SMEs to Drive IT Spends in Next Two Years
Monday, February 11th, 2008The small and medium enterprises (SMEs) in the Indian IT space are confident of achieving 65 per cent growth in the next two years, surpassing 43 per cent growth rate posted for the last two years, according to a study from Dun & Bradstreet (D&B).
The study titled “Emerging IT SMEs of India 2007,” provides insights into 244 IT companies involved in providing software and hardware products and services. All the companies profiled were in the below-Rs 100 million-turnover bracket during the previous fiscal year.
The study notes that close to 53 percent of companies faced moderate problems in acquiring funding and 43 percent felt the proposed withdrawal of tax sops for the IT, ITeS and the BPO industry by 2009, will be significant in terms of deciding future industry growth.
Of the 437 locations, from which these 244 companies operate, Bangalore and Mumbai emerged as the top locations for operations. 18 percent and 17.6 percent of the profiled companies were operating from these two cities, respectively.
The overseas presence of 28 percent of the sample audience encapsulated the changing trend in the SMEs perspective, which are now willing to cross borders to pursue growth. Companies with Rs 10-50 million turnover accounted for almost 50 percent of the profiled companies.
The key findings of the study indicate that thirty-three per cent of companies offered IT services as well as software products. Custom application development and IT consulting are the two software services. 36 percent of the companies are looking at tier - II cities such as Nagpur, Surat, Guwhati and Chandigarh to develop centers; IT SMEs derive bulk of their revenues from the domestic market and only 35 per cent of the companies are involved in exports. Exports are mainly to the APAC region; thus IT SMEs are fairly insulated from the rupee appreciation while wage inflation, high attrition and withdrawal of tax sops remain topmost concerns for IT SMEs.
Kaushal Sampat, COO of D&B India, said, “Despite the strong growth prospects, the IT SME sector is witnessing several challenges such as the acute shortage of skilled manpower, which is mostly faced by IT SMEs located in Tier-II and Tier-III cities.”