Internet goldmine awaits small companies

While India’s large enterprises were among the first to adopt broadband and now lead the way in adopting more advanced web technologies to increase revenue and reduce costs, small and medium enterprises (SMEs) have not yet fully leveraged information, communication and web technologies, according to McKinsey & Co.

They are held back by a lack of education about how to use the web and by the high cost of Internet access and technology solutions.

“However, SMEs across aspiring countries, and in India too, that have used the Internet state that they have increased revenue, reduced costs, and recorded higher productivity; they are also growing the fastest,” said Chandra Gnanasambandam, Anu Madgavkar, Noshir Kaka and others of McKinsey in a study last week.

In the government sector, they said, India is starting to offer better and more accessible public services through the Internet, but the impact on citizens has been limited, given that the low levels of Internet penetration reduce the impact of e‑governance initiatives.

India is ranked 48th in a sample of 57 countries across the developed and aspiring world, on a par with some peer countries such as Brazil and Vietnam, but lower than China, South Africa and Malaysia.

India scores well on the availability of financing opportunities, but less so on the ease of starting a new business and on Internet accessibility.

Factors within each of these categories can be improved to spark more entrepreneurship.

The other major barrier to India’s Internet entrepreneurship readiness is Internet accessibility, which is limited by India’s low PC and Internet penetration. Internet accessibility is depressed by the costs associated with bandwidth and domain registration.

But Indian entrepreneurs are already forging ahead, devising innovative business models to overcome the challenges of the Internet ecosystem and reach a wider set of customers, thus capturing the nascent e‑commerce opportunity, they said.

Many of these entrepreneurial start-ups have achieved scale in their Internet businesses, despite low Internet penetration and the weak infrastructure for online payment, by devising solutions that utilise mobile phones or cash-on delivery.