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MSME Growth in ITeS
Context:
The micro, small and medium enterprises (MSMEs) in information technology enabled services (ITeS) industry is estimated to grow 7-9 per cent in rupee terms to ~4.2 trillion this financial year.
Drivers of Growth:
- Digital Transformation & Technological Advancements: The demand for cloud-based solutions drives growth, exemplified by Freshworks, which provides popular SaaS products.
- Increased Outsourcing Demand: Global outsourcing trends benefit MSMEs like Fusion BPO, which offers customer support services internationally.
- Strong Order Pipeline & Project Resumption: A robust order pipeline in sectors like BFSI allows firms like Mindtree to resume deferred IT projects and expand operations.
- Government Support & Policy Initiatives: Initiatives like Startup India help MSMEs such as Vakilsearch thrive by providing online legal services.
- Rising Demand for Cybersecurity: The increasing need for data protection boosts growth for companies like Lucideus, which specialises in cybersecurity solutions.
- Collaboration & Partnerships: Haptik has expanded its offerings through strategic partnerships, providing AI chatbot solutions in collaboration with global firms.
- Access to Funding & Venture Capital: Venture capital support enables rapid scaling, as seen with UrbanClap, which has grown its digital home services platform significantly.
ITes Industry
- Information Technology-enabled Services (ITeS) industry encompasses a wide range of services that utilise information technology to enhance and streamline business processes.
- It acts as a crucial extension of the IT industry, providing support to various sectors by optimising operations through technology-based solutions.
Key Segments in ITeS:
- Customer Relationship Management (CRM) Services: Includes customer support, telemarketing, helpdesks, and call centres, often shifting from voice-based to non-voice-based operations (like chatbots, emails, and social media interactions).
- Transaction Processing Services: Involves services related to financial transactions, such as billing, payroll, and digital payment processing.
- Data and Knowledge Processing Services (KPO): Includes high-value services such as market research, legal services, and data analytics, which require specialised knowledge and expertise. documents, data entry, and other back-office operations.
Industry Composition:
- MSMEs make up 30-40% of the ITeS industry.
- These enterprises are primarily involved in customer relationship management (CRM) services, which account for three-fourths of the industry’s revenue.
Revenue Shifts:
- CRM services are poised to benefit from a shift towards non-voice revenue streams.
- Transaction services will expand due to increasing digital payments.
- Knowledge services are focusing more on analytics-driven offerings.
- Employment Trends:Employee growth is expected to be modest at 0-1% as companies focus on cost efficiency, skill development, and internal programs.
Challenges for MSMEs in the ITeS sector:
- Limited access to capital.
- Keeping up with rapid technological advancements.
- Competition from larger companies and other low-cost economies.
- Cybersecurity risks.
Conclusion:
With digitalisation on the rise globally, MSMEs in the ITeS industry have strong growth prospects. By focusing on innovation, specialisation, and leveraging government policies, they can thrive and compete effectively in both domestic and global markets.
