MSMEs see technology as cost centre due to lack of awareness: Experts

Technology for MSMEs: Even as technology has become critical for micro, small and medium enterprises (MSMEs) and there has been a gradual uptake as well in the adoption of digital solutions particularly after the pandemic, a large chunk of small businesses are still not certain of leveraging technology. During a panel discussion on ‘Easing the Adoption of Digital Solutions for MSMEs’ at the FE MSME Business Conclave organised last week, experts noted that MSMEs have been reluctant to adopt relevant technology tools.

“MSMEs reluctant to technology adoption will not be able to scale up,” said Logesh Velumsay, CEO of software cloud-based management software provider Effitrac.

Lack of awareness has been another challenge, according to experts. Not many small businesses are aware of the right technology solutions required in their operations to scale up production and revenue. In fact, technology is largely seen as a cost to the business.

“Lack of awareness has made MSMEs view technology as a cost and not as a return on investment,” said Bhushan Parekh, Director – SME, CRISIL.

Cost continues to be a strain in adopting digital solutions as many MSMEs are usually not able to define their business objectives clearly or identify the right digital partner for cost-effective growth.

“You cannot be successful if you cannot reach your customers in a cost-effective way. Hence a cost-benefit analysis at every step of digitization is a must as each enterprise has different needs and a one-size-fits-all approach for digital solutions doesn’t work,” said Subhash Goyal, Founder Chairman, STIC Travel & Air Charter Group.

Velusamy also echoed that a cookie-cutter approach to digital solutions is not possible as “SMEs cannot predict their future problems. Hence, they need technology that adapts to their problems.”

Moreover, in contrast to having in-house teams that might add to the cost for small businesses, Low-Code No-Code (LCNC) solutions can be used that allow individuals, without any coding experience, to build and test (business) applications, said Velusamy.

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Nonetheless, those willing to adopt technology have been able to leverage affordable solutions with a decline in the cost of adoption. “The advancement of technology over the last two years has caused a ‘tectonic shift’ in the reduction of cost of adoption of digital solutions. Due to this, the percentage of MSMEs adopting digital solutions has increased from 10 per cent before Covid to 50 per cent in 2020,” Parekh added.

For instance, customer relationship management (CRM) software to maintain customer base, accounting and collection software to check the flow of money, operations management tools to manage backends of software systems or manufacturing assembly lines, integration tools to connect with B2B enterprises such as payment gateways, and collaboration tools such as Zoom to connect with teams are some of the critical technology solutions witnessing adoption, he added.

On the other hand, small businesses must also undertake due diligence before digitising sections of the business. “Businesses should not digitise for the sake of it, especially in service-based industries where technologies like artificial intelligence cannot solve customer queries. Ultimately human interface is important and face-to-face interactions with customers generate most business,” added Goyal.

According to a recent survey of around 540 micro and small enterprises by Crisil, over 65 per cent respondents said they had adopted or upgraded their use of digital channels including online aggregators, social media platforms, and company websites for growth amid pandemic-led disruption last year.

“The growing demand for digitalization in operation was visible across segments. The highest transformation was recorded on financial transactions with around 68 per cent extensively adopting payment wallets and net banking, while a mere around 4 per cent were focused on procurement or inventory management,” Parekh had said.

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