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The Importance of Private Public Partnerships in SME Adoption of ICT

by on September 3, 2015
 

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By Emmanuel Obinne, The breadth and speed of changes brought by the internet have radically altered business landscapes across the world. Since the Mid 90s, the internet has made possible the validation of electronic interactions between humans and computers. This was and is still revolutionary as such interactions are able to take into account who the individuals are in order to deliver information and services in a personalized manner. The possibility for individuals to establish a personalized interaction with, and to be recognized by a remote computer system has been a major step. This ushered in a decade of innovation, enabling web, mobile and digital services to become more ubiquitous and increasingly essential in everyday life; it has transformed economies and societies, serving as a building block for economic development.

The e-MarketPlace is one of the major economic transformations borne out of the digital revolution of the mid-90s. It is a virtual online market where multiple suppliers and multiple buyers can undertake business transactions over the internet and other digital mediums. The following are some of the benefits that can be derived from an e-MarketPlace:

Benefits for the buyer

  • Established e-marketplaces provide a level of trust for the buyer as they are dealing exclusively with suppliers who are members
  • Updated information on price and availability makes it easier to secure the best deal

Benefits for the seller

  • It provides an additional sales channel to market and sell products
  • E-marketplaces can offer reduced marketing costs when compared with other sales channels

 

The SME sector plays a significant role in its contribution to the national economy in terms of the wealth created and the number of people employed (Rashid et.al, 2001). With the development of ICT (Information & Communication Technology), and the shift to a digital and knowledge-based economy, ICT is becoming an increasingly important tool for SMEs, both to reinvigorate corporate management, and promote growth of the national economy (UNDP, 2004).

SMEs account for meaningful economic development in a nation. For instance, the small scale sector is the backbone of India’s manufacturing sector with 95 per cent of the total industrial units. But despite advances in IT (Information Technology) and acceptance by large organizations of such technologies, the same level of adoption is not evident among SMEs. This suggests that SMEs face significant and unique challenges in adopting ICT and e-commerce. This low level of adoption, particularly impedes SMEs especially in developing countries.

Some of the reasons the electronic environment has been intimidating for SMEs are as follows:

  • Complexity of use due to illiteracy
  • Expensive: Setup costs and pricing issues; not wanting to make substantial investments especially when there are no guaranteed short term returns
  • Lack of awareness and perceived benefits
  • Misinformation and mistrust of the IT industry
  • Concerns about legal and liability aspects
  • Inequality in public access to the internet
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Low adoption of ICT by SMEs results to unhealthy conditions for economic growth – widening the gap in financial inequality, increasing state of underpowered citizens and unemployment etc. To further compound this challenge, SMEs relatively have poor book keeping practices, their transactions are largely cash based and occur outside the banking and financial system. As a result, banks are unable to prequalify them for credit (loan) facilities to help with business expansion. According to Ann Cairns (President International Markets MasterCard), SMEs lack a financial identity and cannot easily receive money from relatives overseas or assistance from their own governments. They are usually unable to get loans and often cannot access efficient markets to buy and sell their goods.

 

Governments also face the challenge of a dearth of trade data on their activities which makes projection and planning a difficult task. The fact that the small scale sector is the backbone of India’s manufacturing sector with 95 per cent of the total industrial units is a global phenomenon. The impact of SMEs in their local economies is vast. Therefore the importance of this sector to national development cannot be ignored.

 

The Project VIKAS Example

With a sole aim of improving the competitiveness of SMEs, the National Manufacturing Competitiveness Council (NMCC) and Microsoft India, set up Project Vikas[1] in June 2007. Under the aegis of the project, the Tirupur Exporters’ Association (TEA) through its Special Purpose Vehicle (SPV) launched online solutions for the textile manufacturing SMEs in Tirupur. This was done in partnership with G-Tech Info Solutions Limited and Microsoft India. The solutions include an Online Desktop by Airtel, Hosted Email by Global Outlook and Unified Communications by WIPRO. These comprehensive and affordable enterprise solutions aimed at enhancing the productivity and efficiency of the clusters. The association has been working closely with the government, industry and solution partners to help the textile exporters and manufacturers in Tirupur grow their businesses through technology adoption. Their goals is well elucidated by the following statement made by Mr. Ravi Venkatesan, Chairman, Microsoft India:

 

There is no denying that the Indian SME sector has the potential for immense growth – but the challenges faced by it are equally a fact of life today.”

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[1] http://www.firstpost.com/business/biztech/sme/project-vikas-spearheads-ict-revolution-among-smes-1870661.html

Highlights of the National Manufacturing Portal include:

 

  • Knowledge base on different manufacturing sectors/sub-sectors Intellectual property rights (IPR) information to achieve niche competitiveness

 

  • Data bank of Micro Small and Medium Enterprises (SMEs)

 

  • Market information to improve:

 

  • Market access

 

  • Credit and finance related areas for SMEs including various policies, schemes etc.

 

  • Empowering SMEs through ICT – such as how to analyse ICT needs at firm and cluster levels-A to Z. IT and VAT handbooks on hardware and software, important forms for taxes etc.

 

  • Database of different clusters, updated directory information and applications to find companies and clusters on India map

 

  • Central and state government Industrial Acts, policies, schemes, incentives etc. for the manufacturing sector; and related useful links

 

Through Project VIKAS, hosted solutions and training programmes have helped to address the key issues of affordability and skill availability faced by SMEs. ERP[1], CRM[2], Internet and B2B[3] collaboration technologies have become imperative in making SMEs take stock of global markets and develop operational efficiencies. This is because with the global online presence which an e-MarketPlace provides, their business frontiers have been expanded. Free, Perfect, Instant – these attributes append to information when you digitize them; enabling you measure them more effectively. This facilitates the implementation of feedback mechanisms that would allow measurement of economic growth, hour-by-our, minute-by-minute, number and time of growth etc. Simply put, these are some of the benefits that ERP, CRM and B2B provides in the use of ICT. The SMEs are now able to obtain customer feedback, manage interactions as well as exchange information among themselves promptly.

Project VIKAS is a Public Private Partnership (PPP) and it is clearly seen that such partnerships integrate knowledge and expertise to bring about efficiency and achieve economies of scale. It is imperative that customised solutions are deployed or instituted to meet the unique needs of SMEs because catering to the micro businesses would not be economical for private service providers. Therefore in this context, Private Public Partnerships (PPPs) are essential to:

 

  • Enhance awareness among micro firms and businesses and

 

  • Develop subsidized cost effective solutions for SMEs

 

Speaking at the 2015 Conference on Inclusive Capitalism – London 2015, Ann Cairns (President International Markets MasterCard) agrees with the importance

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[1] ERP – Enterprise Resource Planning

[2] CRM – Customer Relationship Management

[3] B2B – Business-to-Business of PPPs in global economic growth:“The only way to reach scale in addressing it is through public-private partnerships. Two billion people won’t be reached by governments, telcos, banks or merchants, acting alone”. The initiative by the National Manufacturing Competitiveness Council (NMCC) and Microsoft, India at Apparel cluster in Tirupur is an excellent example of such a collaboration for the benefit of SMEs.

 

Particularly in third world countries, partly because of growing disappointment with results of development strategies focusing on large scale capital intensive and high import dependent industrial plants, these enterprises have begun receiving increasing policy attention in recent years. The impact of SMEs is felt in the following ways: Greater utilisation of local raw materials, employment generation, encouragement of rural development, development of entrepreneurship, mobilisation of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers. The vast majority of developed and developing countries rely on dynamism, resourcefulness and risk taking of small and medium enterprises to trigger and sustain the process of economic growth. Aptly speaking, SMEs are major player in economic development which is critical to self-sustenance of an economy. The SME population inevitably requires handholding through appropriate policies to enhance usage of innovative ICT solutions in order to enjoy the benefits thereof and contribute to meaningful economic and infrastructural development.

 

 

Bio – Emmanuel Obinne

 

Emmanuel Obinne is an e-payment, electronic collections and Financial Services Industry analyst with 8+ years’ experience, building winning revenue bases and structures for businesses. He is currently the Deputy Manager, Public Sector Business Development & Special Projects at eTranzact International Plc, Nigeria. He joined eTranzact from Skye Bank PLC where he was the Regional e-Payment Sales Manager.

Emmanuel is a firm believer in the power of data in driving the growth of businesses, and this has fuels his passion for continued involvement in the provision of innovative e-Business and Technology Solutions, and facilitating training to different stakeholders.

 

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