CHAPTER v

Industry overview

5.1 ROLE OF SMALL AND MEDIUM ENTERPRISES

Small and medium enterprises (SME) are the backbone of industrial development. It is very
important for both developed and developing country .Small and medium enterprises always
represented the model of economic development, which were emphasized as high contribution to
domestic production, which had significant export earnings, with low investment requirements,
employment generation, also been an effective contribution to foreign exchange earning of the
nation with low import-intensive operations. The contribution of small scale industries (SSIs) has
been remarkable in the industrial development of the country. It has a share of 40% in the
industrial production. 35% of the total manufactured exports of the country are directly
accounted for by this sector. In terms of employment generated, the SME sector comes second to
agriculture employing approximately 14 million people. Largely, the small industry sector has
done quite well and has enabled the country to achieve considerable industrial growth and
diversification. Small scale industries are less capital intensive and suit the Indian economic
environment with scarce resources. In addition, it is hugely labor intensive for building upon the
traditional skill and knowledge. Since independence small scale industries have remained a top
priority on the agenda of all political parties and policy makers as a legacy of Gandhian
philosophy.
Small and Medium Enterprises Defined
According to new THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006
the Definitions is as stated below:
In the case of the enterprises engaged in the manufacture or production of goods pertaining to
any industry specified in the first schedule to the Industries (Development and Regulation) Act,
1951, as
Micro Enterprise -When the investment in plant and machinery is less than twenty five lakh
rupees, it is a micro enterprise;
Small Enterprise - When the investment in plant and machinery is more than twenty five lakh
rupees but is less than five core rupees it is a small enterprise.

Medium Enterprise - When the investment in plant and Machinery exceeds five crore rupees
but is less than ten crore rupees, it is a medium enterprise. The definition of small and medium
enterprises varies from country to country. In general, the industries all over the world are
defined in terms of number of employees or capital investment or both. The employment
potential criterion was dropped from Small and Medium Enterprises definition in India due to the
following reasons:
Employment changes seasonally and hence it is difficult to follow this criterion An
employment limit acts as an incentive to limit employment to remain within Small and Medium
Enterprises.
Discrimination between labor intensive and techno sophistication.
The role of small and medium enterprises in economic development of a country can be
explained with parameters such as increase in the number, the production, the employment, and
the exports over a period of time could be common parameters to adjudge the role played by
small enterprises in the country.
5.2 SMES IN THE MANUFACTURING SECTOR
The burgeoning importance of SMEs in the manufacturing sector is due to their significant
contribution to the key factors of the growing Indian economy. According to Small & Medium
Business Development Chamber of India, SMEs currently1 contribute 45 per cent of the nations
industrial output as well as 40 per cent of the total exports. SMEs form 95 per cent of the total
industrial units in the country and manufacture around 8,000 quality products for the Indian as
well as international markets.
5.2.1 ENABLING SMES TO CONTRIBUTE MORE TO THE ECONOMIC GROWTH
The key to ensure that SMEs are able to grow in tandem with the economy in this age of
increasing globalization is to reckon the issues faced by most of them. The government has
already set measures in place to harness the growing issues associated with them as it recognizes
the importance of SMEs for the overall development of this country, and.
5.2.1.1 Financing

The major hindrance in the expansion of SMEs is the unavailability of sufficient and timely
funds to power their growth plans. Measures proposed by the government would ensure
availability of adequate funds to MSMEs to finance the growth. Small Industries Development
Bank of India (SIDBI), the countrys apex development bank, had targeted 1820 per cent Year
on Year growth as in disbursement of credit to microfinance institutions (MFIs); with this, the
total credit disbursed during FY11 would sum up to INR10 billion. To gather more funds for
these, government is been drawing the attention of private equity (PE) firms and venture
capitalists (VC) towards MSMEs. The Ministry for Micro, Small and Medium Enterprises
(MSME) has plans to network major private equity through informal meetings to make an
investment in MSMEs. Besides, in July 2011, the secretary of Department of Industrial Policy
and Promotion (DIPP) announced plans to offer incentives to VCs on their investments in SMEs.
Also, SMEs will now have greater exposure to public funds given the recent launch of an SME
exchange at the Bombay Stock Exchange (BSE). The BSE SME Exchange commenced
operations in March 2012 and senior BSE officials expect about 100 companies on its trading
platform by mid-FY13. The exchange is set to be a key source of low cost equity capital for
SMEs to aid their growth and expansion plans. SMEs Role in Indias Manufacturing Sector9
5.2.1.2 Infrastructure issues
Policy focus on infrastructure will be instrumental in boosting growth in SMEs manufacturing
activities as it brings markets closer. Government infrastructure spending is set to touch USD1
trillion under the 12th Five-Year Plan (201217), up from USD514 billion in 11th Five-Year Plan
(200712). Much of this investment will be directed at the development of the roads, the bridges,
the ports, the power, the railways, the airports and the urban infrastructure, among others. The
government is keen to engage the private sector in this endeavor. Successful execution of many
number infrastructure projects through the Public-Private Partnership (PPP) model has
encouraged the government.

CHAPTER vI

Data Analysis
and interpretation

6.1 DATA REDUCTION, INTERPRETATION AND ANALYSIS

The primary data was collected from 30 SMEs by interacting with the top
management

and

IT

personnel,

followed

by

getting

responses

to

the

questionnaire. Many organizations did not have an IT staff; in such cases the
answers were obtained from the top management. Figure 1 and 2 depicts the
mean of various benefits and threats that an SME perceives while evaluating erp
on Cloud.
Flexible Payment

3.84

IT Infra Cost

3.72

Low Oper Cost

4.16

Low IT Manpower

BENEFITS

3.84

Platform Ind

2.84

Scalability

3.76

Customization

1.8

User Friendly

2.56
0

0.5

1.5

2.5

3.5

4.5

MEAN

Figure 1: Mean of factors leading to benefits of software

on cloud.
SMEs have limited budget and manpower and if a software solution allows them
to stream line their processes at low operational cost they would be eager to
adopt such a solution. Hence benefits of reduce cost and low manpower
requirement are perceived as important benefits by SME. Scalability is also
another important benefit that they perceive depending upon the software
usage and the number of persons using the software. The main idea to deploy
software by a SME is to gain operational efficiency. To achieve this, they do not
feel a need to customize the software and make it user friendly. The people in
the organization can be trained to use the software.

For an SME the biggest threat while considering the option of software on cloud
is with respect to data security, its backup and recovery. They have questions
like Is my data safe?, What if someone accesses the data?, What will
happen if the server crashes?. All this factors needs to be addressed with due.
Vendor reliability is another threat and it can be addressed by doing the market
survey to check vendor credentials. In a SME, the number of employees is less
and thus people related issues are not considered an important threat. Market
survey to check vendor credentials. In a SME, the number of employees is less
and thus people related issues are not considered an important threat.

Interoper

3.2

Availability

4.35

Security

4.7

THREATS Resistance to change

1.55

Loss of staff

1.45

Vendor Reliability

4.25
0

0.5

1.5

2.5

3.5

4.5

MEAN

on cloud.

Figure 2: Mean of factors leading to threats of software

Hypotheses H1, H2, H3 and H4 formulated to find out SMEs perspective for selection of
software in cloud are validated using one-tailed sample t-test. These hypotheses are tested by
verifying whether the scores the respondents assigned to the organization perspectives were
significantly better than the middle score on the Likert scale for an item (Condori- Fernandez,
2006). Initially, the scores of each subject were averaged over the different items that are relevant
for a perspective. Three mean values were obtained for each subject for each perspective. One-

tailed sample t-test checks the difference between the mean of each perspective and the value 3
(middle score). The statistical test was applied with a significance level of 5% (alpha=0.05).

Statistics

Economical

Technological

People

Technological

Mean

benefit (H1)
0.95

Benefit(H2)
2.74

Threat (H3)
0.19

threat (H4)
1.12

difference
95% conf.

0.7231(lowe

-0.5011(lower)

-1.474(lower)

0.904 (lower)

r)
1.17 (upper)

-0.0189(upper)

-1.291(upper)

1.3386 (upper)

8.642

-2.226

-31.61

10.806

Interval for
the diff
Observed t
value

Table 1: t-test results.

Tools used for analysis were mean and two tailed test .Results obtained for each question is
compiled and are given above in summarized form.
Efforts have been made to identify critical benefits, which when implemented can contribute to
the growth of the company but though benefits can be appreciable, threats are also given equal
weight age for implementation of the cloud in SME sector.

CHAPTER vIi

Findings,
conclusions and
suggestions

7.1 FINDINGS
The results of the t-test as shown in table 1 allow us to accept the hypotheses
H1 and H4 and reject the hypotheses H2 and H3. According to hypothesis H1
and H4, SME perceives economical benefit as most important while going for

ERP on cloud and it has technological threats as the major concern. These
threats can be addressed by mitigation measures given in the SLA signed
between the SME and the ERP vendor. Table 2 summarizes the findings.

SME Perspective
Economic

Benefits
Most Important to

Threats
None

Technological

perceive software
Scalability and

Most Important and needs to

Platform

be addressed with due

Independence are

diligence, while selecting

important for

software solution in cloud.

SMES to go for
People

software on cloud.
None

Not Important

Table 2: Findings.

7.2 CONCLUSION

The main objective of the study is to provide a framework to find possible benefits and threats
based on the three enterprise perspectives (Economical, Technological and People) that a SME
has while evaluating an software solution on Cloud in Indian SMEs. The results indicate that
economical perspective is the major benefit that SME perceive for adoption of software in cloud
whereas the major threat is the technological issues like data backup, security, availability etc.
People related threats are not considered important by a SME as the number of employees
working and using software are less. This framework can be used by other SMEs to find out
important benefits and threats that they perceive while evaluating options of software on cloud.

7.3 SUGGESTIONS

An increase in the awareness and familiarity with cloud computing amongst SMEs serves as the
perfect recipe for increased adoption. There is therefore the need to focus and raise awareness on
its benefits and importance in the current digitized knowledge-based economy amongst small
businesses particularly technology-driven ones. This would encourage the understanding and
acceptance of cloud services within the SME sector and make them more productive and
competitive. Accordingly, affordable cloud solutions and free cloud-based applications on the
web can serve as the foundation for increasing awareness, availability and usage of cloud
services amongst SMEs. SMEs must also place emphasis on the provision of training facilities in
Information and Communication Technology for their employees to increase knowledge.

CHAPTER ViII
BIBLIOGRAPHY

1. Alkhalil, A. (2013). Journal of Information Technology Management A Publication of the

Association of Management CLOUD COMPUTING FROM SMES PERSPECTIVE : A
SURVEY- SURVE BASED INVESTIGATION The Concept of Cloud Computing, X(1),
112.
2. An SME perspective on Cloud Computing. (n.d.).
3. Azarnik, A., Shayan, J., & Alizadeh, M. (2012). Associated Risks of Cloud Computing
for SMEs, 1, 3745.

4. Carcary, M., Doherty, E., & Conway, G. (2014). The Adoption of Cloud Computing by
Irish SMEs an Exploratory Study, 17(1), 314.
5. Computing, J. (2013). Cloud Computing: The Level of Awareness amongst Small &
Medium-sized Enterprises ( SMEs ) in Developing Economies, 4(11), 832839.
6. Dogo, E. M., Salami, A., & Salman, S. I. (2013). Feasibility Analysis of Critical Factors
Affecting Cloud Computing in Nigeria, 2(4), 276287.
7. Mahara, T. N. (2013). Indian SMEs Perspective for election of ERP in Cloud, 8594.
8. Opara-martins, J., & Networks, M. (n.d.). Understanding Cloud Computing From An
SME Perspective.
9. Programme, M. B. A. (2013). ROLE OF SMES IN ECONOMIC DEVELOPMENT OF
INDIA, 2(6), 120126.
10. SMES ROLE IN INDIA ' S. (n.d.).
11. Sultan, N. A. (2011). Reaching for the cloud: How SMEs can manage. International
Journal

of

Information

Management,

31(3),

272278.

doi:10.1016/j.ijinfomgt.2010.08.001
12. Zabalza, J., Rio-belver, R., Cilleruelo, E., & Garechana, G. (2012). Benefits Related to
Cloud Computing in the SMEs, 637644.

ANNEXURE I

1. What is the size of the enterprise you represent ?

1-9 Employees
10-50 Employees
50-250 Employees
Over 250 Employees

2. Please choose the country your SME is based

Please select your country
Please choose the city your SME is based in
Please select your city
Other (please specify)

3. What were the reasons for your possible involvement in the Cloud Computing area?
Remove economic/expertise barriers impeding to modernize business processes by the
introduction of Information Technology
Avoiding capital expense in hardware, software, IT support, Information Security by outsourcing
the infrastructure/platforms/services
Flexibility and scalability of IT resource
Increasing computing capacity and business performance
Diversification of IT systems

Local and global optimization of IT infrastructure through automated management of virtual

machines
Business Continuity and Disaster recovery capabilities
Assessing the feasibility and profitability of new services (i.e. by developing business cases into
the Cloud)
Adding redundancy to increase availability and resilience
Controlling marginal profit and marginal costs
Other (please specify)

4. Which solution do you see as the most suitable for an SME, according to this possible Cloud
Computing taxonomy?
Public Cloud (owned and managed by an unrelated business)
Private Cloud (owned and managed internally)
Partner Cloud (owned and managed by a trusted partner)
A federation of clouds provided by various sources (partner, private, etc).
Other (please specify)

5. Which layer of the Cloud would you be most likely to approach?

Individual software packages (SaaS)
Complete operating system and software package available via cloud services (PaaS)
Just infrastructure services such as storage, network capacity etc (Iaas)
Security services in the cloud

Other (please specify)

6. Would you be willing to outsource to multiple providers?
YES
NO

7. Which of the following disaster recovery options are of interest to you?

Fully outsourced disaster recovery and business continuity
A contingency plan based on internal resources (i.e. leveraging services/platform/infrastructure
already in use before the Cloud)
Other (please specify)

8. Which IT services/Applications supporting business processes are most likely to be outsourced

to a Cloud Computing service provider?
Payroll
Human Resources
Procurements
CRM/Sales Management
Accounting and Finance
Project management
Application development on the cloud
Anonymous data analysis
Other (please specify)

9. What are your main concerns in your approach to Cloud Computing?

Not Important Medium Importance Very Important

Showstopper

Privacy
Availability of services and/or data
Integrity of services and/or data
Confidentiality of corporate data
Repudiation
Loss of control of services and/or data
Lack of liability of providers in case of security incidents
Inconsistency between transnational laws and regulations
Unclear scheme in the pay per use approach
Uncontrolled variable cost
Cost and difficulty of migration to the cloud (legacy software etc...)
Intra-clouds (vendor lock-in) migration
Other (please specify)