Welcome to the Small Business Survey

180 companies in nine cities. Find out what Indian small businesses are planning for IT this fiscal

This year IMRB surveyed 180 companies across nine cities for our annual Small Business issue. These companies were distributed across BFSI, Manufacturing, Chemicals & Pharma, Textiles, Education, FMCG and Services. About a third of the respondents were their organisation’s final decision-makers on IT spending, the CEO in most cases; the rest were key members of the team. The bulk of the respondents believed that they were responsible for adding value to the organisation by building or re-building business processes, as well as by implementing new technologies to achieve tactical and strategic enterprise goals.

About the respondents

The respondents had an average of about six branches in India with Chemical & Pharma companies having a presence abroad, along with Services (more so). The average organisation polled in this survey had 296 employees, with the lowest number in BFSI at a bit over a hundred and the highest in Services where the head-count hit 470 and Education where it was a whopping 850. On an average, the surveyed organisations had 170 PCs with that number being lowest among FMCG and Manufacturing types and highest in Education. The turnover of the average small business in this survey was Rs 72.36 crore. That was up from an average turnover of Rs 64.84 crore last year. The growth in turnover at 11.59 percent has been healthy. Annual profits have been high at close to Rs 2 crore, and average growth in the top-line was an impressive 17.26 percent. The projected rise in profits in the current fiscal is a relatively modest 12.72 percent. Export-driven revenues are expected to soar by 18.71 percent, with the highest growth expected in Chemical & Pharma, FMCG and Textile (above 25 percent in all three sectors).

The top three business priorities are to ramp up production capacities, increase sales and profits, and create new markets. If you look vertical-wise, BFSI, FMCG, Services, Education and Textiles want to increase their geographical coverage. Textiles and Manufacturing are very serious about creating new markets. Services is keenest on brand-building, but it is a low priority with the other verticals.

High on the list

IT is a high priority area for these organisations as is seen from the fact that 70 percent of them invested in IT last year, and 57 percent will continue to do so this year. That’s higher than the number that invested in expanding the rest of their infrastructure, or in buying or upgrading plant and machinery. Despite this, IT is still seen as a necessary business expense at over half the surveyed companies. That said, 37 percent see it as a value-add. When it comes to how they allocate their IT budgets, 43 percent intend to invest in proven technologies, while 30 percent want to compete at the cutting edge. Concern areas regarding IT include rapid changes in the technology landscape, higher priority being given to other capital projects, and unclear RoI. 80 percent of the respondents have a dedicated IT department. The IT in-charge goes by different designations—IT Manager, IT Head, EDP Manager, EDP In-charge... In seven out of 10 cases, the IT In-charge reports directly to the CEO. In four-fifths of these organisations, all the IT purchases are centralised.

The purchase process in a small business is quite intriguing; the IT head’s role shrinks as the process matures from assessment to sign-off, while the CEO’s involvement grows.

How the pie is divided

In 46 percent of small businesses there is no IT budget and spending is need-based. In 38 percent there are IT budgets and these are strictly followed. The amount of investment in the previous fiscal was Rs 22 lakh. That’s expected to grow by 8 percent to almost Rs 24 lakh. Systems accounted for over a quarter of IT spend, followed by software (13 percent) and peripherals (12 percent). Networking, connectivity, storage, supplies, support services and administrative costs all weighed in at between 7 and 9 percent. In the current fiscal, systems are expected to account for a fifth of IT spending while the share of software and peripherals is almost the same. However, the 5 percent drop in spending on systems is translating into a point or two extra in other areas.