How can Indian Small and Medium Enterprises Bridge the Digital Skill Challenges?

By Dedu Ajith John March 21, 2018

India is one of the fastest growing economies in the world and is expected to grow at 7.2 percent in 2018-19. In recent years, business confidence in Indian markets had increased internationally.  According to the quarterly 'Business Outlook Survey' by the Confederation of Indian Industry (CII), the business confidence index soared to 59.7 in the 4th quarter of 2017, up from 58.3 in the previous quarter. As the effects of demonetization and the Goods & Services Tax (GST) that were rolled out two years ago begin to subside, there are indications of business normalization across all sectors.

The Small and Medium Enterprises (SME) sector which has been recognized as the backbone of Indian the economy is also expected to show recovery.

Present Landscape of SMEs in India

SMEs contribute 45 per cent of India's GDP, according to a report titled 'Micro Merchant Market Sizing and Profiling Report', released by MasterCard and the Confederation of All India Traders. This percentage is almost three times what corporate India contributes, and it also shows that the SME sector provides employment to around 46 crores people in India and is registering an annual growth of 11.5 per cent.

In spite of the tremendous potential it promises for the socio-economic development of India, the nation's small and medium businesses are plagued by various challenges, such as:

  • Poor infrastructure to increase production capacity
  • A lack of adequate funds
  • Little innovation
  • Technology knowledge gaps
  • Lack of training and skills
  • Inability to attract tech-savvy talent

The concerns about infrastructure and finances require cost-intensive measures, and both the government and private sector companies are taking several steps to address these. Other challenges are closely linked with digitization. These can be addressed through Technology Knowledge Transfer, a process through which technology is disseminated from experts to concerned individuals or organizations to bridge the digital skill gap. Current policy initiatives, such as Digital India and Skill India, are focused on helping SMEs become digitally literate and train their manpower to develop necessary digital skills.

SMEs need to foster innovation, take their businesses online, accept e-payments, upgrade existing technological know-how and compete globally. Even with the rapid adoption of technology in the country, many SMEs don't even possess basic computer literacy skills - creating a digital presence through websites, mobiles or social networks is almost impossible for them.

SMEs operate on low margins and funds, and do not offer the most attractive salaries.  Hence, they struggle when trying to hire candidates with digital. As a result, their sustainability is under threat.

India is in dire need of augmenting its innovation capacity. While India has climbed the Global Innovation Index rankings two years in a row, it still stands at 66th position among 130 nations. India is also the third-largest and the fastest growing e-commerce market after China and the US. But, to compete with these two countries, it has to improve its performance. The SME sector is also poised to become a $25.8 billion market for emerging technologies by 2020. Since SMEs can be instrumental in pushing innovation, e-commerce and technology, it is imperative that they embrace digitization. Hence, the efforts to close the digital skill gap need to be rapid.

The good news is that India has the largest digital talent pool in the world, a fact that works highly in favour of SMEs. A joint survey by Capgemini and LinkedIn revealed that the digital landscape in the country ranks highest at 76 percent. SMEs will shift to online hiring to tap into this talent to meet their digital skill needs, and it shouldn't take long for talent to start showing equal preference to joining SMEs as they do with start-ups today.

Government Initiatives to Bridge Digital Skill Gap

The government has already undertaken initiatives to help SMEs develop and sharpen their digital skills:

  • The 'National Manufacturing Competitiveness Programme' encourages SMEs to adopt information and communication technology tools and applications. It includes activities such as developing web portals, providing local software solutions, giving e-literacy training to employees and establishing e-readiness centres. This scheme also sensitizes SMEs to use energy-efficient technologies and supports them on international quality certification.
  • The 'Skill India' program focuses on inculcating technical, soft, financial, digital and industry-relevant skills through theoretical education, practical learning, training and projects. However, this initiative encompasses industries of all sizes, with no specific thrust on SMEs. 
  • The 'Assistance to Training Institutions' initiative  provides a capital grant to national level training institutions operating under the Ministry of MSME to strengthen their infrastructure and create entrepreneurship skill development programs. The main purpose of this effort is to encourage people, especially rural youth for self-employment in SME sector.

Industry Initiatives to Bridge Digital Skill Gap

There is more good news for SME talent looking to acquire digital skills. Several multi-national organizations have launched major India-focused efforts to give this sector a boost.

  • Facebook has announced personalized online learning through 'Start-up Training Hubs' and 'Digital Training' programs. The English and Hindi curriculum developed in association with Digital Vidya, DharmaLife, StartupIndia and EDII, is targeted at training more than half a million Indians by 2020 in various digital marketing skills.
  • Based on the findings of its joint research with KPMG, which revealed that 68 per cent of Indian SMEs are offline, Google has commenced a 'Digital Unlocked' program. The training is certified by FICCI and the Indian School of Business, and will enable SMEs to create a digital identity. The training is a set of 90 self-paced video tutorials that are highly relevant to the Indian market. Google will conduct 5,000 free workshops in 40 cities across India. Additionally, it has also launched a free mobile app called 'Primer' that SMEs can use to gain digital marketing expertise on their Apple and Android phones in English, Hindi and other vernacular languages.
  • SAP India is also working on empowering SMEs to transition to a digital platform. It has signed a MoU with the Ministry of MSME to launch the 'Bharat ERP' program, aimed to train more than 30,000 SMEs and youths on ERP solutions. The company has also set itself a target of skilling, upskilling and reskilling 1.5 million SAP consultants in the next three years. Another of its programs, 'Leonardo,' will equip SMEs and even larger enterprises to enter the digital ecosystem and deliver innovation capabilities with ease.
  • Even HDFC Bank has introduced digital banking for SMEs to access credit, payments and other transactions online. Its 'Digital SME Bank' program will encourage SMEs to use the internet for all their banking needs. As SMEs start relying on internet banking, they will pick up more digital skills which, in turn, will create demand for careers and courses in SME banking.
  • The State Bank of India (SBI) and Oracle have joined hands for the 'D-Change' program. Volunteers from both organizations will promote IT literacy among school students and rural youth to groom the digital workforce of the future.

Improving Digital Skills at SME Workplaces

Before implementing any digital skill programs, SMEs need to conduct a talent audit to identify skill gaps and evaluate the stage of digitization in their workplaces. Does the company need to start from the beginning? Are digital skills already actively used but require upgrades? This will give an idea about digital readiness in the organization. Accordingly, SMEs can design appropriate training and development as well as recruitment plans.

However, in order to do the digital skill audit, HR in SMEs would need to ensure that it has top management support. A top-down communication would instil trust and credibility among employees regarding the changes pertaining to digitization.  At the same time, HR would sensitize employees on how digital skills can be a personal asset to improve business efficiency, enhance customer experience and earn better career opportunities.

After the talent audit and employee awareness creation, the HR team in SME workplaces can tap into the programs initiated by the government and industry. It can also leverage online digital courses and free tools to develop their digital skills. Digital Vidya, NIIT, UpGrad and are a few among many who offer comprehensive virtual courses in digital skills at affordable costs. There also are tools such as HootSuite, Google Analytics and BuzzSumo for SMEs who have basic digital marketing knowledge and looking to advance their skills further.

The 'American Express Global SME Pulse 2017' survey conducted across 300 SMEs in 15 countries, states that 71 percent of the Indian SMEs are bullish about their domestic economy and 61 percent have optimism about the global economy. They also understand the importance of technology in driving revenue and profitability. Hence, they plan to use innovative business models and scalable technology in the next three years.

India's SME sector seems to know where it stands and appears ready to embrace technology to upgrade its digital skills and recruit tech-savvy talent. It is now up to the government and private organizations to empower SMEs with a digital workforce.



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