Indian SMEs, which are aggressive on IT adoption, make the the $8-billion Indian SME IT spend market one of the most exciting avenues for growth, says Vinod Krishnan, managing director, TVS Infotech (TVSi). In an interview with FE’s S Saroj Kumar, he says that tech spend by SMEs is getting a fillip, since SMEs today have access to funding, technology and above all, the legacy of family-owned business. Excerpts:
The Indian enterprise software market will witness a growth of 12.3% between 2009 and 2014, according to Gartner. How do you view this in the context of SMEs?
You will see more businesses in tier III zones which will adopt technology to enhance their business value. The very fact that all tier I companies targeting this segment today points to this fact. Today, most SMEs are spending on IT for data management and those who have already automated their businesses will spend on decision-making initiatives. This is TVSi’s mantra — to help companies in fields ranging from data management to decision making, to help them focus on their core business activities and not be worried about keeping their servers, attrition, disaster recovery, their mail servers being down, ERP support etc. We will be their ‘CIO’ on demand.
Is it true that ERP system vendors like Oracle, Microsoft and SAP are planning to jump into the end customer fray, bypassing customising vendors like TVSi?
I doubt this is true. For any enterprise software vendor, it is imperative to develop a strong channel strategy and build an ecosystem of vendors and promote their products and solutions. Even with ‘ERP on the cloud’ gaining a strong momentum, the channels will coexist.
You say that 90% of your clients lie outside TVS group companies. Will group companies remain a virgin territory to be tapped later?
TVS Group companies will not give any special preference to TVSi just because of the group affiliation. We have to earn our way on merit. TVSi has looked at the whole market from the beginning, with TVS Group companies being an important part of the target market. We expect to progress on both the fronts in the coming years.
On a standalone basis, what is TVSi’s contribution to the group company and how much is it expected to grow?
Our current contribution to the group is in a single digit, but I expect this to change over the next few years.
ERP solutions bare the whole gamut of operations of an SME. Traditionally, family-owned proprietary SMEs do not wish to expose their operations fearing competition and tax implications. How do you succeed in convincing your clients about the suite of ERP solutions?
We have never come across an instance in which a customer feared exposing its operations. Most of them talk of doubling/tripling their turnover in the next 3-4 years. For this, they need to have a strong foundation and a principled approach towards business. Today, companies cannot run businesses like their predecessors did decades ago. Second and third generation entrepreneurs are taking over the mantle of running these family-owned businesses. They understand the necessity of a strong backbone in terms of an ERP/IT systems for the growth envisaged and the requirements for security and confidentiality to be in place.
Is vendor lock-in an issue in enterprise software segment? What do you think of the call to develop solutions in open standards and open architecture?
Yes, to an extent there is a fear of lock-in, but this fear in is there in every business transaction, including that of a mobile service provider. If you ask an enterprise today to go with open standards-based solution, they will hesitate, both to build or to buy such a system off the shelf.
The ERP segment is a highly reference-based environment, with a herd mentality for procuring technologies. If you consider the manufacturing domain, SAP is dominant and will remain so for a long time to come because the adoption of SAP in this sector. If you drill down further within SAP for manufacturing, you will find a slew of solutions for every micro-vertical you can think of. Considering these dynamics, it is always better to entertain a known devil than an unknown one. Developing solutions in open standards will become a norm in the near future but enterprises would not risk taking the gamble right now. Their risk appetite for their core business is very high. However, this is not the case in non-core areas like IT. It is also a well-known fact that it is possible to integrate system architectures of better known ERP systems with open source solutions.