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Mid-market businesses are the backbone of India's economy as they employ millions of workers. The SME segment is responsible for nearly one-third of the country’s manufacturing output. With advancement in technology, more and more small businesses are adapting to the latest technology, including AI.
The Indian mid-market businesses are prioritising the implementation of generative artificial intelligence (Gen AI) at a moderate or strong priority at 96%, ahead of the rest of the world at 91%, says Rajeev Singh, Vice President & Head of Mid-Markets, SAP Indian Subcontinent, citing a SAP survey released in September. Singh also believes there is an immense potential in the segment in terms of technology adoption . In an interaction with ET Digital, Singh says that many SMEs are still evaluating how they can make business outcomes out of AI.
Edited excerpts: The Economic Times (ET): Where do India’s SMEs stand in terms of technology adoption? Rajeev Singh (RS): We have been in India for the last 28 years and 80% of our customers are SMEs. We have closely seen the journey of SMEs over the period. When the technology transformation started happening, people called it transformation.
But it was more of an automation. It all started with SMEs trying to translate their paperwork digitally using software. So, it was more of a translation than transformation.
When SAP came into the picture, some of the SMEs got hooked on it, but mainly for some basic stuff like general ledger. However, 10 years down the line, people have started realising the potential of digital transformation. The next generation of promoters of SMEs has started looking at technology as a catalyst that can transform their business in terms of supply chain, operational efficiency and customer outreach.
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P. Gupta, Professor: Department of Finance and Business Economics, University of Delhi View Program Then came Covid which, according to me, was an inflection point, especially the last three years after the pandemic, which saw maximum shifting of small businesses towards technology. ET: What role does AI play in India’s SME ecosystem? What’s the trajectory of AI in the small business segment? RS: The Indian mid-market businesses are prioritising the implementation of Gen AI at a moderate or strong priority at 96%, ahead of the rest of the world at 91%, according to the SAP survey released in September.
Adopting Gen AI, at 66%, only trails preparing for cybersecurity threats, at 67%, as Indian mid-market businesses’ strongest organisational priority in 2024, and ahead of making business operations more environmentally sustainable at 65%. The mid-market businesses are also putting a high priority on AI to improve training and skills development at 51%, customer experience at 50%, and to optimise supply chains and logistics at 50%. Hence, AI is very, very ingrained today in SMEs.
But having said that, I think a lot of SMEs are still evaluating how they make business outcomes out of AI. So, AI is still a buzzword for a lot of organisations. ET: Does India have an adequate skilled AI labour force? RS: Yes, absolutely.
I think India is the talent capital of the world in technology. Globally, if I am not wrong, more than 50% of tech resources are Indians today. I have no doubt that India will be the talent capital of the world for AI also.
There is an immense amount of work happening in AI courses across India. Industries are collaborating with the academia to train such people. In SAP, 40% of global innovation is happening in India.
So, 40% of the global R&D of SAP happens out of India at the Bangalore office. Around 25% of patents come out of India. So, that means that if SAP is moving into AI, all the development is happening inside India from Bangalore.
ET: What are the biggest challenges for the Indian mid-market businesses? RS: Indian mid-market businesses are the growth engines of our economy, driving significant growth, innovation and employment. As growth-oriented companies, these businesses encounter the same issues related to global complexity as larger enterprise businesses. While their priorities may differ from industry to industry, Indian mid-market businesses find themselves seeking to streamline their businesses, often in complex data and regulatory environments.
They are looking for benefits that advanced and newer technology offers to their larger counterparts — speed, frictionless updates, industry best practices — to manage their business. All this with the limited resources they have at hand, including the size of their IT teams. This is where SAP comes in.
With 80% of SAP’s customers in India coming from mid-size organisations, we have a long history of understanding their requirements. We are committed to co-creating, empowering and enabling mid-market organisations in their digital-first businesses and growth journey. ET: Take us through some of your products for the Indian SMEs ? RS: Our SME customer base ranges from across sectors, including IT & ITeS, life sciences & pharma, manufacturing companies, retail, engineering, construction & operations verticals.
We are committed to empowering every mid-market organisation in India with integrated cloud technology while enabling them to become globally competitive and intelligent, sustainable enterprises. With our digital core, we are offering a modern and intelligent platform tailor-made for these businesses to manage operations so that they can focus on the core task of market expansion. At the same time, they are looking for predictable costs and rapid implementation that ensures minimal disruption nor compromises their agility.
This is what makes SAP unique in the industry today — we offer our customers solutions that address all these elements. ET: What are your expansion plans for India? RS: As India is set to emerge as the world’s third-largest economy by 2027, surpassing Japan and Germany with a GDP crossing the $5 trillion mark, we recognise the critical role that small and medium enterprises (SMEs) play in this transformation. SMEs are the backbone of the Indian economy, contributing approximately 33% to the country's GDP and accounting for nearly 123 million jobs.
In line with this, SAP is deeply committed to expanding its presence in India, particularly in the mid-market segment in tier 2 and tier 3 towns such as Baroda, Ahmedabad, Hyderabad, Kochi, Bhubaneshwar, Patna, Orissa, Coimbatore, Jaipur, etc. As a market leader in enterprise application software, we understand the unique needs of emerging businesses and will continue to offer these businesses an innovative range of solutions encompassing various business models, faster implementations, and deployment options across multiple industries, enabling businesses to meet both current and future requirements. Additionally, we are prioritising talent acquisition from tier-2 and tier-3 cities to support the broader ecosystem's growth and meet their evolving needs.
Our expansion in this market will also focus on leveraging AI to drive the digital transformation of SMBs, empowering key sectors, and addressing challenges related to data, cybersecurity and talent management..
