Overcome HR challenges
The Financial Express — March 11, 2005

S. Ramadorai*
There was a time in the country not so long ago when there were many domestic IT companies offering ERP solutions. Today, just a few survive and they are struggling as well! Creating and nurturing small and medium enterprises and putting in place a self-sustaining eco-system that encourages their growth is one critical challenge facing the country’s industrial leaders today. The United States of America, for instance, has over time developed such an ecosystem, where a billion dollar company works with many smaller $100 million companies, while each of these, in turn, support smaller $10 million enterprises and so on.

From a macro-economic perspective, small and medium businesses can be a major growth engine for the Indian economy. They provide significant employment and drive entrepreneurship. It could also act as “Seed-Bed” from which large companies can grow. In the IT industry, there are some specific challenges small and medium enterprises have to overcome, namely, limitation of size and scale as well as funding & human resource challenges. However, the foremost issue, I believe, is that of the mindset. To foster entrepreneurship, we need to develop an attitude that is not afraid to fail and views failure only as a necessary stepping-stone to success!

It is critical that SMEs come together and create a vision and a long-term perspective for their respective business. These smaller players can either collaborate with leading IT players or create their own niche market segment. It is essential that any SME articulated how it can build on its USP, and how it can differentiate itself from competition with its business model. If we consider the collaborative model, how will it work? One option is the allied industry model, which has been successfully practiced by the manufacturing industry, the world over.

As the Indian IT matures on the global stage, companies (including SMEs) can pitch for large customers by bundling their offerings into a holistic solution. Another option is to leverage on the market access gained by the larger players, to showcase compelling products and solutions developed by an SME. Developing a niche market is the other growth option SMEs can pursue. A very focused, mid-sized or small company that can make products a substantial part of its strategy may be one way forward.

And there are opportunities galore! Embedded software, which is harder to write than normal software is one such opportunity where Indian SMEs can really make a mark. The challenge is to develop a compelling customer proposition that insulates the enterprise from the soon-to-be commoditised market of vanilla services like application development and maintenance. Another emerging opportunity for the smaller IT players is the potential domestic market of other SMEs across sectors.

Especially, because creating value from small businesses has proven elusive for many companies and IT firms can help bring their systems and processes to world-class standards and control costs. While there is no “one-size-fits-all” answer to these critical challenges, the potential of these smaller IT companies are being recognized by the industry and beyond. Acknowledging his tremendous potential that SME enterprises in the IT sector, the National Association of Software & Services Companies (Nasscom) has launched the Nasscom SME Forum.

The interactive platform will enable SMEs to share best practices and learn from industry leaders. The SME Growth Fund, has also been established this year by the government with a corpus of Rs 500 crore to provide equity support to units in knowledge-based industries such as pharma, biotech and IT. The time is ripe for the industry to come together and drive innovation. This is where the SME segment will fit in the larger growth picture. Due to their size, innovation in these enterprises is not only a survival strategy but it can also be converted into a growth strategy at the appropriate time.

*The writer is CEO and MD of Tata Consultancy Services