturity stages (3 and 4), compared to 11% in 2019.
Slightly more than half of SMBs have embraced digitalisation to become Digital Observers (stage 2).
Only 31 % of SMBs are still reactive to market changes and have made hardly any efforts to transform digitally (stage 1).
"Given the rapidly changing market conditions and speed of technology evolution, SMBs should work with the right industry partners to ensure they can maximise their technology investments and thrive in their digitalisation journeys," said Daniel-Zoe Jimenez, AVP, Head Digital Transformation & SMB research at IDC.