Technology Adoption Challenge for SMEs in India

SME’s- Their significant role in the Indian economy and the challenges they face.Small and medium-sized enterprises (SMEs) at a global level, all over the world, have become the backbone of struggling and developing economies. These are constantly in search of a solution for recession and unemployment. Governments are encouraging entrepreneurship at a great scale for providing multiple benefits, including job opportunity creation, increasing the productivity, increasing industrial output & exports, the development of entrepreneurship, developing rural economy, healthy competitiveness, gradually eradicating poverty and achieving various societal goals. One of the universal concerns is to facilitate the creation of such enterprises.In spite of playing the key role in the Indian economic development, Indian SME’s have to deal with major challenges such as inadequate credit facilities, unavailability of proper technology and skilled manpower. Meanwhile, facing competition from both, national as well international sectors of their respective industry or the organizations associated with them.India’s technology sector, inclusive of the large Indian Corporation, also small and medium organizations have aided companies worldwide. An evaluative look at technology adoption by SME’s would present that the manufacturing and service sectors are comparatively slow in technology adoption. They still depend heavily on the traditional non-technical systems for the purpose of sales, marketing, and finance and for maintaining interaction with customers.India’s ambitious growth targets and economic goals can be achieved by providing, proper support, training and for the SMEs. Technology adoption may be the single most important factor in this growth strategy.

Some major challenges faced by SME’s are discussed below:Limited Equity FlowMostly SME sector is formulated by individuals getting in their own expertise and manpower with limited capital.The workforce is comprised of mostly family and friends also the same for general support and capital source. Owners, financial institutions could only incorporate limited equity investments. There is a lot of pressure on revenues and profit margins for SME’s. All these further create extreme competition amongst them.The landscape of Indian businesses is rapidly changing. Not just for large enterprises but also for the SMEs. One of the biggest drivers is technology and communication for this long-lasting and rapidly developing change. If the adoption of technology by SMEs in India is evaluated, it is clearly evitable that they have multiple barriers that come in their way. The most significant hurdles to technology adoption in SMEs are as follows• Lack of awareness of beneficiaries• Unfamiliarity with technology• Lack of proper guidance• Lack of credible support from Governmental institutions• Very poor technology adoption.The technology is extremely important in every sector like selling an online marketplace, management of inventory, post-sales support, financial reporting etc.SMEs, somehow do not give technology adoption the attention that it deserves. SMEs are not enough convinced about the return on investment in technology and cost is the biggest obstacle.IT policiesSeveral rules and regulations are established by governments, that guide business. Organizations normally change the way they function when the government changes policies. Economic policy and market regulations by the government have an influence on the business profitability. Regulations established by federal, state and local governments must be compiled by the owners. As technologies are rapidly changing, it’s important for organizations to innovate.Technology challenges for SME can be dealt easily by IT consultants. They consult and integrate new technologies, particularly in mobile, for app development, and in cloud computing.Dependence on physical IT resourcesEnabling employees to work productively and ensuring the security of the IT network and data is one major challenge for SME’s. Systems should be actively working to aid employees to work effectively. Cloud computing and IT Managed Services have helped enterprises enormously. Some organizations also outsource IT services.Not staying up with changing technologyRapidly advancing technology demands these organizations to keep up with its pace. Purchasing latest smartphones, tablets, routers and other such utility devices for an entire team could be expensive. It is very expensive to subscribe to Software-as-a-Service applications that are very important for much functionality like accounting, customer relationship management, invoicing etc. Because of budget constraints, SMEs can’t upgrade technology frequently, hence technology budgeting is one of the biggest technology challenges for SME.Upgrading technology is very crucial as it helps businesses to be competitive and enable employees to work better and efficiently. Establishing a precise annual budget is essential to keep technology up to date.

Inappropriate backup systemsPower outage, server crash, files getting deleted accidentally, or any such data disaster can demolish important data in the system. SMEs don’t have massive budgets to spend on data backup, storage, and protection. They do not have a plan for backup and disaster recovery. The appropriate backup solution and disaster recovery steps can help to deal and overcome these events thus eliminating the expenses that come along with them. There are various data solutions available.Unclear device policiesThe security of Information technology systems is one such duty for which every employee is responsible. Policies should be implemented and precisely communicated to the employees.To make SMEs aware of all the resources available for technology adoption, it is important that the Government of India, private sectors and training institutions and other such stakeholders must work together to develop the SME’s an effective communication program.The government today is highly concerned for the growth of SMEs like never before. Subsidies and other cost benefits are being offered to SMEs. With increasing awareness about these benefits including reduced costs, our Indian economy will see more advanced technology adoption. A realization must be brought in amongst these organizations that technology is not just an option but a necessity.

Alternative Sources of Business Growth Finance: There Is More Than One Way to Fund Growth

Talk to any business owner or read the business section of any newspaper and you’re likely to come across stories of struggles to access sufficient finance to grow or maintain their business. But we are beginning to witness a change in how business owners access finance with many now actively seeking out alternative sources.

A survey carried out by the UK’s Forum of Private Business found that 26% of businesses were hunting out alternative financial products, with 21% seeking them outside of the traditional main High Street lenders. In fact, in another survey undertaken by the Federation of Small Businesses, it was discovered that only 35% of respondents used a traditional overdraft facility in 2011.

So, if banks are continually reluctant to lend to all but the lowest risk businesses, how can the remainder of the UK’s business population finance growth? Here are some of the increasingly popular alternative sources of finance to investigate.

Better Management of Working Capital

This may appear to be an odd source of finance but very often businesses are sitting on undiscovered cash reserves which can be used to finance growth. A report issued by Deloitte in 2011 revealed that the UK’s largest businesses were sitting on £60 billion of unproductive working capital. Inefficiencies in how working capital (debtors, stock and creditors) is handled can unnecessarily tie up your cash. Cash can be unlocked and released back in to the system thereby allowing self-financed growth plans by taking a close look at credit procedures, how credit terms are granted and how outstanding payments are chased.

Ensuring that stock is kept at an optimum level via better inventory management is another area where cash can be released to support and finance growth. Take a good look at your inventory management process and identify areas where cash is trapped.

Good management of working capital is not just about better control of debtors and stock, it is also about maximising the terms given by creditors. Are you too eager to maintain a first class relationship with your suppliers by paying well before the due date? You can positively impact your cash position by taking full advantage of terms offered by your suppliers. Have you fully leveraged your position by seeking an extensive of terms from say 30 days to 45 days?

Being more efficient in how working capital is managed can release sufficient funds to self-finance growth plans.

Personal Resources

With traditional avenues of funding being more difficult to access business owners are now looking to their personal resources to fund growth. Whether it be drawing on cash savings, using personal credit cards or taking additional mortgages on residential properties, such sources are an instant solution. A survey by the Federation of Small Businesses found that 33% of respondents had utilised their savings to fund growth. As well as being more immediately accessible using personal resources is often a cheaper source of finance.

Family and Friends

Sometimes referred to as the three F’s – family, friends and fools – this can appear to be a less stressful way of raising finance. In some ways it can but it can also be a journey fraught with danger. Tapping into their personal network business owners source finance by either seeking a loan and offering to pay an interest rate higher than that on offer on a High Street savings account, or offering a slice of equity in the business in return for investment.

Raising finance in this way can be relatively easy because the request and fulfilment is very much based on personal trust. Typically a Business Plan would be presented highlighting both the investment opportunity and the risks but at the end of the day success is down to the depth of the relationship and level of trust.

The danger in raising funds this way is that the nature of the relationship will change from that of a personal nature to a business transaction. Failure to regularly pay as per agreed terms, or even total failure to pay, can irreparably damage the relationship so tread with care.

Asset Finance

The Asset Finance industry is based on the concept of either preserving cash or speeding up access to it. Asset finance, which consists of invoice discounting, factoring and funding of asset purchases, has been available as a source of finance for many years, yet it’s only now gaining more recognition. Figures released by the Asset Based Finance Association, a trade association representing the industry, show that to the third quarter of 2011 the amount financed by the Association’s members increased by 9% compared to the same period in the previous year. Whilst the increase may not seem significant it is against the backdrop of a fall in traditional bank lending.

In a world where ‘cash is king’ asset financiers help preserve cash by financing the purchase of assets such as vehicles, machinery and equipment. Because the financier is looking to the underlying asset as security there is usually no requirement for additional collateral. According to the Asset Finance and Leasing Association one in three UK businesses that have external finance now utilise asset finance.

Asset financiers can help speed up the flow of cash within a business by allowing quicker access to cash tied up in the debtor book. An invoice discounting and factoring facility gives businesses the ability to immediately access up to 80% of an invoice instead of waiting for the agreed credit terms to run their course. Such finance facilities will speed up the velocity of cash within the business thereby allowing the business to fund a high rate of growth.

New players such as Market Invoice are entering the market to allow businesses to raise finance against selected invoices. Tapping into high net worth individuals and funds Market Invoice acts as an auction house with funders ‘bidding’ to advance against certain invoices.

Crowfunding and Peer-to-Peer

A relatively new phenomenon is the concept of raising finance by tapping into the power of the crowd. The historically low rates of interest payable on savings have led to depositors seeking out new ways to increase their returns. With business owners struggling to raise the funding they need it’s only natural that a market would be created to bring these two parties together.

CrowdCube entered the market in 2010 to match private investors seeking to be Dragons with those businesses looking to raise capital. Once a business passes the initial review stage their proposal is posted on the site and potential investors indicate the level of investment they wish to make with the minimum amount being as low as £10.

Businesses looking for a more traditional loan should consider Funding Circle. Established in 2010 Funding Circle also matches individual investors looking for a better return with those businesses seeking additional finance. Businesses can apply for funding between £5,000 and £250,000 for a period of 1, 3 or 5 years. As a minimum the business has to have submitted two years Accounts with Companies House and be assessed in order to arrive at a risk rating which guides potential investors.

As the crowd sourcing concept matures we are likely to see more players enter this market to capitalise on the need for better investor returns and easier access to business finance.

There is More Than One Way to Fund Growth

Accessing finance to fund growth plans does not have to be difficult if you are prepared to seek out alternative providers. Funding growth is now no longer the exclusive preserve of the traditional High Street bank and it’s now down to business owners to seek out the alternative routes.