Adoption of New Technologies: Do MSMEs have a trust deficit?

Everyone agrees that MSMEs need new tech. But why isn’t it happening?

There is little debate on whether or not the adoption of the latest technologies is necessary for the MSME universe. Nearly everyone agrees that the latest advancements in Artificial Intelligence (AI) and Machine Learning (ML), Internet of Things (IoT) and Data Analytics are going to power the MSMEs into a new era of global competitiveness even as they increase their contributions to the economy. However, the speed of adoption of the new technologies remains an area of concern. While basic-level technologies and processes have been adopted by manufacturing and services enterprises, we have not seen the MSME sector as a while take that technological leap of faith. For the sector to unlock its true potential with technology, we must ask: are MSMEs holding back due to a lack of trust in new technologies? Or is there more to it than that?  

As per a recent study from Zinnov the market size of digital technology adoption among MSMEs will grow at around 25% CAGR, from an estimated $30 billion in 2019 to around $85 billion in 2024. This might heartening news, but when another survey spoke to over 120,000 MSMEs, it came to light that only 34% of them adopted digital means to interact with employees, customers and suppliers. In terms of full adoption, the figure dropped drastically to only 7%.  

In a recent survey on the state of technology adoption conducted among over 2500 MSME businesses, it was revealed that only 25% of business management software users have adopted business applications like financial applications, customer relationship management applications, even though 45% were keen to adopt these in the near future. While the adoption of online services is relatively on the higher side, the adoption of applications that can greatly help improve business efficiency and effectiveness has been disappointing. The road to technology adoption that is at par with those of large enterprises is long but filled with opportunities for exponential growth.  

While every industry has its own technology adoption lifecycle, there are some universally acknowledged standards on how this process unfolds. Technology adoption passes through the following five stages 




In this piece, we will attempt to decode what holds MSMEs back from technology adoption, by focusing on the first three stages: Awareness, Assessment and Acceptance.   

Awareness: Enough knowledge to take confident technology Decisions 

Most MSMEs do not have a qualified technology resource in-house, and here begins the challenge. Who should be the right person to manage this transition and the adoption of new technology? Should this be someone with a macro or a micro perspective on technology? Should it be someone who is a part of the business and understands the day-to-day or someone who has only an in-depth understanding of the technology? These are some of the questions that prevent the first steps from being taken.   

Assessment: The Disclaimers in the Technology 

The world of technology does not work on guarantees – instead, it is all about disclaimers. For the value-seeking MSME, this is counter-intuitive to the way of doing business. There are multiple options for everything and every one of them comes with its own disclaimers on what is possible and what is not. What’s worse, everyone from the world of technology believes that everyone else is as aware as they are. This leads to a cloud of jargon that makes little sense to someone trying to assess the potential impact of an investment in technology. The need for hours is clear explanations on what the business needs and how technology can meet those needs.  

Acceptance: The Transition into Technology 

Whether it is a large or small enterprise, a transition to a new technology that changes the ways of working is never easy. In this respect, MSME buying behaviour mimics that of larger enterprises, especially when it comes to technology. This means that to a large extent, MSMEs will acknowledge the need and will have the high expectations of sales and service of technology products.  This is not always feasible for larger technology providers as it requires an innovative sales and distribution strategy, and an appropriate business model supporting this client base. While digital distribution and servicing has been on the rise, it still has some way to go before it can help MSMEs accept the transition to technology smoothly.   

Decoding Trust in Technology:  

Despite the efforts by the government to promote technology adoption, the MSME sector still has problems in accepting these offerings for the upgrade they need. MSMEs are circumspect when it comes to new jargon and silver bullets and evaluable potential investments with a keen lens of the value that it can help them unlock. There are a lot of government-funded schemes and support programmes for the business for encouraging them to upgrade or adopt new technologies, however, smaller firms face serious limitations in terms of manpower and finance and also in their capacity to be part of available innovation networks.  

It is fairly simple to see that once technology providers begin to address their MSME relationships through the lens of Awareness, Assessment and Acceptance, the question of a lack of trust in technology or providers does not arise. It is merely a question of changing the language of the communication to be understood by those in the market for the technology. The reality is that every MSME knows that they need technology to enable growth, all that is needed is a set of enablers that help them unlock tech’s true value.