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G00238770

SMB Growth and SaaS-Based ERP Will Fuel ERP Adoption in India Published: 24 January 2013 Analyst(s): Sunil Padmanabh, Asheesh Raina

The small and midsize business sector in India is in a rapid growth phase, and is expected to grow with the same momentum during the next three years. Globalization and software-as-a-service-based solutions targeted at SMBs will drive ERP adoption in this sector.

Impacts


Small and midsize businesses (SMBs) in India faced with global competition are being compelled to streamline their operations. The growth of software as a service (SaaS)-based ERP will provide alternative deployment choices for Indian SMBs. ERP vendors are aggressively focusing on Indian SMBs with industry flavors and targeted ERP solutions. SMBs are penetrating Tier 2 Indian cities, raising expectations that they will progressively adopt ERP.







Recommendations
Indian SMBs:


Consider how ERP can improve functional integration and drive business process improvements. Assess the readiness for deploying ERP, and clarify the changes required to your business. If your organization is located in a Tier 2 city, evaluate the IT infrastructure availability prior to embarking on cloud ERP. Evaluate the credentials of your ERP vendor's partner ecosystem that has a focus on the SMB segment.

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Analysis
"SMB" Defined
Gartner's SMB market definition varies regionally because of variations in currency and earned revenue. Table 1 indicates how SMBs in India compare to the rest of the Asia/Pacific region and the world. Table 1. SMB Definitions Around the World Asia/Pacific and Japan Small Business Segment Number of employees

EMEA

Latin America

North America

1 to 99 Less than $10 million

1 to 99 Less than $15 million

1 to 99 Less than $10 million

1 to 99 Less than $50 million

Revenue range

Midsize Business Segment Number of employees, low-end midmarket Number of employees, upperend midmarket

100 to 499

100 to 499

100 to 499

100 to 499

500 to 999 $10 million to $500 million

500 to 999 $15 million to $500 million

500 to 999 $10 million to $500 million

500 to 999 $50 million to $1 billion

Revenue range
Source: Gartner (January 2013)

The SMB sector in India (estimated at more than 75,000 enterprises) is one of the key growth drivers of the country's economy. Gartner estimates that SMBs account for more than 10% of the Indian GDP, and they are expanding and growing. Gartner believes that ERP in SMBs will grow at a compound annual growth rate (CAGR) of 17.2% through 2015. A recent Gartner enterprise IT spending survey revealed that 42% of the organizations surveyed in India (base of 86) have allocated separate budgets for ERP applications; 52% of the respondents indicated an increase in their ERP budgets for the next year. Many SMBs in India are family-operated businesses or being run by first-generation entrepreneurs. In such organizations, most activities — such as sales, marketing, production, distribution — are being handled by the proprietors themselves, and many IT-related initiatives depend on the extent

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Gartner, Inc. | G00238770

of their propensities for deploying technology. In recent years, a significant number of these "techsavvy" proprietors have been proactive on technology, and specifically on adopting ERP. Traditionally, some of the key IT challenges SMBs in India face are technology obsolescence, lack of internal IT expertise, extensive reliance on manual operations, lack of expertise in evaluating the ERP vendor marketplace and inability to unlock value from their homegrown solutions that don't scale at the pace of their growth and expansion plans. Leveraging IT in a cost-effective manner, with judicious deployment of technology and enterprise applications, is increasingly becoming critical to SMBs in India. Gartner estimates that more than 50% of Indian SMBs are outgrowing the capabilities of...
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