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Saturday 13 Nov 2010

ICT Penetration In India

As penetration of PCs, mobile phones and the Internet increases

across India, SMEs need to monitor the changing landscape and

be ready to reap the benefits

By

The rebounding of the economy has had a direct impact on the ICT sector in India. The first quarter of 2010 saw

spending on computers recover modestly and analysts look forward to greater spending by enterprises this year

To put things in perspective, the total size of the Indian IT market currently US $14.7bn and is projected to

increase to US$26.6bn by 2014.

Having said that, India presents a confusing picture from the perspective of ICT penetration. If we look at three

major indictors of analysis-the PC, the Internet and the mobile phone-the variations are surprising, but there are

also reasons for these that need urgent attention from both policy makers and market forces.

PC usage

The penetration of PCs in India is abysmally low, about 26%. Only about 3% of India's population owns a

computer as compared to China where ownership figures are five times higher. Rising incomes in middle class

India do not translate into PC ownership because of lack of awareness of how the PC can be of real use in an

average home. Falling computer prices have made PCs a lot more attractive, and the notebook market has been

the gainer in urban areas. Poor dial-up connections have been cited as a major reason for low PC penetration

and the government has plans to encourage WiMAX network deployment to remedy this.

However, it is penetration in rural and peri-urban India that will drive volumes. Various government initiatives to

boost usage like the five-year e-government and the ambitious IUDAI identity card scheme are yet to take off in

a complete sense. The next decade is likely to see some momentous changes. However, rather using ownership

data to gauge penetration, it would be more pertinent to look at community computer usage through cybercafes

schools, kiosks, e-governance centres, etc. A drive to enhance such facilities will impact penetration and in the

long-run result in increased ownership.

Internet penetration

Internet usage has been rising steadily. In 2009, 63 million Indians are using the Internet (defined as anyone who

uses the internet once a month), representing a mere 5.2% of the country's population. A survey conducted

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recently by the e-Tech group of IRB International and IAMAI for 2009-2010 (which also covered 100 SMEs

among households, individuals and cyber cafes in 31 Indian cities) shows some interesting results. It appears that

a growing number of Internet users live in India's small- and medium-sized urban centres and not in metros as is

commonly perceived. Of the total users in 2009, for instance, 34% lived in the top 8 metros, 18% in large towns

12% in towns with 5-10 lakh population and a surprising 36%, the largest group, in towns with below 5 lakh

population. Compare this to the year 2000, when only 5% of the total Internet usages (itself an abysmal 5 million

users) was attributed to towns with population of less than 5 lakh people.

Clearly, the desire to be connected and use technology is widespread. The delivery of government services via

the Internet, e-commerce, ease of access to information, popularity of social networking among youth, a higher

presence of e-kiosks, mobile phone penetration and affordable plans from ISPs are all contributing factors to this

phenomenon. This also means good news for SMEs, many of which are located in non-metro urban areas and

serve and employ semi-urban and even rural populations.

Mobile phone usage

Mobile phone ownership is a different story altogether. About 19 million new subscribers were added each

month during the first four months of 2010 alone. Total wireless subscriptions are projected to reach 766.0

million by end 2010, shoing a year-on-year increase of 45.9%. An astonishing figure quoted by iSuppli says thatby 2014, 97% of the population will have mobile phone access.

Impact on SMEs

SMEs are increasingly deploying information technology to improve performance and efficiency, reach out to

more customers and deliver value-added products and services. A technology-enabled environment where

connectivity is cost-effective, speedy and reliable translates into profits for SMEs.

SMEs need to leverage the transformations in the Indian ICT landscape to their advantage by looking out for

government schemes and attractive deals from private sector service providers while also investing in appropriatesoftware for their businesses.

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