The Cost Conundrum: Indian SMEs Struggle with Cloud Infrastructure Expenses

Traditional solutions to standardise IT infrastructure with data preservation and information security are designed for large-scale usage and are loaded with many features that many SMEs do not require.

With 75 million Small and Medium Sized Businesses (SMEs), India is the largest SME market in the world. It currently contributes nearly a trillion dollars to the Indian economy.

In the coming years, the number of SMEs in India is expected to reach 95 million and this could significantly contribute to India’s ambition of turning its economy into a five-trillion-dollar economy.

Even though technology penetration is good among SMEs, cloud adoption remains significantly low. In this exclusive interview with Analytics India Magazine, Vishal Prakash Shah, co-founder and CEO Synersoft Technologies, discusses some of the core challenges faced by SMEs, why cloud adoption is low and how it can be tackled.

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AIM: What services and products does Synersoft Technologies offer?

Vishal: Synersoft is an Indian B2B IT product company focussed on MSMEs. It offers a Plug and Play; product to achieve IT Compliance, Data Protection, Information Security, Remote Computing, and Productivity Monitoring objectives. These products are offered under the brand name ‘BLACKbox’. It is offered in two forms as per the preference of the MSMEs. ‘BLACKbox Prime T’ is an on-premise hardware product while ‘BLACKbox OneCloud’ is an on-cloud service.

AIM: What are some of the core challenges faced by SMEs and MSMEs in India when it comes to implementing IT solutions?

Vishal: In order to understand the core challenges SMEs and MSMEs face, it is necessary to understand the background. MSMEs are either exporters or suppliers to large enterprises. They compete on global standards and have to adopt technology in its latest form. 

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They need standard IT infrastructure with data preservation and information security provisions to facilitate the adoption of technology. 

Traditional solutions to standardise IT infrastructure with data preservation and information security are designed for large-scale usage. Hence, they are loaded with many features that many SMEs do not require, considering their usage scale. It therefore sounds complex and expensive to them and defines their first challenge. In addition, such systems designed for large-scale usage require professional IT talent to implement and maintain. Professional IT talent does not aspire to work with MSMEs; their services are expensive. It is then difficult for MSMEs to recruit, retain, and afford professional IT talent—defining yet another challenge.

AIM: Could you share some use cases of how your IT services are helping SMEs in India increase efficiency?

Vishal: Most large or overseas customers of MSMEs expect their MSME vendors to comply with Information Security and Data Protection policies they follow to protect their IPR, data, and business information. They have empanelment criteria that MSMEs have to match. Additionally, MSMEs are prone to external and insider threats from a data leakage point of view. 

Traditional solutions—designed for large-scale usage—to comply with empanelment criteria and provide information security and data protection are complex and expensive. The affordability of such solutions and the difficulty in IT talent acquisition calls for an affordable and easy-to-manage product. 

BLACKbox’s products are ‘plug and play’ solutions to achieve compliance with data protection, information security, and IT standardisation criteria mandated by their large or overseas customers. Interestingly, all this without having to hire professional IT talent. 

They empower MSMEs to focus on their core business without worrying about compliance, cybersecurity, and insider threats. It is designed on the premise that 20% of the features meet 100% requirements of 80% of the market. Our ready-to-comply products become affordable by optimising necessary features and excluding unnecessary features that require lower hardware and bandwidth resources. It saves on CAPEX, reduces OPEX, and makes MSMEs more competitive.

AIM: Why is there a lack of adoption of cloud computing by a large segment of Indian businesses?

Vishal: The main reason is mentality. When presented with the option between paying a ten-year EMI to own the land for their factory or office and paying a yearly lease rental equivalent to 5% of the property’s value, most Indian SME owners tend to choose the former option despite the latter being more tax-efficient and providing better cash flows as operating expenditure (OPEX). Indian SMEs have a strong preference for capital expenditure (CAPEX) over OPEX.

Leading CEOs at large enterprises tend to avoid tying up capital and liquidity with capital expenditures (CAPEX) and opt for operating expenditures (OPEX), when possible. Indian MSMEs prefer ownership to subscription. The success of on-premise solutions like Tally and many such offerings in the Indian SME market reflects this mentality very well. So, the idea of paying a subscription (rental) to use a SaaS application has not appealed to the Indian SMEs so far.

AIM: Why are cloud computing service providers unable to penetrate millions of Indian MSMEs?

Vishal: The most compelling reason is the ever-increasing price trend in cloud infrastructure. Over the past five years, the cost of cloud infrastructure has seen substantial growth. This increase has affected many SaaS companies that rely on cloud infrastructure from providers such as Google, Microsoft, and Amazon. Indian SMEs—being highly price-sensitive—are resistant to frequent price increases, which has put pressure on the margins of B2B SaaS companies. As a result, these companies are looking to expand into markets that use the Dollar or Euro in order to remain viable and sustainable.

AIM: How is cloud adoption among SMEs and MSMEs in India?

Vishal: With the exception of the mailbox, SMEs and MSMEs have hardly adopted cloud computing for their business. Over the last five years, prominent mailbox providers like Google and Microsoft have increased their prices. It is a widespread perception that cloud companies increase the price as the dependency of the customers increases. It leads to the feeling that such practices leave no choice for the customer but to accept the increased price. Such an experience has made them averse to entrusting their data to cloud companies.

AIM: What initiatives should the government take to make cloud computing more trustworthy and dependable?

Vishal: I foresee the role of the government at two levels. One at the level of regulatory framework development and the other at the level of incentivising the adoption of cloud computing

There needs to be a regulatory framework for lowering the exit barriers for MSMEs in case they disagree with the price escalation by the cloud service provider and want to migrate to a more cost-effective provider. In the current situation, they have to accept the escalations because they cannot migrate their data to another cloud service provider. 

It is similar to the portability in mobile phone connection. You can retain your number and choose your service provider. The absence of portability leads to monopolistic practices by many providers. The concept of Super Cloud, similar to ONDC (Open Network for Digital Commerce), can also be explored. SuperCloud can fuel the democratisation of cloud computing greatly.

The government can recognise Data Centres and Bandwidth Infrastructure similar to roads, bridges, and port infrastructure. Public-private partnerships can be effectively developed to expedite the creation of cloud infrastructure to make it affordable. Much like the government provides subsidies for ISO Certification, Exhibition Participation or incentivises Startups, Green Initiatives, subsidies or incentives on cloud adoption in the hands of MSMEs can accelerate the commoditisation of cloud computing.

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