Small businesses opening up for PCs

KOLKATA

NOVEMBER 13,2006

Despite the ubiquity of PCs, as many as 75 percent of small businesses (1-99
employees) in four of the most populous countries in Asia — India, China,
Indonesia and the Philippines — do not own any computers at all. If some see
this as a problem, it is also a huge opportunity in terms of an untapped demand
and opportunity for vendors to convert these to PC-enabled businesses.

According to the latest study by New York-based Access Markets International
(AMI) Partners Inc, there's reason to hope. The study notes that about 40
percent of the non-PC Small Business (SBs) in India, over a third in China, and
about a quarter each in Indonesia and the Philippines have expressed their
intent to buy PCs in the next 12 months. “SBs in China and Indonesia plan to
spend relatively higher amounts — especially on desktop PCs,” said Dev
Chakravarty, Kolkata-based Analyst at AMI-Partners. “The retail store remains
the preferred channel for buying computing hardware. The touch-and-feel concept
is still crucial among non-PC SBs — especially those with a low level of
computer literacy. This explains the huge preference of the retail store for
first-time PC buyers in the four mega economies.”

Currently, China has the highest PC penetration among SBs, at 33 percent.
This is followed by the Philippines at 24 percent, India at 22 percent, and
Indonesia at 18 percent. “It is surprising that even today, a huge majority of
SBs conduct their daily business without the help of computers,” said
Chakravarty. “However, there is a huge latent need among these businesses for
PCs that can be fulfilled by PC vendors that focus on the Asia-Pacific region.”

Most of the non-PC SBs in these four countries are small — with 1-9 employees
each. The bulk of SBs in these countries belongs to the wholesale and retail
vertical sector. The exception is China, where more than 50 percent of non-PC
SBs are in the manufacturing vertical.

What hinders them from buying PCs? The primary hurdle is the belief that PCs
are not relevant to their line of business. About 30% of non-PC SBs in India and
14 percent in China told AMI that they just have not thought about buying PCs. A
significant portion of SBs believes that a simple fax and phone is enough for
their business. Lack of knowledge about the installation and operation of PCs is
also a powerful deterrence. “It is important to note that neither financing
methods nor a cash crunch has emerged as a problem area for SBs in these
countries,” said Chakravarty.

What can motivate SBs to opt for PCs? Despite these deterrents, a portion of
non-PC SBs is still considering buying PCs to automate business processes,
improve efficiency and productivity, adhere to business partners' demands, keep
pace with competitors, and grow the business. “A concerted effort by PC hardware
vendors to convince non-PC SBs about the utility of computers and educate them
about PC usage can go a long way in clearing the way for computers,” said
Chakravarty.

Most of these non-PC SBs said they learn about IT products and usage through
newspapers, followed by TV. Some also reads business and IT magazines. However,
being highly traditional and primitive in choosing the right PC, a large
proportion of these SBs said they base their judgment on word-of-mouth and
opinions of peers, friends and family members.