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AMI-Partners' Study Shows Small and Medium Businesses in India Spent $17.5 Billion on IT and Telecom

Top Six Metros Driving 80% of the IT Spending

NEW YORK--(BUSINESS WIRE)--July 19, 2004-- Small and Medium Businesses (SMBs) in India spent $17.5 Billion on IT and Telecom-related products and services in 2003. AMI expects the above to grow at an impressive Compound Annual Growth Rate (CAGR) of 14% during 2003-2008. Of the above, Indian SMBs spent approximately $7.1 Billion on IT in 2003, which AMI forecasts will register a strong 26% CAGR during 2003 to 2008. However, Telecom-related expenditures, which totaled $10.4 Billion in 2003, is forecasted to experience less than 3% growth during 2003-2008.
-- Top Six Indian Metro SMBs Experienced Healthy Growth In Annual Sales Turnover; Increasingly Aware Of Web Based Processes, IT Security and Scaleable Solutions; Outlook Is Bullish for 2004
-- Unfortunately, Exorbitant Costs For High Speed Broadband Access Could Adversely Affect Indian SMBs Lessening Their Competitiveness in Global Markets; Industry Must Rally For Lowering Tariffs For More Affordable Bandwidth For Indian SMBs

More than 578,000 SMBs, located in the six major metropolitan areas, spent approximately $5.7 billion on IT-related solutions (computing, networking, Internet and service/support) in 2003, accounting for 80% of the $7.1 Billion SMB IT market in India. "Indian SMBs, especially those in the top six metros, are increasingly shifting their focus from just buying basic PCs and low-cost Internet access to scaleable IT solutions," said Andy Bose, CEO and Founder of AMI-Partners. "The good news for vendors and partners targeting the metro area SMBs is that such businesses are finally expanding their IT budgets and purchasing advanced networking and security solutions, in particular, to enhance their investments in basic computing infrastructure," said Swati Sasmal, analyst at AMI-India.

The above findings were released today by New York-based Access Markets International (AMI) Partners, Inc., a leading consulting firm specializing in IT, Internet, Telecom and business services market intelligence, trends and strategy with a strong focus on global Small and Medium Business (SMB) enterprises. AMI conducts the IT industry's most comprehensive annual tracking surveys of small and medium business (SMB) enterprises in several countries including the U.S., Canada, France, Germany, U.K., Australia, China, India, Japan, South Korea, Singapore, Brazil and Mexico.

A Bullish outlook for the next 12 months

Selected highlights from the AMI study, which included face-to-face in-depth interviews with a statistically relevant and projectable sample of 1,000+ PC owning SMBs, in six major metropolitan areas (Chennai, Bangalore, Delhi, Hyderabad, Kolkata, and Mumbai), are shown below:

-- 25% (One-in-four Indian) PC owning SBs plan to expand their workforce over the next 12 months.

-- 7% of PC SBs plan to open new sites or branches.

-- 67% (two-thirds) of MBs plan to hire new employees.

-- During the last twelve months, approximately three-quarters of all Indian PC SBs experienced an increase in their annual revenues, with one-in-four recording an annualized revenue growth rate exceeding 10%.

-- During the last 12 months five-in-six MBs experienced a rise in revenues with 40% of them recording more than 10% growth last year.

The outlook for the next 12 months remains strong -- as 78% of SMBs expect an increase in revenues. "Much of the current year's SMB IT growth is due to the growth of India's economy and also the emphasis placed on developing the IT and Telecommunications infrastructure by the government," said Swati Sasmal, analyst at AMI. "Moreover, emphasis on a greater degree of integration between IT and business has also contributed to the growth of the SMB IT sector," added Sasmal.

Traditional SMB focus on basic computing technology

AMI's study reveals rosier times for PC vendors catering to the SMB market due to stated interest in low-cost machines as well as the desire to replace existing machines, with 2004 heralding the beginning of a new PC replacement cycle. PC shipments to Indian SMBs were estimated by AMI at 1.655 million units and are expected to register a 24% CAGR. Price-conscious Indian SMBs have a preference for affordable personalized services offered by local dealers, which has fueled white box PC adoption by these businesses. Currently, three-quarters of PC SBs use white box/assembled desktops, with over a third of PC SBs having purchased one in the last 12 months. White box desktops are well-positioned to maintain a significant market share over the next 12 months with half of all PC SBs planning to purchase such a machine.

SMBs eager for affordable high-speed/ broadband access

The lack of affordable high-speed Internet access is a huge setback for SMBs, particularly those in the services sector. The Indian Government, clearly, needs to take a far more aggressive role to lower tariffs in order to increase broadband penetration among Indian SMBs. Currently, only 16% of all Indian PC owning SBs have adopted some form of high speed access, which is in stark contrast to other Asian counterparts like China and Korea, which enjoy 46% and 92% broadband penetration, respectively. Much of the above 16% includes ISDN, which by today's international standards would not meet the definition of high speed access.

"In today's global economy, the exorbitant cost of broadband access, makes Indian SMBs less competitive to their global counterparts, and limits their efficiency and productivity. Indian SMBs are desperate for affordable bandwidth. The government must work with the industry and make this imminently possible. This, in turn, could significantly contribute to the economy and further accelerate growth for the domestic IT industry," said Mr. Bose.

Networking and security solutions will finally gain importance as Indian SMBs aim to keep current with evolving technologies

AMI's study shows that the top six metro SMBs are looking to implement cost effective scaleable, connectivity solutions. Nearly three-quarters of the top six metro Indian MBs have adopted LANs and there is sufficient room for growth in the under-penetrated SB market over the next 12 months. As more than one-sixth of SBs have separate branch locations, there is burgeoning interest in deploying VPNs (Virtual Private Networks) , which are perceived as a secure and reliable form of communication with remote branches and off-site or mobile employees.

Due to the increased utilization of the Internet for wide ranging business processes from customer relationship management to order fulfillment, Indian SMBs have been exposed to the risks of unwanted intrusions resulting in increased awareness about electronic security solutions. In order to address their security concerns, SMBs in the top six metros spent a total of $48 million on security components in the last 12 months, including hardware, software and services delivered by a third party. Firewalls are also becoming important due to the elevated risks and vulnerabilities of networks. Over a quarter of Indian SMBs have currently implemented a network-based firewall, with a strong preference for software-based firewalls running on PCs and/or LAN servers.

About Access Markets International (AMI) Partners, Inc. (AMI-Partners)

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital and actionable market intelligence - focusing on global small and medium business (SMB) enterprises. The AMI-Partners mission is to empower the firm's clients for success with the highest quality data, business planning and "go-to-market" solutions. AMI-Partners was founded in 1996 under the name of Access Media International (USA), Inc. (AMI-USA) by Andy Bose, formerly a group vice president at IDC. Since its inception, the firm has built a world-class management team spanning 10 to 25 years in IT, telecommunications, online communications and multimedia. The team is comprised of individuals who formerly built careers at leading industry-companies such as ADP, Cablevision, Compaq, IBM, IDC, Gartner, McKinsey and other major corporations.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 130 leading IT, Internet, Telecom and business services companies in the last seven years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys; and its proprietary database of several thousand SMBs in the U.S., Europe, Asia-Pacific and Latin America. The firm invests significantly in collecting survey-based information with several thousand SMBs globally through the industry's most comprehensive SMB survey instrument, and is considered to be the leading benchmark for tracking SMB trends.

For more information on AMI-Partners or our Global SMB surveys please visit www.ami-partners.com or call 212-944-5100.

Contacts


AMI-Partners
Nancy Carty, 212-944-5100 ext 100
ncarty@ami-partners.com

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