Lessons from High-Growth SMEs

August 23, 2013 by Susan Galer 0

Photo: Shutterstock

Photo: Shutterstock

A survey from Oxford Economics has found that high-growth small and midsize enterprises (SMEs) across Brazil, Russia, India, China, and South Africa (the “BRICS” countries) are acting on an international scale, competing even more against larger rivals, and investing aggressively in technology to improve operations and become more nimble. The findings reflect a quiet but powerful transformation that’s fundamentally changing global markets for companies of all sizes, and bringing innovations like cloud, mobile, and Big Data front and center to every business conversation.

The enormous changes are being felt by SMEs every day. Sixty-five percent of SMEs in these countries strongly agree that global competition has increased substantially in the past two years and say they are increasingly focused on penetrating new geographic markets. Two-thirds of the companies are competing against larger companies than in the past, with Indian SMEs at 83 percent.

Finding talent for global expansion is the new imperative

Representing almost three billion people, with a combined GDP of US$14.8 trillion, the five BRICS countries can be even more important economies for SMEs. Growth rates for new business startups in BRICS nations average 40 times faster than other countries. The Oxford Economics study reveals how these SMEs are transforming themselves to compete in the global market.

Next page: Concerns about recruitment are high

For example, as a provider of business process outsourcing and IT services in Asia, Europe, and the US, Zensar Technologies, a $310 million professional services company based in Pune, India, considers itself in the “people business.” Its recruiters are always on the lookout for talent in India and abroad. Once hired, workers must be trained and kept engaged, says CEO Ganesh Natarajan, while the company needs to get full value from workers as wages increase. In India, “the cost of manpower is going up at a rate of seven percent to eight percent a year,” says Mr. Ganesh, “so productivity improvement becomes very important.”

Indeed, 35 percent of surveyed SMEs from BRICS nations are concerned about the lack of skilled workers with that percentage climbing to 52 percent in India and 41 percent in Brazil. Forty-four percent of SMEs are finding it increasingly difficult to recruit people with the right skills for their businesses. The problem is most acute in Brazil (53 percent), China, and India (both at 48 percent). Meeting skill demands is the highest priority for SMEs in Brazil and India (29 percent), as well as South Africa (25 percent). To address this challenge, over 20 percent of SMEs have made acquiring digital skills through hiring, training, or acquisitions one of their strategic priorities.

Technologies fuel business transformation

Technology plays an equally important role for SMEs in BRICS nations as they increasingly go global. Compared to SMEs in other parts of the world, a higher percentage of those in BRICS countries believe that technology will have a significant impact on the revenue growth of their companies.

Next page: Cloud computing and business analytics to see greatest increase in adoption

Almost 70 percent agree that technology helps them achieve longevity and sustainable growth, with that percentage rising to 77 percent in Brazil and India. Seventy-three percent of African SMEs view technology as the heart of their business transformation efforts. And despite economic uncertainty, leading-edge adopters are willing to invest in solutions that will give them a competitive edge in the larger world arena. Fifty-six percent of all companies say they invest in new technology when there is a clear ROI.

Cloud computing and business analytics are expected to see the greatest increase in adoption at growth rates of 34 percent and 33 percent, respectively. Russian SMEs had the highest cloud computing growth rates at 45 percent. Indian and Chinese SMEs had the highest growth rate for business analytics, respectively at 73 and 72 percent in the next three years. Thirty-five percent of SMEs give priority to mobile technologies during the same time frame in order to optimize the supply chain, deliver better customer service, improve product/service development, drive cost efficiencies, and improve innovation. South African SMEs have the highest expectations for mobile (29 percent) overall. India tops the growth in social media usage in the next three years (75 percent), with China close behind (73 percent).

Each of these technologies provides unique advantages

Cloud-based deployment is increasingly popular because of the flexibility and agility it offers. For example, software-as-a-service (SaaS) models with subscription-based pricing allow SMEs to channel in-house IT resources towards innovations that will grow their business. It’s no wonder almost 33 percent of SMEs in BRICs nations believe that cloud computing will help drive cost efficiencies and improve product and service development (28 percent).They can also adjust service levels on the fly, depending on evolving business needs.

Next page: Business analytics and mobile technology

Advanced analytics can give SMEs easy access to high volumes of data for better decision-making from supply chain through customer engagement. Almost 60 percent of SMEs in BRICS countries expect business analytics to create a competitive advantage for their companies in the next three years. That percentage jumps to 65 percent for SMEs in China and India.

Anywhere, anytime access on mobile devices holds the promise of improved productivity, better customer service, accelerated sales cycles, and the ability to close deals faster. Fifty-eight percent of SMEs in all the BRICS countries believe that mobile technology will give them a competitive advantage in three years.

Business management software most popular in China and India

Just as important to SMEs is having an integrated platform that unites operations for real-time visibility across the company. Business management software (BMS), will be most widely used by SMEs in China and India (both at 61 percent), followed by Russia at 56 percent. This is higher than the global totals for SMEs at 50 percent.

Next page: From main street to global powerhouse

It’s clear from this study that similar to large multinational corporations, SMEs in the BRICS nations are just as impacted by increasing globalization, fierce competition, more empowered customers in new markets, and fast-changing technologies. With a commitment to enter new markets and willingness adopt technology innovations, SMEs have never been better positioned to win.

Background on “SMEs Equipped to Compete Study”

The “SMEs Equipped to Compete” study was sponsored by SAP and is based on responses from over 2,100 small and midsize companies in 21 countries, with $20 million to $750 million in annual revenue. More than half of the respondents from the BRICS countries were C-level executives, and they represented businesses in the discrete manufacturing (31 percent), consumer products (21 percent), professional services (21 percent), retail (18 percent), and wholesale (11 percent) sectors. Sixty percent of the surveyed companies have been in business from three to seven years and 35 percent have been operating for more than 10 years. Feedback was collected via quantitative surveys and executive interviews.

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